In a significant development, the Stock Exchange of Mauritius (SEM) has unveiled an exciting opportunity for Kenyan investment banks and stockbrokers to participate in its market platform. This move has the potential to broaden the spectrum of offshore investment opportunities within the Indian Ocean island State.

SEM’s Chief Executive, Sunil Benimadhu, announced this groundbreaking initiative in the exchange’s recently released 2022 annual report. He highlighted that the introduction of a new automated trading system (ATS) in the previous year has paved the way for the integration of foreign intermediaries.

By welcoming foreign members into its ATS, SEM aims to tap into a broader pool of investors. This development comes at a time when African exchanges are actively seeking to enhance cross-border trading, with the aim of boosting liquidity and trade activity in their respective markets.

Notably, in November of the previous year, seven African exchanges, including the Nairobi Securities Exchange (NSE) and SEM, jointly launched the African Exchanges Linkage Project (AELP). The AELP, a flagship initiative of the African Securities Exchanges Association (ASEA) and the African Development Bank (AfDB), is designed to facilitate cross-border trading of securities within Africa.

Mr. Benimadhu stated, “The new ATS of the SEM has facilitated the integration of remote members to our platform. Consequently, despite the difficult economic environment, the SEM will work towards attracting remote members, initially from South Africa and Kenya, during the financial year 2022/2023. The objective of this initiative is to increase the investor base of our market and attract more global order flows to our platform.”

SEM has been actively positioning itself to compete with European platforms as a preferred destination for African capital-raising ventures, including sovereign bond issuances. Currently, SEM offers a multi-currency platform, aiming to entice foreign stockbrokers to participate. Furthermore, the exchange provides an array of fiscal incentives to investors, including no withholding tax on dividends, no capital gains taxes, free repatriation of profits, capital, and interest, as well as double taxation avoidance treaties.

These incentives are strategically designed to expand the investor base in its capital markets beyond the relatively limited population of the island nation. Currently, the Mauritian exchange boasts approximately 100,000 account holders holding around 17.2 billion shares, with a market capitalization of Sh1.09 trillion.

Over the past decade, financial sector firms from Mauritius have established a notable presence in Kenya, following a surge in bilateral investment flows between the two countries following the signing of a double-taxation agreement in 2012. Several key transactions include SEM-listed financial services group SBM Holdings’ acquisition of Fidelity Bank and assets of the collapsed Chase Bank. Additionally, in the capital markets sphere, fund manager Axys acquired stockbroker ApexAfrica Capital.

This development has also seen a number of Kenyan firms establish offices in Mauritius, capitalizing on its more favorable tax laws. The move to open its doors to Kenyan investors marks another milestone in SEM’s commitment to fostering international cooperation and expanding investment opportunities within the African continent.
The SEM functions through two distinct markets: the Official Market and the Development & Enterprise Market (DEM). At present, the Official Market boasts 40 listed companies, collectively commanding a substantial Market Capitalization of nearly US$5.3 billion. Meanwhile, the DEM currently houses 48 listed companies, with a combined market capitalization of nearly US$1.5 billion as of July 31, 2012. It’s noteworthy that SEM stands as one of Africa’s premier exchanges and proudly holds membership within the esteemed World Federation of Exchanges.

Photo Source: Google

September 27, 2023
Delino Gayweh
Serrari Financial Analyst