The East African Community (EAC) is moving closer to the establishment of a consolidated capital markets body that will create a trading infrastructure to enable safe, fast and synchronized transfer of securities and cash.
Integration of the regional securities bodies is seen as a critical factor for the smooth functioning of the regional financial markets as well as full EAC integration that targets a monetary union by 2012.
Aloys Mutabingwa, Deputy Secretary General of the EAC in charge of Planning and Infrastructure said that the EAC Secretariat is currently working on the revised strategy options, the roadmap and implementation framework for the EAC capital markets integration.
He made the remarks during a recent workshop on the EAC financial markets infrastructure in Rubavu. The workshop aimed at reviewing the recommendation and roadmap to establish a robust capital market infrastructure in the region.
Mutabingwa said that the significance of the financial sector to the integration process in the EAC is clearly emphasised in Article 85 of the Treaty for the Establishment of the East African Community which deals with Banking and Capital Markets Development.
The article states that, the Partner States undertake to implement within the community, a capital market development programme to be determined by the Council and shall create a conducive environment for the movement of capital within the Community.
“From January to March 2010, we have planned two regional workshops and national workshops in the five Partner States to entrench the ownership of the EAC capital markets regionalisation programme by the various stakeholders and finally its implementation,” Mutabingwa said.
According to Mutabingwa, at the end of the regionalisation process, market intermediaries should be able to offer their services and deliver them in each of the EAC countries.
“EAC investors should be able to invest in other EAC domestic markets through local intermediaries, EAC issuers should be able to seek investors in any part of the EAC, transfer of funds and securities across EAC borders would be quick, easy, secure and cost effective,” he explained.
The move is also aimed at generating high returns on investments through lower transaction costs, more efficient allocation of capital arising from the fact that savings can flow more easily and cheaply to investment.
Olivier Kamanzi, Deputy Executive Director of the Capital Market Advisory Council (CMAC) said that instead of having a fragmented payment, clearing, and settlement infrastructure in EAC, the region should look beyond and come up with an infrastructure that is available, accessible, and affordable to all markets.
The efficient regional market infrastructure is seen as a crucial factor to the creation of a robust regional capital.
According to Kamanzi, the implementation of the recommendations and roadmaps for the development of an efficient post trade infrastructure at both the national and regional level is one of the key contributors to a market which attracts both issuers and investors.
Experts say that an expanded and deeper regional market will offer greater potential to raise resources from a wider range of investors to fund the most urgent sectors such as infrastructure, agriculture, housing, energy, health and then enhance the social economic conditions of the EAC population.