In Kenya, when we have a major problem, GoK responds in the following order;
- Delaying tactic-hence all the commissions of enquiry
- Diversionary tactic-don’t know who leaked the terror story, but you can see what I mean
- Wrong option-mass grave for Molo victims
- Right option-finally...
The crisis of confidence at the NSE is about the economy, brokers with sticky fingers, global credit crunched economy in that order. The number one solution is not Stella and CMA board, though it’s been led by a/an ….. (fill in as appropriate) in Ntalami. Waruinge wasn’t any better as Chair and allowed regulatory capture to happen far too easily.
The solution is not CDSC though there is some culpability.
The real underlying/overlying solution is dealing with the brokers and their thieving ways. Its the NSE brokers and their conflict of interests; political connections; lack of transparency (who knows how much any of the brokers made for 2007 never mind 2008?); front-running; circular trading and other oddities. Unless you create the institutional framework that supports a vibrant, transparent, integrity conscious, liquid NSE and the conducive macro economy environment, all the rest is pissing in the wind. Reconstituting/firing CMA board which already includes AG, PS at Treasury, CBK governor is the minimalist and wrong approach. Does that mean UK is proposing firing his PS, Ndung’u (please) and smiler? Is he going to force the NSE (a private entity) to allow more brokers?The clincher is that there is no timing on any of this...
The right options would have been:
- Yesterday-adopt the CMA rule on disclosure. All brokers to publish their accounts for 2007 and 2008 within the next month.
- Today-compensate Nyaga investors
- By end of June- adopt the remainder of those CMA rules into law and then if CMA can’t deliver with a stronger mandate, get rid off it altogether and create a financial sector regulator in its place to oversee not just brokers, but bankers and insurers. However, note that you can’t at the end of the day regulate anybody that doesn’t think regulation is good for them. But you can close them down.
In a related development, D&B’s CEO has resigned. The guy has been involved in all the IPOs since 2006 so to a certain extent can be applauded for a giving NSE some increased volumes and be blamed for introduction of the matatu syndrome into the NSE. One is not going to speculate about his reasons for departure. Timing is interesting though. I am sure you won’t want to be the guy who presided over a sinking ship now would you?