Shares of some government companies under privatisation will soon be floated on the Rwanda capital market, a minister announced.
The move comes at a time a fully fledged stock exchange is expected to be operational between April and June this year.
It is hoped this will develop the capital market and the stock exchange in particular.
"In some companies where government has shares, these shares will be floated on the capital market," Jame Musoni, Finance minister said.
He cited Rwanda Breweries and Soft Drink Manufacturer (Brarirwa), MTN Rwanda, Commercial Bank of Rwanda (BCR) and FINA Bank as some companies the government has a stake. It also has shares in the cement manufacturing company-Cimerwa.
Kigali Bank (BK), which is in advanced stages of privatisation; the minister said, the solution is to persuade the prospective buyers to float some shares on the stock market.
The executive secretary of the Privatisation Secretariat Manassé Twahirwa said shares of companies to be floated on the capital market will soon be identified.
The minister however said that much as they are interested in promoting the capital market, there is need to determine the share prices and expected capital from these companies.
This implies that government is shifting from the asset sale type of privatisation where the entire government firm or part of it is sold to a strategic investor usually trough auctioning, to a share issue type of privatisation.
Share issue privatisation is the floating of shares at the stock market and it is believed that this type of privatisation can broaden and deepen domestic capital markets, boosting liquidity and potentially economic growth.
However, it is also urged that if the capital markets are insufficiently developed it may be difficult to find enough buyers and transaction costs are always high.
Currently at the secondary market on the Rwanda Over-The Counter (OTC) market, only bonds are traded.
There are three products on the OTC market currently. Two are government Treasury bonds issued by the National Bank and one corporate bond issued by Rwanda Commercial Bank (BCR).
"Government will continue to support longer term maturity bonds to finance productive investment," Musoni said.
Adding: "estimated Frw20 billion is to be traded from the private sector individuals."
As government is planning to issue equity, additional treasury bonds will also be launched but after assessment of repayment capacity.
The government will also continue admitting members of the OTC market both from Rwanda and the region.
Musoni said that participation of private sector is essential for the success of capital market development.
This therefore calls for private companies to come forward to issue more securities or financial instrument on the capital markets. At the same time it calls for individuals to come up and save or invest in these instruments.
Private sector participation in the Rwanda capital market will in turn increase the contribution of private sector to the country’s output and employment.