ASEA urges Africa exchanges to ease entry barriers for SMEs

Small-and-medium enterprises (SMEs) play an important role toward economic growth and development of any country. However, few African SMEs list on stock exchanges despite the numerous opportunities presented by the stock markets. Zeona Jacobs, the Johannesburg Stock Exchange (JSE) director for marketing and corporate affairs, said listing on stock exchange gives SMEs an avenue to easily access capital to finance expansion and new ventures. Jacobs added that this will help break barriers to funding, given the nature of the SME industry and working patterns. He, however, called for easing of regulations to encourage small-and-medium businesses to come to the market. “Easing of initial public offering (IPO) conditions could be a big incentive for SMEs to come to the market and hence be able to raise much-needed investment finance, especially for startups,” he said. He added that SME-listing provides an avenue to raise capital through equity infusion for growth-oriented SMEs. Jacobs was speaking during the second day of the 20th annual African Securities Exchanges Association (ASEA) conference in Kigali yesterday. Sunil Benimadhu, the Security Exchange of Mauritius chief executive officer, advanced further the case for less regulatory controls on SMEs “to encourage more small firms list and help diversify the markets. “Listing provides these SMEs with the benefit of greater credibility and enhanced financial status, leading to higher valuation of the company on one hand, and improved customer-client credibility, on the other,” Benimadhu added. World Federation of Exchanges director for policy Siobhan called for special incentives to attract SMEs to list, adding that creating a special fund or an SME Bank can help to manage and sustain startups. Dr Diane Karusisi, the Bank of Kigali chief executive officer, rooted for an ‘intervention-mix’, saying that putting in place a well-structured system to support SMEs is critical for stock exchanges on the continent. “Many SMEs and investors are often looking for exciting opportunities and products to invest in…It is, therefore, important to have innovative products on our stock markets to attract more listings,” she noted. According to sector experts, listing helps small enterprises to unravel their real value through market-driven mechanism. “Banks and financial institutions prefer to fund listed SMEs compared to those that are not listed. This should give SMEs enough impetus to come to the market,” they said. According to Karusisi, a more flexible regulatory environment for SMEs, including lower barriers to entry and relaxation of constraints on investors’ ability to access IPO markets and smaller cap companies, is critical for expansion of Africa’s stock markets. Improving the ecosystem to better serve companies at different stages of growth and different types of investors is equally important, she added. Participants agreed that creation of an equity culture, through education of investors and companies and ensuring greater availability of capital markets data and research is important. They also said is vital for Africa’s stock markets to refocus tax incentives and remove preference for equity over debt and encourage long-term investment, particularly in ‘growth companies’. The 20th annual ASEA conference attracted over 300 participants, including capital market firms, regulators, bankers, law firms and issuers, local, regional and international investors, rating agencies, portfolio and investment managers, government officials, and technology providers. The event also coincided with the association’s AGM, and sought to enhance competitiveness of security exchanges to boost their contribution to the continent’s GDP. This year’s theme is, “The Road to 2030: making the African Capital Markets Relevant to the real economy”.

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ASEA urges Africa exchanges to ease entry barriers for SMEs