Rwanda: Country to Open 'Over the Counter' Stockmarket

Source from:  The East African (Nairobi) 14 January 2008 01/15/2008

Rwanda will have a fully operational stockmarket by the end of this month, according to Robert Mathu, executive director of the Capital Markets Advisory Council . The CMAC was formed by the government in June 2007 specifically to help set up the exchange. "We are in the process of receiving applications from corporate stockbrokers, dealers and sponsors from Kenya, Uganda and Tanzania, as well as from Rwandan nationals to get the country's capital markets going," Mr Mathu said. He added that the country needed a secondary market where transactions will take place among investors, with centralised trading linking all players. Mr Mathu said one of the key responsibilities of CMAC, which was set up by the Ministry of Finance to help establish the stockmarket, is to develop an official securities market in Rwanda. The stockmarket will be known as the Rwanda OTC Market (ROTCM), and will be operated and supervised by the government until it it is developed enough to be managed by the private sector. ROTCM will be the fourth stockmarket in the East African Community, the others being the Nairobi Stock Exchange (NSE), the Uganda Securities Exchange (USE) and the Dar es Salaam Stock Exchange (DSE). Only the NSE is run by the private sector. The USE and the DSE are supervised by government bodies. The NSE is Africa's fourth largest stock exchange in terms of trading volumes, and the continent's fifth in terms of market capitalisation as a percentage of the gross domestic product. Burundi is the only East African country yet to set up a capital market. Mr Mathu said that once it becomes operational, the Rwanda stockmarket will join the East African Stock Exchange Association, while CMAC will join the East African Securities Regulatory Authority EASRA, which helps member states develop capital markets institutions, currently comprises Kenya's Capital Markets Authority Kenya (CMAK), Uganda's Capital Markets Authority Uganda (CMAU) and Tanzania's Capital Markets and Securities Authority. The authority also facilitates exchange of information to help enforce laws and regulations in the different countries, besides conducting cross-border surveillance and public education awareness in addition to co-ordinating technical assistance and promoting consultancy within the region. Mr Mathu said CMAC will strive to get East African companies and foreign multi-nationals to cross-list between the country's stockmarket and those of Uganda and Kenya. Currently, only a few multi-national companies are cross-listed between the USE and NSE, among them Jubilee, British American Tobacco, Kenya Airways and East African Breweries. British American Tobacco and Kenya Airways have established a major presence in Kigali. Mr Mathu said CMAC will, for the time being, operate as well as regulate Rwanda's stockmarket. "The economies of the other East African countries are big enough to allow them to leave their stockmarkets in the hands of the private sector. Rwanda's economy is quite small, and setting up a stockmarket means someone must foot the bill. In this case, it is the government," Mr Mathu explained. "We have finished working on a blueprint for setting up a stockmarket. All we are now waiting for are individuals and firms to apply for membership," he said. Initially, ROTCM will operate using over-the-counter (OTC) trading, that is, trading in unlisted securities. This method is usually used when the trading companies are too small to meet exchange listing requirements. "OTC is usually used for smaller markets. Rwanda's government will also use CMAC as a privatisation tool," Mr Mathu said. Mr Mathu said CMAC is looking for suitable corporate stockbrokers, individuals and corporate dealers, as well as corporate sponsors to become members of the stockmarket. Those who wish to be dealers must be legally resident in Rwanda, while corporate stockbrokers are required to put up about $20,000. Mathu said the Rwanda stock- market will also acquire an Automated Transfer System within the year. When this occurs, trading will become an instantaneous electronic exchange of information. Both the USE and DSE have yet to go electronic while the NSE adopted an automated trading system in 2006. Enditem