Stock investors are set to pay KES 100 per month as maintenance fees for their CDS accounts.
This comes after the Central Depository and Settlement Corporation (CDSC) reported huge maintenance costs as most accounts remain idle. In 2021, the organization recorded earnings of over KES 300 million, but 60% of this was eaten up by maintenance costs.
There is little activity in the stock market even as the CDSC reports that at least 97% of CDS accounts have been idle for the past 2 years. The market capitalization at the NSE has also dropped to KES 2.43 trillion in 2022 from KES 2.6 trillion in 2021.
A research by the Africa Capital Markets Watch 2021 indicates that Kenya recorded the worst performance in Africa in terms of Initial Public Offers (IPOs). The report indicates that South Africa, Egypt, and Namibia are leading in Africa with 16, 14, and 4 IPOs respectively since 2017.
It has been over a decade since Nairobi Stock Exchange (NSE) undertook a major IPO. Even after the CDSC engaged in investor campaigns in collaboration with the Capital Markets Authority (CMA) in 2017, the market failed to attract more investors. The M-Akiba mobile platform which was aimed at attracting more investors with multiple market opportunities and incentives failed to meet a pre-set target of KES 3.7 billion. Instead, the platform raised only KES1 billion.
With little activity in the stock market, the CDSC has experienced high costs and reduced income over the past few years. As a result, the organization is aiming to raise more revenue through the newly implemented maintenance fee, which will take effect from July.
A message sent to investors’ mobile phones reads, “Dear investor, effective July 15, 2022, CDSC will introduce a CDS account maintenance fee of Sh100 per month payable annually.”
Commentators in the money market sector believe that the move is aimed at compelling CDS account holders to either close their inactive accounts or bolster their transactions. However, the major aim of the decision would be to increase the firm’s revenue streams.
The CDSC earns its revenues through transaction charges, registry fees, bond levy, etc. However, as maintenance costs continue to escalate, the firm is looking for new ways to raise more earnings.
The maintenance fee will help in raising up to KES 1.8 billion a year. Even though the fee is charged monthly, it will be deducted annually from the investor’s account. This would mean that investors will pay KES 1200 per year for every CDS account they own.