Home Afrika was listed as the first SME in the GEMS markets segment of the Nairobi Stock Exchange almost one year after the segment was established. The NSE has various market segments that allow various companies to list provided they meet the minimum requirements for listing on these segments. Traditionally, listing for SMEs has been a difficult and challenging affair because of the prohibitive costs and requirements. The GEMS segment makes it easier for SMES to list. A company wishing for a GEMS listing can only do so under the advice of a registered NOMAD that is a nominated advisor. Despite the attractive features of these segment uptake of listings and even NOMAD registrations has been slow. Not many professionals have gotten the NOMAD license due to several factors. The role of NOMAD is big. The NOMAD must understand the business of the company and also prepare the board for the listing. This includes advising on the fitness or otherwise of board members. The NOMAD would also continue acting as the interface between the NSE and the company listed on the GEMS. From what I understood no company that practises in one field would be able to serve as a NOMAD. By the way only few professionals qualify as NOMADS and these include lawyers, economists and financial advisors. The person applying for the license must be a company and must show it has at least 3 years experience in doing similar work and must have in its employ at least 2 authorized representatives who must also have minimum qualification and further a compliance officer. For lawyers in practice, it is difficult to use the experience of your law firm to apply for the license because traditionally law firms are either sole proprietorships or partnerships. That knocks out most law firms from getting the license. Perhaps lawyers would consider forming companies and employing the requisite staff. However the challenge would be where would such a company, newly incorporated get the requisite 3 years experience from? Besides there is the Law Society of Kenya which prohibits lawyers from practising as companies. The same challenge is also faced by accountants. Therefore the few licensed NOMADS are the financial services company that have always done listing work. This is because they meet the requirement of being a registered company and also that company having the requisite 3 years experience in corporate finance.
However despite this the uptake of licensing among NOMADS has not been so high because of the amount of cross sector expertise required. A financial service firm cannot be able to properly advice the SME without the help of a lawyer. The NOMAD would also require a HR consultant to advice the board on various issues and will also need to do a technical viability of the listing. One firm is not able to do this alone. The Rules allow the licensed NOMAD to partner with other firms and form a consortium of advisors. This is how the first listing was done. The challenge with this is that the listing cost would again be prohibitive for the SME taking into account the need to pay every member of the consortium. In many countries there are different tier firms that provide services to different segments of the markets. Therefore we do not have the firms that specialise in large listings doing the listing for the GEMS exchange because their cost would be prohibitive to the listings. I suppose if the industry players that is professionals who would qualify looked into the matter carefully, they would be able to partner with other likeminded professionals and serve as NOMAD for this market. For example a mid size financial company can partner with a mid size law firm and seek out the NOMAD license. Their cost would not be too prohibitive for the SME and the service offered would be quality. Another alternative would be for the mid size financial service firm to hire as permanent members lawyers and other professionals who would be able to give the professional service to many companies listed on the GEMS exchange such that we have more one stop shops available to the SMES.