Kenya carries out a Study to facilitate equity investment and exit routes for ICT companies

Mergers, Acquisitions and Financial Results

A team appointed to find ways on how private equity and venture capital funds can be encouraged to invest in ICT opportunities and helped to exit by the Capital Markets Authority has entered the third and final phase of its research.

The facilitation involves making it easier for such investors to sell their stakes in technology companies through the Nairobi Stock Exchange or via private placement. This could lead to the listing of more technology companies unlike the current situation where only AccessKenya is listed in the category.

The East Africa ICT Impact Investing Task Force was formed last year by the Capital Markets Authority (CMA) with the assistance of Rockefeller Foundation. It is expected to complete its work next year.

"The Task Force has inched closer to establishing realistic and measurable steps in its efforts to fill the equity gap with respect to technology-related impact investments to take advantage of the opportunities arising from increased fibre optic connectivity amongst other initiatives," said CMA chief executive Stella Kilonzo in a statement.

CMA is seeking to facilitate an environment where private equity and venture capitalists will be encouraged to exit using the capital markets, to raise capital using capital markets debt instruments in addition to facilitating diversity in investment assets through the growth of fund. The intention is to meet the goals of one of the pillars of the Vision 2030 - to make Kenya a middle income country by 2030 - by facilitating investments.

The task force's overall objectives are to identify the impediments to socially useful technology investments in the region, identify possible technology investments that could be attractive to investors, develop tangible recommendations on steps that could be taken to overcome the existing obstacles to successful investment and venture capital in the East African ICT sector.

The taskforce is expected to come up with relevant data that will aid in attracting ICT Impact Investment to the region.

It will also find ways in which ICT investment in the region can be made attractive through addressing the broader tax and legal issues that restrict the ease of flow of capital into potentially viable projects at all socio-economic levels.

The first taskforce meeting, held in Mombasa in June this year identified policy and regulatory reforms, harnessing of funds, development of investor networks, facilitation of incubation, highlighting impact investing opportunities and exits.

It included consultations with ICT companies, entrepreneurs, experts, Private Equity/ Venture Capital firms and other ICT sector stakeholders in East Africa. Richard Bell, the chairman of the task force who is also the CEO of East Africa Capital Partners (EACP), said the main objectives of the first phase was to define the current status of the ICT sector in East Africa, provide some indicators of the existence of the equity gap and some initial indications of why there is an equity financing gap in the sector - most especially for investments that will also have a positive impact on the lives of the poor and vulnerable in the region.

"We also wanted to have an initial overview on strategies and interventions that have been used in other markets to overcome these challenges and suggest a preliminary list of possible opportunities in East Africa. We have successfully met these objectives and are making good progress in the second phase of the project," he said.

The task force held its second meeting last week in Kigali, Rwanda. In addition to the recommendations that came out of this meeting, CMA said it has engaged the services of consultancy firm Strategic Business Advisors (Africa) Ltd to help the task force refine its findings and recommendations.

The research consultants will be guided at every stage of the research by a Panel of Experts that has been put together by the CMA to oversee the project.

The Task Force is made up of policy makers, impact investors drawn from across the world and technology experts representing East African countries. They include members of the CMA, the Rwanda Development Board, IPP Media, Catalyst Principal Partners, Google, Kenya ICT Board, African Venture Capital Association, TransCentury, Gray Ghost Capital, the World Bank, and East African Capital Partners among others.