Capital Markets Authority (CMA) chairman James Ndegwa has issued a notice of appeal against a High Court decision that ruled against him in the court case challenging his reappointment.
Ndegwa alongside CMA six board members wanted Justice Maureen Onyango to strike out the case filed by rights activist Okiya Omtatah, who accuses President Kenyatta and the Treasury Cabinet Secretary of handpicking the board members as opposed to subjecting them to a transparent, competitive and merit-based process.
In the case that could see the whole CMA board ousted, Omtatah accused Ndegwa of conflict of interest, since he is a major player in the market where he was purportedly appointed to regulate.
Ndegwa and his team argued that the case was misconceived improperly before the court since “the court lacks requisite powers to hear and determine the petition”.
However, on January 22, 2021, Justice Maureen ruled against Ndegwa and his team, allowing the case to go to a full hearing.
“Having found that this court has jurisdiction and further that the Respondents have not established that the issues herein are sub judice, the preliminary objection fails and is accordingly dismissed. Costs shall be in the cause,” ruled Justice Maureen.
Ndegwa and the board members John Birech, Freshia Mugo, George Moibi, Thomas Kibua, Christine Okoth and Peter Mungai have already issued a notice of appeal against the decision.
“Take notice that the respondents herein being dissatisfied with the ruling of the Employment and Labour Relations Court at Nairobi delivered on 22nd January, 2021 (Hon. Lady Justice Maureen Onyango ) intends to appeal to the Court of Appeal against the whole of the said decision,” read the notice by Waweru Gatonye & Co Advocates.
In January 2020, Omtata filed a petition in the High Court seeking to oust the CMA board led by Ndegwa over irregular and unconstitutional appointments that entail conflict of interest.
In the petition filed by Omtatah, Ndegwa was accused of being a player in a market that he regulates, which amounts to conflict of interest to the “extent that he is a public official who regulates his private businesses”.
Ndegwa is the Chairman of First Chartered Securities (FCS). FCS owns ICEA Lion, which owns ICEA Lion Asset Managers, which manages the ICEA Money Market Fund, which is regulated by the CMA.
ICEA Lion recently acquired Stanlib, hence, Stanlib Money Market Fund is also under ICEA lion. Stanlib Money Market Fund is regulated by CMA. FCS and it’s afflictions own a 12 percent stake in NCBA, which is listed in the Nairobi Securities Exchange. Hence, NCBA is also regulated by CMA.
NCBA also runs NCBA money market fund, which is also regulated by CMA.
The Ndegwa family also owns a controlling 50.9 percent stake in the Unga Group which is also listed with the Nairobi Securities Exchange (NSE).
Ndegwa was re-appointed to be the Chairperson of the Board of CMA, for a period of three years with effect from April 18, 2018.
“Initially, H. E. the President handpicked and appointed him to the public office without subjecting him to a transparent, competitive, inclusive, and merit-based recruitment process open to public participation,” argued Omtatah.
During his reign, Mr Ndegwa has expanded his capital markets business interests by acquiring fund management business, money market funds, and acquiring another bank.
The expansion happened under the watch of Paul Muthaura as CEO of CMA, and it is curious that following his exit from CMA, he was recently offered employment CEO of ICEA Lion General Insurance.
CMA has enacted and enforced policies that are very friendly to banks and are very unfriendly to competing non-bank players, this has led to banks controling the business funding market making it very difficult for businesses to get loans at reasonable prices.
Market players have recently been aggressively pushing for the freeing of the Capital Markets governance and operations from the control of the banking sector.
In fact, in the latest Capital Markets Soundness Report, CMA acknowledged that “Current construction finance by capital markets stands at 5% with the banking sector taking up the lion’s share of 95% according to the Africa Housing Finance Yearbook 2020. Therefore, there is potential for the capital markets to bridge the gap and be a source of cheap capital to spur the real estate and construction sector in 2021 and beyond.”
In well-functioning economies, capital markets provide 60% funding with banks providing only 40%, hence there is need to urgently review the capital market frameworks to spur funding for the economy and businesses.