It had been a ‘bad’ trading year. The balance sheet was deep in the negative, following heavy investment in restructuring, rebranding and repositioning.

The share value had plummeted to a record low, never seen at the bourse. People’s savings had literally evaporated. Everyone was scared.

This is what greeted us at the beginning of a new trading year, when a listed manufacturing firm in Kenya share price hit rock bottom, a few years back. We all needed assurance. And assurance we received: 

"Never buy shares, hoping to sell at a profit and pay school fees…shares are good for long-term investment, not short term speculation…”

In this brief address, the CEO had summed up, and demystified what buying and selling shares is all about. In his subsequent weekly briefs, the chief executive would educate us more on this, and soon we all came to appreciate what the stock market is all about when it comes to individual, low-income savers and investors.

In the current conventional capital markets practice, only a few enlightened individuals, big institutional investors and shrewd speculators invest in shares of listed companies. This has created an impression, even among the elite, that buying and selling stocks is a speculative venture: buy when they are low, sell when the stock value goes up. This makes sense for the big institutional investors and stockbrokers, whose lifeline depends on the value and number of shares traded. The capital market should go beyond this, to serve development, not merely speculative trade.

Demystifying and ‘democratising’ the stock market

This is where the capital markets have to rethink their approach, and ‘domesticate’ it to the local context of a typical rural East African Community (EAC) context. There is this misnomer that Africans have a poor savings culture, propounded by theorists who look at Africa through European lenses.

Africans do save, and plan for the future. Besides the traditional wealth in animals and land, the current reality in self-help groups and village banks negates this notion of ‘lack of a savings culture’, which has been described by one pundit as an escapist excuse by technocrats not keen on venturing beyond the comfort of their offices to where the majority of us live.

This is what Pralahad calls the Bottom-of-the-Pyramid (BoP). It works through the power of numbers. The BoP in our context is both a business opportunity and an obligation. It is an obligation in the sense that it is the base and support of our economies.

The capital markets must, therefore, look beyond the ‘bulls and bears’ language of the conventional stock  market and go for the billions down in the villages, held by the thousands of self-help groups and associations. My mother tells me she saves Ugsh75,000 (Rwf21,000) per month in the various community and church groups she belongs to.

It may sound strange, if not crazy, to the ladies and gentlemen in red suits, but if we are to ‘kill’ the informal sector, and transform our rural economies, then the planners and thinkers leading our capital markets have to burn the midnight candle and come up with innovative unorthodox ways of tapping into this latent wealth in the ‘informal’ sector.

And the clue to this lies into what our CEO told us at the time small time investors in our employer company had despaired as their shares lost value: a long-term perspective of investment in listed companies.

My mother will easily find value and reason to save her Ugsh75,000 per month in shares of a listed company, if she understand that, in 15 years, this small monthly savings will have grown to an amount enough to pay her grandson’s fees at university.

A simple computation reveals that this rate of saving will yield Ugsh21 million at a conservative annual interest rate of 7 per cent, in 15 years.

This is the strategy and language that EAC capital markets have to adopt, working out mechanisms that will be meaningful and economical both to the small investors and the regional sector players.

It is through such heterodox means that the billions tied down in the informal sector will be released for investment, job-creation, effective demand and further investment, hence creating a virtuous cycle of prosperity. And we have all that it takes to achieve this.

The author is a partner at Peers Consult Kampala, and CET Consulting Kigali

Email: bukanga@yahoo.com