Kigali — The historic U.S. African Growth and Opportunity Act (AGOA) has created a positive impact across sub-Saharan Africa, and one such development has been the establishment of private equity stock markets in many African countries.

Robert Mathu, executive director of Rwanda's Capital Market Advisory Council, made that point in a July 30 interview with America.gov at the headquarters of the Rwanda Capital Market, which runs the country's stock exchange. Mathu made his comments before the opening of the 8th AGOA Forum in Nairobi, Kenya, August 4-6.

A stock market is critical to a country's financial health and long-term economic growth and development, he said, and thus the Rwanda Capital Market, which was established in January 2008, "fills a gap" in funding key economic projects.

Stock markets are "extremely crucial," he explained, because they provide long-term capital funding needed for economic development at reasonable rates.

"A stock market helps any country allocate capital more efficiently than any other system because ... capital is attracted to one thing: return on investment. Without a capital market," Mathu said, "it would be impossible for investors to access a variety of investments in a competitive environment."

"When you have a capital market in a Western economy, because information is publicly available, the public can select the best-yielding investments and invest accordingly and rationally," he explained.

The capital market ensures that investment funds are priced competitively and transparently for everyone to see, he added.

Citing an example, he said the Rwanda Capital Market posted its first corporate bond issued by BCR Capital in January 2008. The long-term funds that were generated from that investment offering, he said, are now being used to provide 15- to 20-year mortgages that are allowing Rwandans buy homes and, in turn, also helping to stimulate the economy.

Most investment being funded by commercial banks is short-term, he said, and so without a stock market to attract long-term capital, long-term development projects such as mortgages cannot be funded.

Mathu said Rwanda's stock market is just one aspect of an economy that has been totally transformed since the country's 1994 genocide, in which more than 800,000 people died.

"A lot of reforms have been undertaken across the entire spectrum of the economy," he said, with the country's financial, manufacturing and service sectors being reworked from the ground up.

"Rwanda now has the highest level of governance in Africa," he explained, meaning a "zero tolerance for corruption, full transparency, very good security of life and property, with rule of law" being fully observed.

With those reforms now being implemented, he said, the only thing that has been lacking is long-term capital, and that gap is now being provided by the Rwanda Capital Market.

Besides serving the domestic investment sector, the Rwanda Capital Market now also offers investments to international portfolio investors, he added.

The market serves those investors, he said, by following international accounting and disclosure standards and rules of transparency that allow those investors to make their investment decisions based on international standards with which they are familiar.

Those international investors, in turn, provide the country with needed foreign exchange capital, he said. Additionally, he said, foreign investors have an "exit window" always at the ready in the capital markets in that they can sell their investments on the open market at any time.

Mathu said the Rwanda Capital Market is now affiliated with its fellow exchanges in East Africa: the Nairobi Stock Exchange (NSE), the Dar es Salaam Stock Exchange (DSE) and the Uganda Securities Exchange (USE).

In the wake of the world financial crisis, African capital markets are now more important than ever, he explained, because more African countries are trading regionally among themselves.

Since the onset of the crisis, he said, "the demand for our commodities has declined," and so "African economies are beginning to look at alternative" and regional ways to spur economic growth and development.

Returning to the African Growth and Opportunity Act, Mathu said AGOA has done much for the continent.

"AGOA provides the opportunity for eligible countries to export their products to America and trade with America," he said.

Referring to the 8th AGOA Forum, Mathu said, "Out of this conference, African investors will start looking at Africa not in terms of a single country but how at a regional level they can respond to such opportunities" to make the economies of Africa even stronger.