Interview: Kadi Fadika-Coulibaly
In what ways will the upcoming changes to the regulatory framework affect the financial sector?
KADI FADIKA-COULIBALY: The shift towards more stringent regulations within the sector in the UEMOA follows a global trend aimed at reinforcing the financial services sector and meeting the expectations of a more demanding clientele. To respond to these new requirements, banks and insurance companies in the union can use the Bourse Régionale des Valeurs Mobilières (BRVM) – West Africa’s regional stock exchange – to raise the necessary capital to strengthen their equity. The latest issuance of shares and capital increases via the BRVM has aroused the interest of regional investors.
International investors are also interested in investing on the BRVM, and are henceforth invited to participate in future transactions, as larger operations are expected in the coming years. In my opinion, the biggest challenges come from issuers having to showcase convincing development strategies that utilise available capital in order to grow their operations. Financial intermediaries in the UEMOA all have the necessary competencies to assist these companies in the search for the long-term capital required by the regulators.
How can capital markets better respond to increased demand from the small and medium-sized enterprise (SME) segment?
FADIKA-COULIBALY: The BRVM is about to finalise the creation of a board dedicated to SMEs and very small enterprises (VSEs). This board presents specific criteria enabling these small-sized entities to raise the necessary capital for the financing of their development plans. Nevertheless, it is necessary that SMEs and VSEs have a certain structure to convince investors to entrust them with their capital.
Financial intermediaries are also available to act as listing sponsors to small enterprises. Moreover, the government of Côte d’Ivoire, through the Ministry of Commerce, Arts and Crafts, and SME Promotion, is currently putting in place a facility that will, in time, organise and assist small companies in raising capital from banks and capital markets.
What measures are necessary to accelerate the development of capital markets?
FADIKA-COULIBALY: The capital markets will develop through increasing rates of issuances and by attracting more regional and international capital to finance regional issuers. Other regional governments must be willing to cede their shares in certain companies, as the Ivorian government has done for the last several years. Towards the end of the 1970s it also requested that large multinationals open their capital to the stock exchange, thus allowing minority shareholders to enter the capital market. Concerning investors, retail investors showcase a strong interest in the primary equity capital market, accounting for, on average, 75% of capital raised in the last few years. Interest rate securities essentially attract institutional investors who represent close to 100% of capital raised.
To encourage more international investor participation in the issuance of equity shares, we would need to increase the ticket size and reduce the delay between the subscription and the listing in the stock exchange. Likewise, size matters for interest rate securities. However, here we are in direct competition with other African markets, where profitability is higher and analysis and research efforts are more relaxed. There is a consensus that the improvement of the quality and frequency of reporting for the issuance of equity shares and interest rate securities is necessary. The regulator must impose international financial reporting standards for issuers to ensure the level of detail needed to analyse the opportunities offered. This is the case with the Organisation for the Harmonisation of Business Law in Africa, which – from January 2018 onwards – asks listed companies to publish their financials under the International Financial Reporting Standards framework.
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