Interview: Mustapha Ferfera

What can be done to widen the base of investors in the Bourse d’Alger?

MUSTAPHA FERFERA: The adoption of a large-scale reform plan as well as a new organisation of the Algiers stock exchange, which will help it to better incorporate small and medium-sized enterprises (SMEs), are the two major domains into which the government is putting in considerable effort. Further measures are expected to be taken in the future, such as offering tax advantages to issuing firms, developing undertakings for collective investment in transferable securities (UCITS), and the creation of a special fund to reduce the costs of listing on the exchange. All of these measures will help increase both company and investor activity. There is a need to develop the sales of shares objectively and rationally, by promoting the progress of share price during the first months following the admission of securities to stock exchange listing. Foreign investors wanting to set up their companies in Algeria can actually do so by taking part in the financial markets, leaving at least 51% of capital share to national shareholders. Foreign investors holding investments in firms may, under Algerian law, partially or totally divest it for the benefit of national investors through a public offering, once the Algerian government has renounced its right of pre-emption. With regard to the sales of shares on the stock exchange, a proposal to waive the right of pre-emption was made to the authorities benefitting from national holding companies, whose shares were wholly or partly owned by foreign investors. This would make the withdrawal of foreign investors from holding firms more flexible, and will bring about greater transparency and a more level playing field. In addition to that, it will make an effective contribution to the market, diversifying investment opportunities for savers. Regarding the subscription of Algerian securities for non-resident investors, the 04-2000 regulation of the Currency and Credit Council in theory allows foreign investors to transfer corporate income from a securities portfolio to their home countries via banking intermediaries certified by the monetary authority. However, such operations are not yet possible, and legislative revision is required to clarify some issues regarding the participation of foreign investors on the stock exchange.

How can further SME participation on the Algiers Stock Exchange be encouraged?

FERFERA: Some incentive measures have already been adopted. Among the most important include the elimination of minimal capital conditions and the revision of dividend distribution conditions for shareholders. Additionally, the abolishment of the requirement that a firm be profitable during the previous financial year in order to be admitted to the stock exchange has enabled participation by a greater number of firms. Combined, these new initiatives help open the door for SME participation. Moreover, those SMEs that wish to list on a new portion of the exchange should be accompanied by a designated stock exchange sponsor. Their main role is to assist SMEs in administrative procedures and help them execute, issue and communicate their legal and mandatory requirements. However, the success of this SME initiative depends on several factors, such as the adoption of the same tax advantages assigned to SMEs as those provided to companies listed on the main stock exchange and the eventual creation of a special fund to help mitigate a part of costs incurred related to listing on the bourse.

In what way can state-owned companies be supported to participate in the capital markets?

FERFERA: Public companies may resort to the debt market to meet their funding targets and ensure the sustainability of their activities, in addition to improving their governance strategy. Those publicly owned firms that have promising long-term outlooks and are seeking to help boost the wealth of state shareholders are more likely to participate in the securities market – which of course will help stimulate investor activity.