Last week cabinet approved the capital markets law that will put in place the capital market authority and the Rwanda stock exchange. The capital markets authority will replace the Capital Market Advisory Council (CMAC) that is currently responsible for the development of capital markets in the country. CMAC is also responsible for trading financial securities on the Rwanda Over The Counter (OTC). In other economies where the financial sector is well established, the capital market regulator is separated from the institution that oversees financial securities trading. As we move close to a fully fledged stock exchange, government has found it necessary to have a capital market regulator and a stock exchange separated. I was also impressed by CMAC’s proposal to give tax incentives to listed companies. Unlike in other capitalistic economies where stock exchanges are purely developed by the private sector, government here has spearheaded the development of the financial market by committing to float stake in state-controlled firms. Well, one can sympathise with the local private sector because stock exchanges across the globe have been in dire straits for some time now, reaching their lowest ebb in the a long time. There’s also fear in the local community as individuals, firms and economies are facing financial ruin due to the devastating drop in financial markets. But in order to help the capital markets in the country, government should approve CMAC’s proposed tax incentives to listed companies. Incentives should also extend to investors and the saving public that participates in transactions on the Rwanda stock exchange. The tax incentives for individual savings should not only extend to the capital market but also non-banking finance companies. The development of the Rwanda Stock Exchange has been smooth with the dominance of the bond market. But the market has witnessed slow growth in the number of listed firms. It is only Kenya’s KCB that is quoted on the Rwandan bourse. There are no locally-owned firms listed on the national stock exchange. The culture of share trading is not well cultivated in our society and it can only be establish if there are attractive incentives. In order to attract firms on the stock exchange, there must be benefits of going public. These should include tax incentives. However a sustainable favourable macroeconomic environment is vital for attracting firms and investors to share trading. The writer is journalist Contact: gahmanyi1@gmail.com
