KIGALI, RWANDA - The East African Community (EAC) this week witnesses the birth of a fourth stock exchange when Rwanda officially activates its bourse on January 31.
The Rwanda Stock Exchange (RSE) will join Nairobi Stock Exchange (NSE), Uganda Securities Exchange (USE) and Dar es Salaam Stock Exchange (DSE) in Tanzania.
Burundi is the only EAC member country that lacks a stock exchange.
The activation of RSE comes three years after a Prime Minister's Decree established capital markets in Rwanda leading to creation of the Capital Markets Advisory Council (CMAC) as a market regulator.
This led the establishment of Rwanda over the Counter (OTC) market, a small-scale trading platform that went live on January 31, 2008. CMAC has been baby sitting the OTC as well as playing the regulatory role.
Mr Robert Mathu, the Executive Director of CMAC, says the regulator and the stock exchange are yet to split. He says the law establishing Capital Markets and the law regulating the market will be published before end of January.
"Now that we expect the legal framework to be published anytime, one of the requirements is that we must have a stock exchange," Mr. Mathu told East African Business Week in Kigali last week.
This means that the current CMAC will change into Capital Markets Authority (CMA) and will then regulate the Stock Exchange.
The OTC will however remain operational for some time. The government along with private companies had registered RSE as a company in 2007 but it has been dormant. The government had majority shares.
By then, Rwanda wanted to start with stock exchange but the idea died after the plan of establishing a capital markets advisory council that would fast-track establishment of a vibrant capital market gained momentum.
The new RSE has been reformed and it includes stockbrokers, the government and other private companies.
The private sector holds majority shares in the company while the government holds at least 20% shares.
Mathu said including stockbrokers in the ownership of the RSE could help develop the market.
"We would like to see a stock exchange that is going to be pro-business, active and capable of providing a very efficient service to the investors both domestic and international," Mr. Mathu said.
Stockbrokers have welcomed their inclusion in the ownership of the stock exchange saying it will hold them responsible for protecting the bourse.
"This basically brings in ownership by the stockbrokers which is really positive because when you have an ownership in a particular entity, you make sure you protect the interest of that entity," the Managing Director of CDH Rwanda Mr. Kenam Siula said.
Continental Discount House (CDH) Rwanda owns CDH Capital, which deals with the capital markets.
Siula added, "The stockbrokers are likely going to protect the interest of the stock exchange. Since it is a baby, it has to be nurtured and grow and therefore the taking of the shares by the stockbrokers will really help in growing the stock exchange."
Mathu believes that activation of a stock exchange will convince market players to build confidence in the market.
"For the investment world, now investors can see clearly how they relate to the business of the stock exchange," he said.
Siula noted that oversubscription of the Bralirwa Initial Public Offering (IPO), the first domestic IPO, and the upcoming Bank of Kigali IPO is an indication that the market is heading to a brighter future.
However, he noted that more has to be done in educating Rwandans on the benefits they can get from the capital markets.
Statistics from CMAC indicate that since 2008, bonds worth Rwf26 billion have been issued and listed at ROTC. These include seven treasury bonds worth Rwf25 billion and one Commercial Bank of Rwanda (BCR) corporate bond of Rwf1billion.
Bonds traded on the secondary market have so far generated a turnover of Rwf654.4million.
ROTC also witnessed cross-listing of two Kenyan companies, Kenya Commercial Bank (KCB) and Nation Media Group (NMG).
Since 2008, the Rwanda OTC market has generated a turnover of Rwf 1,196,000 from trading of shares and bonds.
The activation of RSE will coincide with listing of Bralirwa IPO on the secondary market, which is expected to boost business activity on RSE.
Already the first Rwandan IPO has been oversubscribed and the many Rwandans who applied for shares have got 100% shares.
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