Stock exchange is key to Rwanda’s economic transformation, says expert

Marc Holtzman, chair, Meridian Capital HK, a private equity firm with investments in natural resources, real estate, food, agriculture and transportation and sits on the board of Bank of Kigali. He supports numerous charity missions, and was recently in the country for board meetings and to support his daughter’s charity. 
Holtzman believes the environment is conducive for stock market to thrive. (Timothy Kisambira)
Holtzman believes the environment is conducive for stock market to thrive. (Timothy Kisambira)

Marc Holtzman, chair, Meridian Capital HK, a private equity firm with investments in natural resources, real estate, food, agriculture and transportation and sits on the board of Bank of Kigali. He supports numerous charity missions, and was recently in the country for board meetings and to support his daughter’s charity.  

The New Times's Collins Mwai caught up with him for insights about various development aspects.

What sector do you think will benefit more in the East African Community integration process?

 The Rwandan stock exchange in my view will be one of the tools for the economic transformation for the entire region. I believe in a very short time, we will see companies from across the region, coming to list because international investors are excited about the dynamism of the early success of the capital markets in the country which will be a driving force for the region. 

Because of the policies the President and his government have put in place, policies of transparency, creating a level playing field, policies of educating the workforce which is the biggest resource, Rwanda is going to become a hub for the region and the continent. There are all the ingredients of this coming true.

Speaking of the stock market, what do you think will facilitate its growth considering it is still at infancy stage in Rwanda?

It is already growing; what will facilitate is the transparency of the market and the dynamism of the economy. I saw this in markets like Budapest and Asian markets, it moves along at a slow pace at first then at some point it takes off.  

There are a couple of things to consider about the life and development of equity markets. In the first ten years in the life of a new dynamic developing equity market, it is still pretty much driven by outside international capital for the first decade. There is not enough domestic equity capital to support any market in the initial stages. 

The goal is to see a thriving domestic stock market, we want to see a lot of people earn dividends by investing in the stock markets, but that will take time. It is important for people to understand that to have international investors here is an essential component for the development of the stock market. 

The foreign investments in the stock market is never a threat. At the end of the day, there is protection since government has an oversight role and regulatory power

What sector do you think we should prioritise for the intended development as the region comes together?

Information technology is going to be a key industry for this country. Bio-technology and agricultural technology could also help to further develop the agriculture sector to take the scarce geography and multiply and leverage the potential.  

I would say the country so far only has tapped less than 10 per cent into the tourism potential. When it comes to ecotourism, there is no place in the world that has the potential to attract more people interested in genuine ecotourism like Rwanda. 

From your interactions with business people across the world, what image does the country have?

People that know about what happened here are converts, but more work needs to be done to tell the story, the word needs to get out, on the progress of Rwanda. The move by the Pesident to shift emphasis to the English language has been one of the most critical decisions in the economic and cultural history of this country. 

Giving an example of its impact, a major US-based company that I helped introduce to Rwanda–which is one of the biggest customer outsourcing companies in the world and will probably set up an organisation in the country–when they first looked at the country a few years back, they were hesitant since they would have a challenge having an English speaking workforce, but in a short time, an English speaking human resource is available.

As someone who has done business all across the globe, what is it that investors and foreign firms look out for?

Companies like a supply of skilled workforce, stable environment, government friendly policies when it comes to taxation and regulation, friendly policies that encourage investments and entrepreneurship; they like a government that helps promote positive outcomes. 

I know that there are discussions underway about further reforming the tax codes, reducing tax rates and probably introducing flat taxes, all these things will be positive. Many ingredients are already in place, but at the top of that list is skilled workforce, it has to be a critical mass of people not just few in all sectors.

Do you think that our higher learning institutions are in place churn out graduates that will provide the intended human capital in the future?

I might not know enough to comment but my instinct is that they are on the right track. From my previous experience, the more collaboration that takes place between higher education and the private sector so that institutions of higher learning are producing the skills set that the private sector needs is always a private outcome. 

Across the world, that conversation does not take place closely as it should. It is one of the jobs of good public policy leaders to facilitate that conversation. I’m satisfied that in Rwanda the skills set being taught are reasonable in terms of what is needed. 

For Rwanda to get to the economic level we are hoping there has been call for public and private sector cooperation, how can this be enhanced? 

There are some areas where the cooperation is important but there are other areas clearly where the public should not be involved or yield to the private sector. There are other areas where the public sector through good public policy should set the preconditions and the private sector should fight it out and competition should prevail.

When countries are developing as we are, they attract numerous ‘friends’ in the name of donors and grant givers who at times do not share in our path, how do we balance between using the support we get and not losing our path due to their influence?

Too many times over the course of modern history, Western nations have created a culture of dependency through aid, charity and helping hand. All these are admirable but as the old biblical parable goes, it is better to teach someone how to fish rather that give them fish, the best thing that can be done is ensuring  education to encourage self sustainability. 

Through that it is possible to break the cycle that they were trapped in before. It is already happening and should continue. 

Rwanda has ambitious plans for economic transformation and general welfare development, the faster it is, the more expensive it is probably going to get. A source of the funding is taxes which raise fears that the cost of living could overwhelm citizens in the future, is it a reasonable fear?

I am part of a group of people that favours lower taxes, I believe that if you tax something less, you get more from it in terms of revenues. I have shared this advice with some of the policy makers and from my understanding, there are considerations of tax reforms in the country. Some of the most impressive tax reforms in the world have been based on single rate flat tax when you lower the taxes, tax evasion decreases and the cost of compliance goes down. 

I think the best thing would be a single rate flat tax system; it would be a boost to the economy. There is a wide enough tax base for that. 

You are on the board of the leading bank in the country. Often, local banks have been accused of being inflexible and not playing a role to facilitate entrepreneurship and business in the country. Do you think this is true?

It is not an easy answer, the banking system is still revolving in the country. As a board member of Bank of Kigali, we are trying to stay ahead of the needs of our customers and at the same time, the regulators make it difficult to offer some of the products on demand. 

I do not fault the regulators, because they are trying to protect the consumers and are doing it from a perspective of concern and good will. It is a work in progress; we are trying to find a happy medium. We are clearly not where we should be.

But a year from now, the banking sector in Rwanda is going to be a different landscape from what it is today. It’s going to be better; it’s constantly evolving–it’s a testament of how fast the private sector can move and adapt.


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