Interview: Walid Saibi
How could changes to the country’s capital markets help Tunisia become a financial centre?
WALID SAIBI: In its day-to-day functioning, Tunisian capital markets are comparable to those of any emerging country. Overall, the stock exchange responds well and functions adequately. However, in order for Tunisia to become a financial centre, the Tunis Stock Exchange (Bourse des Valeurs Mobilières de Tunis, BVMT) must first strengthen its position within the national economy. Although the BVMT is advanced when it comes to regulatory and technical capacities, there is room for development with regard to boosting its economic significance.
Furthermore, in order to develop the country into a financial centre, there needs to be increased foreign investment in the Tunisian stock exchange. International demand for Tunisian stocks is limited by the scope of the market, which is a reflection on the size of the economy. Although the BVMT is, in theory, supported by various international funds, such as the Africa Fund and the MENA Fund, the size of the market is too small for international entities to invest significantly. Furthermore, there is a lack of offering to attract foreign investment. In order to draw more foreign investors to the Tunisian market, we must encourage its growth by listing more companies. Many sectors of the economy, such as telecoms and IT, are unrepresented on the stock exchange. The textiles industry, for example, is an important economic sector in the country, but has only one company listed.
As they offer the possibility for higher returns, large companies are likely to attract greater foreign investment. However, more attention should be paid to small and medium-sized enterprises (SMEs), which are currently unrepresented on the BVMT. SMEs form an important part of the Tunisian economy, yet they face many challenges when sourcing funds. The markets could be an interesting means of raising capital for these businesses. The BVMT does not yet have a debt market or secondary markets; an alternative market for SMEs could be an attractive solution.
Fiscal incentives would also facilitate listing and attract a greater variety and number of enterprises to the BVMT. There is significant potential to encourage a flow of demand through taxation incentives. Although some fiscal incentives do exist, they need to be revised and made more attractive. For companies with governance issues, the stock market could be an attractive alternative to sustaining their businesses.
Additionally, there is potential for developing other investment instruments, such as exchange-traded funds and derivatives, down the line. Stockbrokers should be able to sell life insurance and products that encourage savings, such as business and salary savings accounts. Legislation needs to be changed to extend the range of investment products available, which will in turn attract new investors to the market. With increased investment, Tunisia will be able to develop its stock exchange, forging the path to transforming itself into a true financial centre.
What is the major challenge for SMEs looking to enter the stock exchange?
SAIBI: In 2012 and 2013 many companies of varying sizes entered the stock exchange. However, several mismanaged their initial public offering by not respecting the figures they had previously announced, which affected trust levels between the market and investors. Today, SMEs that want to enter the market have to contend against this mistrust from investors, making it difficult to raise capital through listing. Perceptions need to be changed in order to reverse this trend and re-establish confidence in investing in SMEs. To this end, the exchange launched a tender process, financed by the African Development Bank, and selected a cabinet to help SMEs navigate the procedure of listing on the BVMT.
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