‘Uchumi cross listing a vote of confidence in Rwanda economy’

Uchumi supermarket’s  cross-listing on the Rwanda Stock Exchange yesterday is a key turning point for the local bourse and a vote of confidence in the local financial sector.
L–R, Mathu, David Mataen Faida, the securities transaction advisor, Ndahiro and Ciano address reporters after the corss-listing of Uchumi. The New Times / Timothy Kisambira
L–R, Mathu, David Mataen Faida, the securities transaction advisor, Ndahiro and Ciano address reporters after the corss-listing of Uchumi. The New Times / Timothy Kisambira

Uchumi supermarket’s  cross-listing on the Rwanda Stock Exchange yesterday is a key turning point for the local bourse and a vote of confidence in the local financial sector.

According to the stock exchange’s executive chairman, James Ndahiro, the listing will encourage local firms, especially those of similar or bigger size, to list on the security market.

“With this cross-listing, I am confident that private sector companies in Rwanda will follow suit and put their shares on the market,” he said after the inaugural trading at the Kigali Serena Hotel.

Ndahiro added that the move would also provide investment opportunities for thousands of Rwandans willing to invest in stocks “since it is now convenient for them to invest in Uchumi right here in Rwanda”.

Uchumi yesterday became the third Kenyan company to float shares on the Rwanda Stock Exchange. Others are Kenya Commercial Bank and Nation Media Group, which have been part of the four firms listed on the stock market, including Bank of Kigali and Bralirwa.

The two Kenyan firms have, however, attracted low business on the local bourse since cross-listing.

The Ministry of Local Government Permanent Secretary, Vincent Munyeshyaka, inaugurated the trading by ringing the bell to mark the start of trading in Uchumi shares, and commended the firm for pursuing and embracing the region’s economic integration.

“Uchumi has, by this cross-listing, shown its confidence in local financial sector and the growth of our economy and, thus, giving our people the opportunity to own a supermarket through the buying of Uchumi Supermarket’s shares,” he said.

The Permanent Secretary added that the move showed a positive outlook for the economic growth of the region.

However, Robert Mathu, the Capital Markets Authority executive director, said the situation will soon change, arguing that the capital market was a new phenomenon in Rwanda

Mathu also noted that many local companies were not floating shares on the bourse because they “lack the structures demanded by the capital market”.

“The key challenge faced by local firms is their state of preparedness. The capital market is new in Rwanda, but you also find that the governance structures demanded by the capital market are of ‘higher standards’,” Mathu said.

“They have to meet the minimum requirements of the corporate governance code such as the type and number of directors, as well as capital size.

“But many local businesses are family-owned and are traditionally used to dealing with one lawyer and one accountant for many years, so going public becomes a challenge.”

He said they were embarking on public education programmes to create confidence among the the public “so that people understand that investing in shares is like any other business and beneficial”.

Jonathan Ciano, the Uchumi Group chief executive officer, said the firm floated 265,426,614 ordinary shares valued at Ksh5 (Rwf38) each on the Rwanda Stock Exchange.

He added that after cross-listing, the company would seek additional capital through a rights issue to finance its regional growth and expansion programme as the retail chain moves to consolidate its position in the markets.

The regional retail chain hopes to open four stores in Kigali and one outside Kigali in the coming months, which he noted would be a resources outlet for local suppliers and developers, and also create jobs for the youth.

Commenting on the cross listing, Hubert Ruzibiza, the head of services development at the Rwanda Development Board, said Uchumi’s cross-listing was a great sign on how Rwanda was moving towards being a services-based economy.

Uchumi’s profit before tax rose to Ksh486m in June this year from Ksh406m in June last year. Its earnings, per share, increased by 31 per cent, from Ksh1.03 per share last year to Ksh1.35 for the year ending June 2013.

“Uchumi’s coming means investors will have more diversified products and price competition at the stock exchange which also means more choices for the investors,” said Jean Aime Habimana, a stock broker with Standard Bank Group Securities in Kigali.

Habimana predicted that the retailer’s activity will be much higher than the current cross-listed companies’ “because the Rwanda Stock Exchange brokers have submitted a proposal to the National Bank of Rwanda to have Uchumi’s shares cleared at the local central depository rather than an investor having to wait for about two months for their shares to be cleared in Nairobi”.

Works on interconnectivity of the regional stock exchanges, which will enable a shareholder to move their shares from any stock market across the EAC within four days, are yet to be completed.

A central depository system refers to electronic software that converts physical paper certificates of shares or other debt and derivatives representing ownership of securities.

According to Habimana, once approved by the central bank, Uchumi would be able to trade on the stock exchange like a domestic company, in this case, as Bank of Kigali and Bralirwa.

The broker was also optimistic that with the firm’s cross-listing and more public education campaigns, Rwandan companies would be enlightened on benefits of going public and trading shares.

“Going public allows a firm to borrow from the public for the long-term at a low cost without having to go to the bank. It is better the public understands this,” he said.

According to Ciano, Uchumi’s shares were the most competitive at the Nairobi Stock Exchange last year.

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