February 21, 2008

Kenyan Firms Register On Rwanda Stock Exchange

By Washington Gikunju
 

At least four Kenyan stockbrokers have acquired licences that grant them membership to the region's youngest stock market - the Rwanda Stock Exchange (RSE).

The four, Faida Investment Bank, African Alliance, Dyer and Blair and Tsavo Securities, have all registered local subsidiaries with the RSE, which has so far licensed only seven stockbrokers.

The Rwandese bourse has three licence categories; stockbrokers and dealers; who have access to the trading floor, sponsors; whose main task is to attract and offer transaction advisory services to potential investors or listing candidates, and investment banks.

The RSE is headed by a Kenyan; Mr Robert Mathu, who also helped set up the exchange and doubles as the executive director of the regulatory body, Capital Market Advisory Council (CMAC) of Rwanda.

Mr Mathu is a former long serving official of the NSE who also helped in setting up the Dar-es-Salaam Stock Exchange and the Uganda Securities Exchange.

Licensing of the Kenyan stockbrokers by RSE underpins Rwanda's publicly stated business policy of opening up to all foreign investors as the country battles to repair an economy that was battered by genocide about 14 years ago in which an estimated 800,000 people lost their lives.

Kenyan stockbrokers are only known to have affiliation agreements with fellow stockbrokers in Uganda and Tanzania; with Dyer and Blair and African Alliance the only dealers known to have established a physical presence by way of opening branches in the Ugandan market.

A number of applications for licenses from Kenyan stockbrokers are however still lying at the USE; after the Ugandan exchange suspended issuance of licenses to Kenyan brokers following doubts over the valuation of the licences.

The valuation doubts emerged following the unprecedented auctioning of the collapsed stockbroker Francis Thuo's seat by the NSE for Sh251 million.

"A number of applications by Kenyan firms have been lodged with the USE but the auction of Francis Thuo's seat sent the evaluation team back to the drawing board as they sought to establish the true valuation of a seat at the Ugandan bourse," said one of the applicants who did not want to be named.

The tiny east African country has a total population of about 11 million people and a gross domestic output of about $ 2 billion. Rwanda is a net importing country that relies mainly on tourism, coffee and tea exports to earn the much needed foreign exchange earnings.

RSE was launched on January 31 and has so far listed two 10 billion Rwandese Franc ($18.6 million) treasury bonds and one 5 billion Rwandese Franc corporate bond floated by the Banque Commerciale du Rwanda.

The RSE executive, Mr Mathu, however told Business Daily in an earlier interview that the bourse expects to list at least six government owned companies through a state privatisation programme by the end of this year.

Faida Investment Bank managing director Bob Karina says that the firm's move to the Rwandese market is not aimed at bringing in quick gains but it is a long term strategic decision.

"Our decision to register a company in Rwanda is mainly a strategic one since we are now an investment bank and can offer transaction advisory services but this is only possible if you are a registered Rwandese company," says Mr Karina.

Tsavo Securities managing director, Fred Mweni, whose firm's trading name in Rwanda is Kingdom Securities, says that the relative ease in registering a business in Rwanda is likely to pull in more players to the landlocked eastern Africa country.

Mr Mweni says that Rwanda is a business friendly country that is likely to reap gains in form of foreign direct investments as it enjoys a lot of goodwill from the international community.

The Rwandese economy has been growing at an average rate of about seven per cent in the past 10 years.

The stock market is therefore expected to be a preferred channel by the Rwandese Government for transferring wealth built over these years in the form of profitable state corporations to its citizens through initial public offers.

Dyer and Blair and African Alliance are some of the well established Kenyan brokers that now have a substantial regional foothold.