17 October 2017

Rwanda: RSE Eyes New Products As It Grapples With Attracting SMEs to the Market

interview

The Rwanda Stock Exchange recently formed a partnership with National Institute of Statistics of Rwanda, where the statistics body will be releasing market information periodically.

Business Times' Stephen Nuwagira caught up with RSE chief executive Pierre-Célestin Rwabukumba to discuss this initiative and other stock market issues. Rwabukumba explains why it is taking long for SMEs and local governments to come to the market to raise development funds, as well as the long-awaited automation of the local bourse.

Tell us more about the collaboration between RSE and the statistics body. How will it benefit you, investors and the general public?

We produce these statistics and market data every day, which data vendors and the general public pick all the time.

The new initiative of linking to the statistics body seeks to enhance and centralise the release of RSE information. That way, investors, researchers or other people, who may need it, access it in a central place. This move will also make the market more visible.

What other initiatives are in the pipeline to ease access to local capital market information and deepen understanding of the market operations and opportunities it offers?

We are doing just general awareness campaigns countrywide as well as in print, broadcast and social and other media platforms to disseminate market information. We're in the process of introducing more products such as Exchange Traded Funds (ETFs), municipal bonds and Real Estate Investment Trusts (REITs).

All these are good products that are aligned with the country's development goals. Remember, there are these platforms or opportunities in place, but it is always upon the issuers to seize and exploit them maximally; we cannot force them.

There were efforts to attract SME players to the alternative market segment. What happened to those efforts? Is there any SME preparing to list on alternative market in the near future?

That push is still there, the rules of the game are there, and the players are doing what they are supposed to do, but the SMEs are yet to list. Though there are a few in the pipeline, but we can't disclose them now.

This particular section takes more time because, remember at the end of the day, even if we approach them, discuss and they listened and start their processes, we must follow all the rules and procedures. No shortcuts because this is public money. So we have to make sure the investing public is fully-protected.

The programme to sensitise local governments about municipal bonds, and help them come to the market to raise development finance has been going on for over two years now. Why has it not yielded any fruits so far?

Well, when you plant a seed you don't except the crop to be ripe immediately; a lot has to go in before you can harvest. This process involves a lot of different players not just the local government entities and ourselves. Certain prerequisites must be in place for this to kick-off but a lot of work has been done and it is progressing slowly, but with sure steps. The fruits shall be seen in due course. What are the inherent challenges keeping away local governments from the market?

Like I mentioned above, it is an entire process to use these markets. You have certain education that has been going on; and rating that must be done before they can access public markets (in that light). Also, financial management, revenue streams and other structural issues must be all aligned. It is a new concept which must be done properly with no mistakes. Otherwise, you can't just have products for the sake of it.

There has been planned listing of some big and SME firms since 2015. Why did they shy away?

I don't like the word 'shying away'. They are not necessarily shying away. Some of them are afraid of opening up to other people, others are simply not capital market investment-ready but are maybe good for other types of funding and others have other alternatives.

For instance, we have approached some SMEs and started work with them. Then along the way you find that there are several issues that make them not ready for the market, meaning you go back to square one: Handholding because you don't want to expose the general public to unnecessary risks.

Though it has taken long, we can't give up because there are some good prospects which are progressing well.

What happened to the planned automation of the local bourse?

The plan is still on and also involves neighbouring countries as the infrastructure will link to the regional exchanges. But you must note that the most important and difficult part of the market is automation of the clearing and settlement process. The rest will have to link this settlement to the trading platform which we have, at least, already tested. The EAC capital markets integration project will enable us to tap into a wider investor pool and wider range of products the region has to offer, as well as help improve our efficiencies.

Central bank figures show that the bond market is outperforming the equity market whose performance in the first half of the year was only supported by sale of government stake in I&M Bank. What is your take on this?

I am not sure which results or measuring instruments you are using but all I know is that yes, the bond market has improved and people are now starting to come on board in better numbers for that market section. However, the equities market section is by far the most used by the general public. When you have more products coming in, such as IPOs, you get more or fresh investors entering the market. Going back to your question: Yes the bonds market has gotten more traction this year in terms of volumes, but also the equities market has recovered in the volumes transacted compared to the same period last year.

What is this year's performance outlook for RSE, and regional markets?

I see RSE stabilising at the current levels or slightly edging up in indices but activities will be more less higher than last year as we close the year.

Regionally, I think a lot will depend on how the situation evolves in Kenya and the rest of the world events could play some role looking ahead. Remember, we do not live or work in isolation.

Follow @NuwagiraStephen

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