15 April 2014

East Africa: EAC Stock Markets Move to Harmonise Legal Regimes

Free movement of capital and tradable securities at the regional level could soon be a reality once the legal frameworks governing the regional capital markets are harmonised, Robert Mathu, Rwanda's Capital Markets Authority executive director, has said.

According to Mathu, harmonising capital market laws, especially disclosure requirements companies normally give when seeking capital, will pave way for cross-border investments and push further regional integration.

He said Rwanda's capital markets regulations already met the common market protocol requirements as evidenced during the recent company cross-listings on the Rwanda Stock Exchange. The common market protocol is among the pillars of the East African Community integration and includes free movement of capital.

"Currently, Rwandans are free to invest in any of the East African Community member countries and Rwanda has also fully liberalised the capital account, meaning an investor doesn't need approval from the central bank when sending dollars out of the country," he explained.

He noted that with such freedom, investors would prefer somewhere they can take out the money when they want. He also noted that other East African Community member states had substantially met the requirements, with only Tanzania yet to review its law in order to facilitate free capital movement.

"Once the laws are harmonised, companies will be able to target investors from the region to raise capital," he said. He said a number of directives and schedule of fees had been agreed on for regional issuances of bonds and equity under the East African Community secretariat.

"Once these are adopted and an investor here wants to do an issuance in Nairobi, the regulator there will contact us immediately and if there is no objection from here, they will go on to do the regional issuance after which Nairobi will collect the fees on behalf of the rest," Mathu explained.

He said this is essential as it will help in raising long-term capital for companies and also create opportunities for brokers who would be able to practice their profession in the region. "The directives have a list of what to do like what you do to become a regional broker or to issue a regional bond," he explained.

"Once those standards are met and we comply with the directives, then we will have one regional market in East Africa," he explained. "They can bring in capital and distribute to the whole region at a lower cost and also the time for approval will be shortened because if one is already approved here, there will be no need to seek further approval in other markets."

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