Interview: Yazid Benmouhoub
How would you assess the outlook for Algeria’s financial markets over the medium term?
YAZID BENMOUHOUB: With respect to the mid- and long-term development outlook, it is important to consider the recent foundations of the stock market’s development, notably the modernising programme that was launched in 2011. This programme was concluded in 2013 and provided an assessment and a number of recommendations. Since its conclusion we have been following those policy suggestions.
A key part of this is trying to increase the number of companies that are publicly listed. Currently there are only five, and that is a relatively small number. Given that having the necessary technology is a clear prerequisite for the growth of the market, we are also working to acquire a new negotiation system that is up to speed with all modern standards. The tender was launched and we hope that we will have a fully operational system by mid-2017.
We are also hoping to reach a capitalisation of $10bn over the next five years, which represents 5% of GDP, and we hope to have more than 35 companies listed in order to reach our capitalisation goals.
There are seven public companies that are due to be listed, two of which will be listed imminently. The pace of new entries will be slower at the outset but as more and more companies come on, there will be a momentum that drives the number of listed companies to increase more and more quickly. We are also focusing on training, since this is a key element for having functioning financial markets. We have recently seen the third cohort of market professionals graduate as well as the second cohort of financial analysts.
In what ways can the development of Algeria’s capital markets help generate new projects?
BENMOUHOUB: The current economic situation means that the development of the financial markets is a clear priority. We have seen that the prime minister has said that large projects will no longer be financed by the state budget and that companies need to go explore new financing options: the financial markets are a clear option. There is also a clear reduction of liquidity in the banking sector. Less credit will be issued, so companies need to find an alternative way to finance themselves. The future will likely be a mix of bank credit, self-financing and financing via the capital markets. There are further advantages for companies joining the market. It helps companies improve their transparency, which makes them more attractive for investment and also allows them to work abroad more effectively. Furthermore, for family-run companies – which remain a central part of Algeria’s economic fabric – going public can lead to greater longevity.
How will the issue of the national bond and the emergence of other financial mechanisms serve as a catalyst for more investment?
BENMOUHOUB: The national bond is a positive development for several reasons. First, in a context of reduced financial resources, it helps to bring in much needed funding. Secondly, and perhaps more importantly, it helps bring a new product to the financial market that will ultimately help to attract new people. For instance, with the diversification of financial products we may see greater participation from people who have kept their money out of the banking system.
Leasing companies also have substantial operating budgets and therefore gaining access to financing through the capital markets will allow them to finance their operations and grow. As a consequence, the growth of Algeria’s capital markets also allows for the growth and development of other financial products.
The market should also be progressively opened to foreign investment. To begin with, the market should be opened to foreign-owned sovereign wealth funds. Additionally, there is a great opportunity to propose attractive financial products to the Algerian diaspora.
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