Rwanda: What Next for Stock Exchange After 10 Players Milestone?

The Rwanda Stock Exchange this year gained two additional players to reach the minimum 10 players requirement for consideration under the World Bank Doing Business Report’s protection of minority investors indicator.

This follows the entrance of two new players; cross listing of RH Bophelo Limited as well Cimerwa’s listing by introduction.

The entry of Cimerwa, brought the total of trading companies on the RSE to 10. Other firms on the local bourse including Bank of Kigali (BK), Kenya Commercial Bank (KCB), National Media Group (NMG), Bralirwa, Uchumi Supermarket, Equity Bank, I&M Bank Rwanda, Crystal Telecom, and RH Bophelo.

Having less than 10 players saw the bourse perceived as not of age yet and unlikely to serve purpose in mobilisation of capital for large and medium sized firms. This for instance featured on the 2019 World Bank Doing Business Report’s indicator on protection of minority investors.

Rwanda Stock Exchange staff during the presentation. Photo: Dan Nsengiyumva.

The bourse has increasingly handled a diverse profile of transactions include; listing by introduction, Initial Public Offer, cross listing and the recent rights issue by I&M Bank Rwanda which had an oversubscription of 112 per cent.

What next for the bourse?

For Celestin Rwabukumba, the Chief Executive of the Rwanda Stock Exchange, remaining relevant at a time of global crisis following the Covid-19 pandemic has among other things boosted the confidence of the bourse among the local and regional stakeholders.

At a time when a majority of global stock exchanges have been witnessed a slowdown in activity as well as firms shedding value, the local bourse has maintained stability over the Covid-19 pandemic.

“We have remained resilient, only shedding 8 per cent on our domestic share index and gaining 9 per cent in whole index. The total transactions value up to now in the market this year is around Rwf 315B,” Rwabukumba said.

Following the attainment of the 10 companies listing milestone, the agency’s officials say that they are in a better position to serve their mandate.

“We seek to continue serving out mandate to raise long term capital at a cheaper cost, good corporate governance and allowing the SMEs to grow. The general public can also use it as a place to save their hard earned income,”

Going forward, the agency says that they medium term projections include is keen on facilitating local firms find alternative ways to raise capital.

By listing on the local bourse local firms have an alternative to bank loans for credit. Bank loans as an option for credit is often not the most ideal for large firms due to inflexibility, short tenures and high rates.

“If you look at most Rwandan companies today, they have more debt than equity, which is not very healthy especially in an environment like this… As a stock exchange, we want to build on this to attract quality firms in our market and create a funding opportunity,” Rwabukumba said.

While the avenue has often been perceived as a sole provision for large firms, a perception they are seeking to adjust over time.

This will involve services to prepare local SMEs and start-ups to meet the pre-requisites to list on the bourse or at least meet basic requirements.

In 2018, RSE launched an SME segment to help firms who wish to meet eligibility requirements for capital market and fall below the blue chip category. This, Rwabukumba said has seen a number of local companies currently working on their market readiness for the bourse.

The agency this year opened a market segment for local start-ups to make them investor ready through the investor clinic initiative.

“We have registered about 40 companies in the past few weeks, we will select a few of them about 15 every quarter. By July next year, we will have on boarded at least 40 to 60 companies in Rwanda in our markets section to help them clean themselves for investors; be it banks, angel investors, private equity, venture capitalists or future listing,” he said.

The oversubscription of various shares on the local market including government bonds experts say creates confidence on availability of capital in the local market.

However, the awareness of the stock exchange, how it works and alternatives it presents for both individuals and firms has been said to be low and a hindrance to growth.

This year, Rwanda Stock Exchange (RSE) surpassed $1 billion in trading with officials saying in January that some $761 million had been raised in the primary market, while $306 million has been traded on the secondary market.

As of December 2019, there were 20,000 active investors on the local stock market from 18,764 in December the previous year.

That represents 83.6 per cent of local investors, 13.8 per cent regional, and the rest were international.

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