Seated in an MBA class in Lausanne, Switzerland, several thousand miles away from his home in Kenya, 31-year-old Jimna Mbaru was told to do something that is considered taboo in many parts of Africa. Before embarking on the course, one professor asked the class to write their eulogies.
“I thought, how do I write my eulogy at 31?” says Mbaru during an interview at his Nairobi office.
“That exercise was meant to make us think long-term. When you die, how will you be remembered? No-one is remembered because he or she left a lot of money. When you think with the end in mind, you find yourself thinking about posterity and creating an institution that will outlive you.”
Decades later, Mbaru—a man whose name features prominently in conversations about Africa’s stock markets—is glad to have sat in that MBA class.
Now aged 66, Mbaru is retired and serves as chairman of his investment bank, Dyer &amp; Blair. He has diverse business interests in several companies, some of which are in the banking and insurance sectors. Mbaru was the driving force at the Nairobi Stock Exchange (NSE) where, as chairman, he was instrumental in transforming the exchange into a global market.
Mbaru describes stock exchanges in Africa as unique. The American approach was always through the equities route, followed later by the bond market.
“For new markets like Rwanda, I took the bond market route first. I advised their central bank to start by issuing bonds and bills with maturity of up to 182 days. Then they extended to one, two and five years so they could start building a yield curve. I knew the equities would come automatically.”
Mbaru was directly involved in establishing stock exchanges in Rwanda, Tanzania, Uganda, Zambia, Malawi, Namibia, Botswana, Mozambique and countries in West Africa.
The success of any stock market is intertwined with the leadership of a country and when he was asked to reorganize the Botswana Stock Exchange, the first thing he did was have a chat with the leaders of the country.
“There is no point of organizing a stock exchange unless a country is committed to it.”
Botswana was an interesting assignment because they had a budget surplus but no budget deficit.
“I recommended that their central bank issue bonds for purposes of managing monetary policy and liquidity in their banking system. They got surrogate bonds and the government decided to fund their pension funds over one year. This resulted in a budget deficit of five years and they were able to move formally into the market.”
Mbaru says the number of listed companies on the NSE has not grown substantially because many of the organizations in Kenya are either family-owned, government-owned or subsidiaries of multinationals which get money from their parent companies.
“They don’t need to raise a lot of capital from the market.”
But this has since changed as family-owned companies like Athi River Mining and Scangroup came to the market to raise money for purposes of expansion.
He says you can make a fortune from the stock market but it is not a place to make money in the short-term.
“We analyzed Kenya’s stock market and found that if you take a five-year horizon and you add dividends, bonuses and capital appreciation, all will average a 35% return per annum.”
Looking at the NSE, foreign investors are the major buyers.
“It is good because they provide liquidity to the stock market.”
With a vibrant secondary market, it means the primary market will be able to get their shares fully subscribed. Besides liquidity, foreign investors make the market vibrant because they do a lot of analysis and research before they invest.
“If Kenyans see foreigners buying they know the shares are good to buy. If anything, they force the local brokerages to upgrade and improve their services and research.”
Regarding the future of stock exchanges in Africa, Mbaru sees a lot of them being internationalized in terms of trading platforms and practice.
“They are also changing in that they will no longer be owned by players. They will be demutualized and will operate like businesses, like the Johannesburg and London stock exchanges.”
He adds that most will be owned substantially by the bigger stock exchanges.
“I see NASDAQ trying to buy Johannesburg or NSE.”

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