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									                                                   Ratio Magazine :: The Inside Track to East Africa’s Economies


Kenya: Investor Relations Management: Practices in East Africa
Wednesday, 20 May 2009


A government that turned to the stock exchange for privatisations, an automated trading platform that made trading much
easier, widespread retail investor enthusiasm and international investor’s interest in ‘frontier
markets’ – companies listed on the NSE never had so much attention as in recent years. But do they know
how to communicate with their existing and prospective investors? In this three-part series, we discuss the practices and
challenges of investor relations management in Kenya and the EAC.


One of Africa’s Largest
The Nairobi Stock Exchange (NSE) was formally founded in 1954, but really began back in the 1920s, when British
businessmen in Kenya still wore hats and liked to swap stocks at the old Stanley Hotel. Trading at the NSE progressed
languidly over the years, but the first Kibaki administration then used the NSE for a number of privatisations that also
generated significant retail investor interest. And technological modernisation brought big investment changes to Kenya:
Automatic trading introduced in 2006 nearly tripled annual turnover rates at the NSE, and a solid bull-run from 2004-08
has seen the entrance of unprecedented numbers of retail investors to the market. The number of equity trading deals on
the NSE rose from 176,483 in 2005 to 890,542 in 2008. At the same time, international interest in emerging and frontier
markets like Kenya has grown.

But despite so much focus on the NSE, public companies in Kenya have yet to understand how to relate well with their
investors. Investor relations (IR) as a formal practice in Africa are largely unregulated and undefined. Investor relations
practices encompass traditional public relations such as marketing, damage control and press coverage, but should go
far beyond this: Publicly traded companies have the responsibility to communicate well with their shareholders and
potential investors to ensure that investors have enough information to make educated investment decisions. Beyond
these legal obligations, active engagement with its shareholders helps a company to build its brand and reputation. Good
investor relations practices also surpass governance standards to include financial reporting and compliance. While
investor relations are very well represented internationally, Kenya, like most countries in sub-Saharan Africa, falls
markedly short of these standards.

In this series on investor relations management, we examine the state of the industry in East Africa, with a focus on
Kenya. We look at governance, online communications, regulation, and the peculiar challenges facing the region.

Investor Relations Requirements in East Africa
The “Guidelines on Corporate Governance Practices by Public Listed Companies in Kenya”, published by
the Capital Market Authority’s (CMA), is probably the only document approaching regulations in the IR area.
These CMA guidelines include several points on shareholder participation:

 - The board must maintain an effective communications strategy to provide its shareholders with information on major
decisions, disposal of company assets, restructuring, takeovers, mergers, acquisitions and reorganisation.
 - There must be public disclosure of any management or business agreements that pose a conflict of interest.
 - There must be an annual shareholder meeting, with expenses for attendance paid by the company.
 - Shareholders must have access to annual reports and audited accounts, and the company should make use of its
website to provide this kind of information to shareholders.
 - The company should also encourage the establishment of a shareholders association. Every public company is
required to disclose a statement in its annual report outlining its compliance with these guidelines and best practices.
However, it is not clear what kind of action would be taken against a company that does not comply, and to date, there is
no evidence of regulatory sanctions from the NSE. Many of East Africa’s largest public companies include
statements regarding corporate governance on their websites or in annual reports. But these statements are often
rhetorical and rarely backed by evidence or appraisal of compliance.

Current Practices
A review of corporate websites and annual reports shows that on the whole, no company in East Africa has managed to
adopt well balanced IR practices that incorporate a broad array of media including a website. Generally only one of the
five points above is adhered to by all listed companies: holding an AGM, as this is required by law. Many companies do
post company news, annual reports and audited accounts online, but there are no uniformly upheld standards of
timeliness, accuracy or interactivity. Safaricom is the only public company in the region that has an investor relations
department, which was established last year following the company’s colossal IPO.

Corporate websites provide some indications of current investor relations practices. Most, but not all listed companies in
Kenya now maintain a website: An online check in early May 2009 shows that out of a total of 54 reviewed listed
companies, 13 do not have a website, and one is not working. But even if the existing websites look good at first glance,
a closer look reveals that the functionality is limited. And without an explicit statement of commitment to good IR
practices, how does anyone know that the information posted online is correct and up to date? Investors and potential
investors often cannot be certain, which adds to the popularity of online portals that distribute investment data purchased
from the NSE. The result: Listed companies are out of the loop in communicating directly with their investment
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communities. The job is left to the NSE, brokers, data vendors and portals each with their own (profit-making) objectives.
This is why listed companies often feel so powerless in dealing with negative press: It is costly and the very same media
that roasted them have to be paid to publish an official response to the market.

Many of the companies traded on the NSE, Uganda Securities Exchange (USE), and Dar es Salaam Stock Exchange
(DSE), are owned by international conglomerates who should, in principle, know better about IR. British American
Tobacco, Stanbic Bank and Bank of Baroda all maintain impressive corporate websites with IR information for their home
base countries, in the UK, South Africa and India, respectively. But these companies offer little insights into or East Africa-
specific information and do little to woo investors in these markets.

Regional notables reveal a mixed performance, based on an informal review in early May:

 - East African Breweries, one of the largest companies traded on the NSE, USE and DSE, has a workable website with
a specific section for IR offering annual reports, share prices, financial information, and contacts. However many details
are out of date: the investor calendar is for 2007, only an extract of the annual report is shown, the share price page says
“share price analysis not available at this time” and announcements and news posts a message “
please check later for updates to this section.
 - Kenya Commercial Bank (KCB), which also trades on the NSE, USE and DSE, posts financial reports online and
maintains a media centre with news updates. However, the “investor relations” link simply leads back to the
home page.
 - KenGen also offers a good amount of information on its website: press releases, AGM details, financial information
including annual reports, contacts, and even an online complaint form. But the 2008 annual report is inaccessible to most
as it is 15.5meg and the graph link is broken. The last press release is 11/9/2008 and no press brief downloads work.
 - Access Kenya has regular press releases posted on its site and an investor relations section with downloadable
accounts, reports and IPO prospectus, and what looks like the intention to be a real time share price function - perhaps in
the world of high speed broadband?
 - Uganda Clays, a relatively small company, makes the effort to post press releases on its website but offers no investor
relations information or financial reporting.
 - The National Microfinance Bank of Tanzania, one of the largest companies trading on the DSE, offers its annual report
and financial statements online in accordance (as the website dutifully states) with the Tanzania Companies Act of 2002.
 - One exception to the lack of localised information from conglomerates stands out: SAB Miller owns subsidiaries on six
continents, including Tanzania Breweries, whose stock is traded on the DSE. SAB maintains country-specific investor
information for each of its major subsidiaries on its corporate website. So an investor interested specifically in the
Tanzanian market can find the annual report, with portions in the local language Swahili, and share price information
specific to Tanzania Breweries all online.
 - The Tanzania Portland Cement Company, owned by the German multinational, Heidelberg Cement Corp, also
publishes its annual report online with a full Swahili translation. In the regional market, Safaricom faces some unique
challenges: After going public in what was the largest IPO ever in eastern and central Africa, the company now has
around 800,000 individual and 30,000 corporate shareholders. Safaricom has taken a more focused approach to
proactively courting investors in retail, institutional, local and foreign markets. Suzanne Kilolo-Kedenge, IR manager for
Safaricom, estimates less than 20% of Safaricom’s shareholders have access to the company’s website.
As a consequence, Safaricom, one of the more proactive firms in communicating with its investors and the public, relies
heavily on the media to communicate with its huge retail investor base. The company’s large shareholder base
also means that the AGM becomes a logistical nightmare in itself.

Kenya: Investor Relations Management: Dealing with the Public
Kenya: Investor Relations Management: Perspectives


We gratefully acknowledge the support of Rob Stangroom for this article. Working for the African arm of the former
Robert Fleming investment banking group, Rob Stangroom established the Malawi Stock Exchange as the first
registered stockbroker and Secretary to the Malawi Stock Exchange. He has subsequently acted as lead advisor in five
successful IPOs in sub-saharan Africa and in 2006 established African Information Solutions for Companies Online
Limited ("African Is Cool") a company established to use technology and international investor relations practices to ease
the burden of strategic communications for listed companies in Africa. African Is Cool is actively involved in promoting
transparency and investment into Africa through its free portals www.africanfinancials.com and
www.africanshareholder.com. African is Cool has nine listed company clients in four countries and sponsors the Green
Annual Reports Initiative (GARI).




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