Stock market presents SMEs huge growth opportunities

Rwanda Stock Exchange (RSE) will, on Thursday, hold a landmark listing forum, targeting small-and-medium enterprises (SMEs), a key step toward attracting small businesses to come to the exchange’s alternative market segment.
Marie Goretti Mukanzigiye (left), the founder of GEFAPRODO, a mango production and processing firm in Bugesera District is one of the over 100 SMEs that have registered for the for....
Marie Goretti Mukanzigiye (left), the founder of GEFAPRODO, a mango production and processing firm in Bugesera District is one of the over 100 SMEs that have registered for the for....

Rwanda Stock Exchange (RSE) will, on Thursday, hold a landmark listing forum, targeting small-and-medium enterprises (SMEs), a key step toward attracting small businesses to come to the exchange’s alternative market segment.

The RSE Listing Forum 2018 follows a two-month long sensitisation campaign to encourage SMEs to take advantage of the immense opportunities the bourse offers to raise affordable investment capital. RSE chief executive officer Pierre-Celestin Rwabukumba explains to Business Times’ Stephen Nuwagira the importance of the initiative and other stock market-related issues in the following interview.


You have been conducting the “Access and grow” campaign over the past few weeks. What is it all about and why target small-and-medium enterprises (SMEs) in particular, especially given the immense challenges they face?

Rwabukumba says SMEs can raise affordable fund on the bourse.

First of all, SMEs form a big part of our economy which, therefore, means it is a big constituency you can’t ignore. So, we want to be part of the solution despite the challenges they face.

As a matter of fact, we want to be with them and understand the challenges and ‘hold their hand’ to enable them overcome those barriers and prosper. Otherwise, everyone will be waiting for them on the other side of the river yet where they need help most is around that ‘Valley of Death’.

Do the SMEs that registered with you during the “Access and grow” drive automatically qualify for listing? Please explain.

No. The issue is not about listing necessarily. What we are trying to do is to raise awareness among SMEs and other corporate companies about opportunities the capital market ecosystem has to offer as another source of long-term finance in their bid to grow their businesses. So, some of them may end up listing, while others may raise money through other means. But all of them stand to benefit from this campaign one way or another as issues at hand go way beyond listing.

You were targeting to bring about 100 small-and-medium enterprises to the alternative (SME) market segment during this campaign. How many have registered so far, and do you think the campaign has recorded the desired results?

Hmm...let me correct you here. We are targeting to reach out to at least 100 companies for the listings forum, the climax event of the awareness drive where we shall take them through the listing experience as we officially launch the bourse’s SME market segment.

So far, more than 100 companies have registered for the forum, but we will select only 100 to attend. Again the public awareness campaign will continue…this is just a start.

Which sectors are more represented among the firms that have so far registered for eventual listing in the future?

I must say that companies that have registered for the forum are across all clusters of the economy, including IT and innovation, agro-processing, Collective Investment Schemes (CISs), and services: finance, tourism and hospitality, transport and general trading, as well as real estate and construction.

What is the sentiment among SMEs from the various sectors of the economy that you interacted with as far as the financial market industry is concerned?

Most of them claim to have problems of access to finance and high interest rates on loans, thus handicapping their growth ambitions

Some tech sector players say that the RSE should enable entrepreneurs and innovators to raise fund basing on their ideas/innovations. What is your view on this? Is there such a window at the alternative market segment of the bourse?

Definitely. Good ideas and fundamentally sound undertakings are welcome, but you must always remember that there are certain rules and conditions that apply to access these platforms (on the stock exchange).

Corporate governance, family-run firms, access to affordable finance and poor accountability are some of the challenges that are affecting SME growth. How will RSE help firms identified for listing to overcome these challenges?

Those are technical, but easy issues to address… as far as we are concerned best practice and good conduct are usually known to everyone. We will seat with them and going through things that they already know, but may take for granted or ignore from time to time without knowing that non-compliance with best practices is crippling their businesses. If I can give you a simple example: Who does not know that it is always good to consult your family about important decisions? That is in family life alone, let on in business.

Considering that the bourse is yet to attract municipal or SME bond issuers after five years following the publication of the enabling law, don’t you think this has been an overly ambitious initiative? What makes this initiative different from the one that targeted local governments, including the City of Kigali?

You know, nothing is easy and no one says it is a walk in the park. We know the need is there, and the demand is there, but the problem is that people may not see it. These things take time and the time for this one (SME listing) is now. Ambition wise? Definitely; let us die trying. We must keep on pushing.

Won’t SMEs suffer same fate as cross-listed counters that never transact any business year-in, year out?

It is important to remember that cross-listed securities most of the time they come in by introduction not to raise money and a lot of people do not necessarily identify themselves quite well, thus low or no liquidity on their counters. Though likelihood of these SME companies having liquidity issues is high if they wish to use the capital market ecosystem, their first priority is not trading but fundraising.

So issues of liquidity would probably be there but eventually people would get used if the firms fundamentally perform well in their underlying business activities because, remember investors are mostly looking for return on their investments especially dividend income and other advantages coming with companies making money.

The market has been performing poorly since the year started, with both RSI and ALSI as well as market capitalisation dropping from highs recorded last year. What explains this trend?

I don’t know what you mean by poorly because a drop of less than 2 per cent in unrealised loss just price movements on the indices is not significant at all. One should focus on the financial results of the listed companies, and all of them have posted positive results for 2017 and announced good dividend payouts, which will be ratified by shareholders in the coming weeks. Therefore, price fluctuations for long-term investors are not a very big indicator for their returns, especially this early in the year.

RSE is one of the bourses that recorded impressive IPO issuances. So, what are you doing to make local more competitive and ensure the exchange is top choice for investors?

We shall continue doing more awareness about what we do, but shall especially keep our heads and thoughts outside of the box for innovation. We will also continue to listen to our customers to address their ‘real’ issues together.

The equity market started in a bearish mood this quarter, what is the outlook for the remaining part of the year as far as its performance is concerned?

It is too early to predict 100 per cent, but it will all depend on a number of issues, including the general liquidity in the system, the economic performance and investor appetite for equities in addition to listed companies’ performance.

What should stakeholders, especially potential investors, expect from the SME market segment if and when you actually get firms to issue IPOs?

Well bottom line: Good return on their investments. Not just a quick buck.

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