There has been talk that the announcement by government to shelve its much awaited pipeline of Initial Public Offers( IPOs) would dampen activities at the Rwanda Stock Exchange (RSE) .In this exclusive interview Fred Oluoch-Ojiwah of  The New Times talks to Robert Mathu, Executive Director at The Capital Markets Authority, on the larger prospects of Rwanda’s young capital markets.

How is the Capital Markets Authority going to take care of disappointments by investors at Rwanda Stock Exchange after reports came that the pipelines of government IPOs had dried up?

We are going to focus more on other alternative areas of growth. Three key value drivers are being worked on right now. One being privatization of key government assets. The second one,  being cross listing of companies arising out of regional integration. The third one is  the listings of private sector companies in Rwanda. The focus on private sector companies is based on bringing on board family owned entities and other forms of businesses to consider the stock market as a vehicle of raising capital and expanding. But such companies must be ready to be subjected to certain requirements.

But it is known that the terms and conditions of raising cash from the stock markets is what has  hampered the government companies from coming on board. I am talking about the listing requirements that demand things like audited accounts or adhering to certain corporate governance issues ‑ that is a very big problem in Rwanda whether one is talking about private or private sector businesses.

While we are aware that not many companies will come on board, you must also remember that the majority of businesses, even in developed economies,  are mostly private run family businesses. So,  the few that will most likely come on board will definitely create a big impact. They can also come to the stock markets without issuing shares to the public. They can come and issue bonds while remaining closed businesses. That is the objective of capital markets, which is to enable businesses to access capital. Whether they do so through selling shares or coming to borrow, it is OK, as we will be seen to be serving our purposes.

How about the other value driver you are talking about?

We already have three companies that have expressed interest to cross list at the RSE.

Are you in a position to give more precise details?

Not at the moment. But all I can say is that they are blue chip stocks all from Kenya. Two of the companies, Equity Bank and Centum Investments Ltd, passed resolutions during their AGMs for cross listings, including doing so at the RSE, but the third one’s case is still too premature to start talking about.

Stock Brokers I talked to expressed great disappointment after the sale of government stakes  in  MTN  Rwanda  back to the MTN Group of South Africa. They thought that if the sale process was taken through the RSE, the prospect would have  further activated trading at the Rwandan bourse  after the BK and Bralirwa IPOs. These stock brokers are saying that such a prospect could have even generated further dynamism in the RSE.

The stock brokers or anybody following such events must remember that the decision of  going public  depends purely on the shareholders of the company in question.

While that is true, I tend to think that your authority has an advisory role to government at the time it is divesting . Since we are talking about  the sale of strategic government stocks in a very lucrative company that has been trusted  by a vast majority of Rwandans, I tend to think that you ought to have advised government to give the same Rwandans a chance to own a piece of MTN Rwanda, through the RSE, just as it is the case with Bralirwa and BK.

It  is  a case  of the majority shareholders in MTN Rwanda known as MTN Group of South Africa exercising what is technically referred to as  pre-emptive rights over the purchase of government stakes in MTN Rwanda. Meaning that MTN Group had  the actual  rights over any other person to purchase government’s stakes in MTN Rwanda in case government wanted to divest.  Maybe it is the policy of MTN Group to only list at the Johannesburg Stock Exchange. Some of these things are not very clear. But stock brokers should not give up on MTN Rwanda.

What do you mean by that?

There is still a further 20 percent of the MTN stocks that could still be brought to the local stock market.

That is good news. But again the question is –will CMA work hard to make that happen and, if so, when will that happen?

No I cannot tell that. Such a decision lies with the shareholders of MTN Rwanda.

Do you see immaturity in the setting up of RSE given that only two campanies have listed so far?

I don’t think so. Remember this fact. Rwanda has really tried. I would give an example of Uganda’s Stock Exchange. For the first 6 years of the life  of The Uganda Stock Exchange, they never had an IPO. In Rwanda , we have 4 listed companies. That being the case, people, especially those in the media, should not judge us harshly. If anything, it takes time to get to that level you are talking about. Meaning that what we have done so far, comparatively,  is just commendable.

Give us details of how you intend to interest Rwandan private companies to come to the stock markets. It could be different from the way you deal with government companies. How are you going to do it and, more so, what are we likely to see?

We are in the process of developing what is called disclosure guidelines for such companies that are not as  rigorous as those requirements for government companies. We are bringing down the bars so that we may be able to entice such companies to enter the stock markets more easily. While doing so, we are putting in place strategies that will enable the general public to be aware of how such companies are entering the stock markets, including their perceived higher risks that comes with higher return profiles.

Does it mean that you will create a separate trading counter for them or what?

Precisely.  We will create a stock market for the SME category. If they come on board they can grow and graduate to join the main category.

Share with the  readers the broad plans for the RSE this year.

The main highlights will focus on automating the trading so that it is done through an electronic platform. Secondly, we intend to integrate with the rest of the region in terms of cross border  trading. Right now we are integrated. But because  we are at different levels of development in terms of maturity  of ICTs ,you will find that trading is not very smooth. We want to make it smoother. Such that you can buy shares today in Nairobi and sell them in Kigali tomorrow or buy in Kigali tomorrow and sell in Kampala the next day. That is a very significant objective of this new year. It means that once we have a more efficient flow of capital,  that is what is needed so that Rwanda can access that kind of long term capital.

How about other aspects of the capital markets such as bonds? A case in point was the long talked about listing of the Kigali Municipal bond that has  never seen the light of  day.

Generally, the bond market is a very unique market compared to shares. Bonds are not very active in secondary markets. It is like a pipeline. Once you have so many bonds, then banks and other intermediaries spot opportunities for trading so, it is a market that takes time. What really affected the development of the bond market at RSE and even the region was the global financial crisis. The crisis hit the credit market. The bond market is a credit market. I can tell you that a vast majority of Rwandan blue chip companies such as MTN, Bralirwa and even the national cement maker Cimerwa Ltd,  wanted to float bonds before coming to list on the RSE. But the credit markets crushed worldwide. So, investors lost appetite for credit. That is what affected even the Kigali Municipal bond. But having said that,  it should be pointed out that it is not the end of the world.

So, what is in the pipeline?

We are still looking at that market. We plan to come up with a bond market known as the real estate investment trust. Through such a vehicle, developers of real estate should be able to access capital from the public and the public should be able to have an opportunity to ride on the fast growing real estate sector.

There has been talk that you were to be replaced by a Rwandan. What is the real story on that? Part of the talk is that your coming on board was for a specific term  under which you were to hand over the leadership to a Rwandan. What happened? It seems as if we are still going to see your face for quite some time.

It is unfair to ask me that question since I happen to be the subject of that topic. But the issue is we have been building capacity. We have capable young  people but you know  transition has to be planned so that there is continuity. There are a couple of things that took time. The establishment of the Capital Markets Authority as a fully fledged body is a case in point. That happened, last year, in December. Now it means that we have to put the structures of the institution in place. Next is implementing the law. There is training the people on managing the processes. We had expected this to come two years ago. It took a bit of time. From a technical side, the institution will run smoothly. From the leadership perspective, being a CEO, is all about capability. Any one in Rwanda should be able to be CEO of this body. While we have people who are understudying me, of course, the final decision lies with higher authorities. But I will be very happy to hand over the leadership  to a Rwandan.

Talking about your tour of duty in Rwanda,  is it possible to talk about both your highest and lowest moments?

The highest is for me to appreciate that capital markets can work. That is the most important for me.

How would you measure that? I also know that there are so many people who do not seem to know how capital markets work?

While I do not want to be dragged on endless discussions on that, I can only say one thing. Rwanda has an asset that you cannot see but you can feel. That is having an environment where governance and the ability to enforce laws works round the clock. I have worked in so many countries and what is happening here is outstanding. It is not easy upholding the rule of law. That is an asset that Rwanda has. Rwandans might even take it for granted. Back to the case of my high point. There were people who were once known to be  skeptical about capital markets in Rwanda. A  case being even some Kenyan investors. Now things have since changed for such investors some of who are busy scramming for a piece of the action. That is very wonderful.

How about your lowest point?
Not at all.  So far  so good.

Ends