Mobilising domestic, regional and international savings on the EAC securities markets, for economic development will be made easier if regional capital markets are harmonised, a top official has said.
Robert Mathu, the Executive Director of Rwanda’s Capital Markets Advisory Council (CMAC) said the operations of EAC’s existing four capital markets of Uganda, Tanzania, Kenya and Rwanda are largely hampered by the absence of harmonised market practices.
“If you are an investor and want to raise capital, you can only raise that capital in your own domestic market— you can not freely go into another member state market and look for investors. This is what we are avoiding with the integration process,” Mathu said.
The CMAC boss was addressing the East African Legislative Assembly (EALA) on Thursday last week. The regional legislators are currently sitting in Kigali.
Mathu says that absence of mutual recognition of listing requirements and trading practices were the major market restrictions for issuers to easily and freely offer their securities outside their domestic markets.
He told the legislators’ committee on communication, trade and investment that currently cross border transactions are difficult and costly.
Through the East Africa Securities Regulatory Authorities (EASRA)—the regional capital markets regulators’ forum, Mathu informed the August House that a strategy for regionalisation of the capital market in East Africa had already been adopted.
The strategy is being implemented in three stages from January 2009 to June 2014 when the region has planned to achieve a harmonised capital market regime.
The strategy paper demands that each of the member states have a regulated capital market regime where legal and regulatory terms are harmonised.
Mathu also stressed that the overriding objective of the strategy is to achieve an EAC capital markets regime that permits free flow of capital and allows market participants to operate freely across EAC boarders.
“Why talk about market participants all the time? Because it is a financial service, it is not a business.
If you allow me to move freely to Tanzania, am going to offer my services there.
If you restrict people from moving they will not easily invest, if you allow them to move they will move with capital,” Mathu argued.
Other critical benefits of a harmonised regime include increased attractiveness to foreign and regional investors and market intermediaries to offer services to each EAC countries.
“EAC investors should be able to invest in any security throughout the EAC from a single point of access.”
The CMAC boss also said the adoption of the EAC Common Market Protocol will accelerate the process of harmonisation of the legal, regulatory and operational systems among the member states.
“EALA should demand from each member state that the recommendations put forward for individual capital market legislative changes be given priority and implemented,” he said.
In response to Mathu’s, James Ndahiro, the Committee chairman pledged support to facilitate regionalisation of capital markets.
“It is in our interest – we are here for integration purposes,” Ndahiro said.
EAC Deputy Secretary General (Planning and Infrastructure), Alloys Mutabingwa, also noted that the Secretariat is already working on mechanisms to facilitate harmonization of the markets.
“Having markets linked is a priority for the region,” he said.