1 January 2018

Rwanda: Why Rwanda Managed Only One IPO in 2017

Rwanda Stock Exchange saw only one initial public offering (IPO) in 2017, underlining a lean year in terms of investment options at the bourse.

Only I&M Rwanda listed through an IPO, with the other two firms expected to float shares still going through the approval process.

Kigali Bus Services (KBS), a city transport company, is at an advanced stage of getting regulatory approvals while a logistics firm that deal makers did not name is said to be also weighing its options.

Analysts blame a tough business regulatory environment on the one hand and their own weak corporate management systems on the other.

"Preparations before equities or debt issuance takes time," said Celestine Rwabukumba, RSE chief executive officer. "For example, it took I&M Bank Rwanda three years to prepare to list after Cabinet made a decision to sell government shares to the public."

Deal makers blame the suspension of the KBS management by the Rwanda Utilities Regulatory Authority (Rura) and appointment of a new manager in the middle of the process of getting regulatory approvals.

"This disrupted the whole process," said a broker. "KBS could not proceed with plans to list while under new administration."

KBS has a contract to transport passengers in Kigali City, and was accused by Rura of breaching the concession agreement when it decommissioned more than 30 buses leaving passengers on some routes stranded.

Rura had promised to return the company to its owner in six months, but a year down the line, the regulator has yet to hand it over.

KBS reportedly withdrew some of its buses citing price undercutting by minibus operators.

Analysts say the capital markets regulator may have to relax listing requirements to encourage more companies to sell shares on the exchange.

But the regulators say the current rules favour small and medium-size companies, which dominate the East African economies, and cannot be relaxed.

Only four

The Rwanda Capital Markets Authority has lined up more than local 40 companies for listing but so far only four have listed through IPOs.

They include Bralirwa, a beer and soda manufacturer, from which the government divested in 2010, Crystal Telecom Rwanda, I&M Bank Rwanda and the Bank of Kigali, which offloaded the government-owned shares to the public in 2011.

The market had to wait for five years before the government offloaded its stake in I&M Bank Rwanda.

Robert Mathu, a securities consultant in Kigali, says governance demands prevent many SMEs from listing. The regulators demand that a business must have at least one independent director and produce audited financial reports.

"These conditions are not negotiable," said Mr Mathu.

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