President Paul Kagame believes that developing strong capital markets can help end the debate on whether African countries can stand on their own without foreign aid.

The President’s remarks were in response to a question asked yesterday at the opening of a two-day international conference on capital markets, organised by the Government and the International Finance Corporation (IFC).

Video: President Kagame at East African Capital markets conference- Kigali, 12 February 2015. Source: Paul Kagame /YouTube

"Between markets and aid, what would you choose?” Moderator Bronwyn Nielsen asked a high level panel of experts that was discussing the topic, "Making markets work for growth.”

The panelists, that included Finance minister Claver Gatete, Tanzania’s central bank governor, IFC experts and a representative of the China-Africa development fund, argued, in response, that "aid and markets supplement each other, and that both are necessary.”

"The question of preference between markets and aid can only be asked in Africa, not in any other region of this world. Aid is more political than anything else. Markets are less political, they are neutral,” Kagame observed.

The President added that the difference between the benefits of aid and markets should not be glossed over.

"Let’s not be diplomatic, let’s not gloss over issues. Markets are markets. We know what they offer outweigh what we have in aid by thousands of times,” Kagame said.

Kagame’s observations to the question of aid and markets quickly changed the direction of the debate, with Minister Gatete referring to the unjustified aid cuts of 2013 as an example of the politicisation of aid.

"When Rwanda’s economy contracted in 2013, for instance, we had done everything right as a government but when donors decided to cut or delay aid, everything was disrupted, markets are more predictable and they pose fewer risks when you do the right thing,” said Gatete.

In an earlier address to officially open the conference, President Kagame had noted that capital markets are not only about money but also people.

"In working to prioritise capital market development, we are opening a new chapter in our story of liberation, by addressing the deeper structural deficiencies that have kept Africa at the margins of the world economy,” Kagame said.

Harmonise markets

The call for the harmonisation of East Africa’s capital markets to create one regional platform featured prominently.

Speakers such as Ethiopis Tafara, the vice-president in charge of corporate risk and sustainability at IFC, said most capital markets in individual African countries were too small and unable to raise big amounts of capital for large projects.

"But creating regional markets circumvents this and makes the region more attractive to investors,” Tafara said.President Paul Kagame also backed this view when he noted during his address that capital markets depend on integration which is part of the infrastructure needed for the optimism in Africa’s growth.

"No country on our continent, on its own, is big enough or rich enough to build and sustain the markets that Africa needs. Regional, continental, and even global integration is more essential than ever before,” Kagame said.

Jingdong Hua, vice-president and treasurer of IFC, pledged the organisation’s support to help develop capital markets not only in Rwanda but the region as a whole noting that there are already ongoing efforts in that direction.

"At the moment, capital markets in the region are at different levels and have different regulatory systems all of which call for harmonisation, but there’s strong political will in that direction, to which IFC and the World Bank would like to pledge support,” Jingdong said.

Benno Ndulu, governor of the Tanzanian central bank, said developing robust capital markets will enable the region to raise money to fund some of the large infrastructural projects such as those in the infrastructure sector, without having to depend on donors for aid.

For instance, Africa reportedly needs at least $48 billion annually to fund infrastructure projects – money that can be mobilised from capital markets.

Minister Gatete said that the conversation for regional stock trading has already been launched and that members are now working towards harmonising the required regulations and investing in the necessary technology to make it possible for an East African Capital Markets platform.

The CMEA conference which closes today attracted over 350 capital markets experts from within and outside East Africa to discuss issues affecting the development of African capital markets, especially in sub-Saharan Africa and East Africa.

Rwanda’s Capital Market Authority was established in 2007 to guide the development of the country’s capital markets.

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