Introduced just less than five years ago, the Rwanda stock exchange market has excited many following the successful acquisition and profiting from Bralirwa shares. Bank of Kigali has revealed plans to issue an Initial Public Offering soon of which Rwandans are upbeat about…
Robert Mathu, executive director of Capital Market Authority (CMA) has called upon Rwandans; especially the youth to embrace a savings culture most importantly through the acquisition of shares on the Rwanda Stock Exchange (RSE).
A stock exchange is a marketplace for securities in the form of company shares and government bonds where the general public can acquire shares of a company at a specific fee per share. The shares fluctuate in value depending on the performance of the company.
Recently Bralirwa, a brewery and soft drink company, sold its shares to the public for the first time; the new shareholders have seen their shares gain value by 62%. This has since encouraged the buying of shares on the stock exchange.
The stock exchange market in Rwanda started in January 2008, preceded by Capital Markets Advisory Council (CMAC) setup in 2007 as a transitional body responsible for establishing a capital market in Rwanda and writing up regulations.
CMAC has transformed into the current Capital Market Authority (CMA) a regulatory body of the Rwanda Stock Exchange (RSE).
During its establishment, CMAC faced a challenge of finding Rwandan companies ready to sell shares on the new stock exchange. The government took the initiative to sell government bonds and set stage for private companies.
Government bonds are a type of security issued by government, which pays back the money paid for the bond with interest after a certain period of time.
While waiting for Rwandan companies to issue shares, CMAC ventured abroad. KCB and NMG, companies listed on the Nairobi Stock Exchange, were invited to sell their stock on the newly formed RSE. A company selling its stocks outside its original stock market is usually referred to as cross listing.
Another major challenge was attracting foreign investors to invest in the RSE. The RSE started during the beginning of the global economic downturn, and foreign investors were cash-tight. Due to its underdevelopment, the RSE didn’t experience much repercussion from the global financial crisis.
Mathu explains, “CMA is now working on implementing the legal framework and improving on investor protection.” A stock exchange just like any other marketplace needs regulation especially in protection of investors, who are essentially the buyers of securities.
Mathu also stresses the need for transparency if the RSE is to mature into an efficient capital market. Transparency is especially needed in everyday transactions, transparency during transactions guarantees that sellers and buyers are given fair deals. Investors will be confident of the stock exchange if they see that it is fair and efficient.
“We intend to introduce an electronic system within the next year. Such a system would improve on speed, transparency and efficiency.” Mathu said, explaining CMA’s future plans.
The CMA in collaboration with stock brokers have embarked on an initiative aimed at educating the public about the stock exchange. Brokers act as middlemen between buyers and sellers on the stock exchange. As the RSE is still in its infancy, the Rwandan public needs to be educated on benefits accruing from investing on the stock exchange.
“We have had to invest more time by meeting people on the streets explaining to them the benefits of capital market investments”, explained Shehzad Noordally, general manager of CDH Capital-Rwanda. CDH is a broker firm operating on the RSE.
Bank of Kigali (BK) has revealed it will issue an Initial Public Offering (IPO) -financial jargon for selling new shares. The bank’s IPO may be another opportunity for Rwandans to make money on the stock exchange.
BK’s IPO has caught attention of the people. There seems to be confidence for a successful IPO; much like that of Bralirwa, as was pointed out by Shehzad Noordally, “Many people made money from the Bralirwa IPO and have spoken to their friends. People will be happy to invest in the BK IPO.”
Bank of Kigali hopes to use money from the IPO for small lending to customers, expanding more branches and electronic banking. The bank’s chief operating officer, Lawson Naibo, points out that the stock exchange is the best source for the bank to raise the funds for its projects.
The stock exchange gives Rwandan businesses a new medium of acquiring cash for investment. The money invested on the stock exchange provides long term capital necessary for continual economic growth. The stock exchange is going to be crucial to maintain Rwanda’s economic growth.
Increasing investment in the stock exchange by Rwandans will also boost Rwanda’s average income. Stockholders can earn an income through dividends paid out by companies.
Rwanda has joined fellow EAC countries Kenya, Uganda and Tanzania in having a capital market. All regional stock exchanges have been around longer and are more active than the RSE-the Nairobi Stock Exchange being the most developed.
The government’s privatisation scheme might see more companies issue shares on the RSE. The Bralirwa and upcoming BK IPO were triggered by the government selling off the shares it controlled in these companies.
In the near future, the government might sell off more shares in other companies that will give Rwandans more investment options on the RSE. More IPOs may lead to more investment as Rwandans see the profits to be made on the stock exchange.
Robert Mathu wants Rwandans to know that they can make money while helping build the economy through stock market investment.
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