Interview: Edoh Kossi Aménounvé
How will the BRVM encourage small and medium-sized enterprises (SME) to list on the exchange?
EDOH KOSSI AMÉNOUNVÉ: SMEs will be provided with substantial advantages both during and after their initial public offering (IPO). The accessing criteria will be much less stringent: social capital of CFA100m (€150,000), a minimum of two years of existence and at least 10% floating capital. They also benefit from our capacity-building funds which will support legal and financial reviews in the context of valuation; build capacity in terms of governance, the creation and diffusion of financial information; and provide support throughout the IPO process. In 2018 we are aiming to target four to six new SMEs listings on the BRVM. We are currently working with 30 SMEs, 10 of which will be chosen to be accompanied during the next couple of years. Ultimately, we aim to reach 10 IPOs per year.
What is the potential of private equity (PE) firms in the development of the stock market?
AMENOUNVE: Transitioning from a debt-financed market, towards a capital-financed market will necessarily go through the PE sector. We expect these funds to play a major role in the region’s economy as financiers, private sector developers, and strengtheners of governance and managerial techniques across industries.
The BRVM wants to be the first option for their exits. In recent years, we have been collaborating with PE firms through the exchange of information to ensure full visibility and transparency of capital markets.
The PE sector is less developed in francophone Africa, but it has also experienced the strongest rate of growth in the last five years, attracting the most investments in the region, showcasing the best comparables and posting an average subscription rate of 300%.
How can the valuation process be improved?
AMENOUNVE: Despite positive results in recent years, improvements in the way exits are handled are needed. The company valuation process has to shift away from the fund and into the hands of an external party to avoid any conflict of interest. By nature, the seller seeks to increase its multiplying coefficient, while the buyer seeks the opposite. Finding independent valuation mechanisms is crucial to the development of the sector.
Enough sectors are represented and the market has enough depth to provide peer company multiples based on local companies, making it unnecessary to look abroad to gauge asset market value. By comparing assets in the region, we are able to determine a more realistic price in the context of our own environment. Exiting an investment is arduous and can take 18 to 24 months. Stakeholders in the process include brokers, legal firms, financial counsellors, as well as marketing and communications teams and so on, all of which must work in concert to ensure the success of an IPO. Several funds point to the market’s lack of liquidity, but I find this to be misleading. Mechanisms to drive liquidity are universal: the more actors that participate in the market, the more liquid it becomes. If all steps outlined are followed, we can absorb larger tickets.
What can reinvigorate the capital markets sector?
AMENOUNVE: Looking at the companies and PE firms investing in the capital markets sector, we mostly find foreign institutional investors. However, there are private African investors with the capacity to invest in the market. I would like to see more family offices investing in the region in the coming years; some already exist, but they are spread out and lack portfolio organisation.
Our goal was to create a pool of potential investors through the deployment of our mobile application in early 2016, which resulted in over 70,000 subscribers throughout the region. A partnership between telecoms operators and stockbrokers may help mobile users to make use of this service to subscribe and participate more easily in the BRVM’s operations. We need to leverage new technologies to enable maximum participation.
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