Interview: Abdelhakim Berrah
How would you explain the limited number of companies listed on the Algerian stock exchange?
ABDELHAKIM BERRAH: Algeria’s economy, like many others in the world, is composed almost entirely of small and medium-sized enterprises (SMEs). The number of joint stock corporations barely exceeds a few hundred. However, to be eligible for listing on the stock exchange, businesses must have the status of joint stock company. Thus, the pool of firms that can tap into the stock market is relatively small given the size of the economy.
In addition, many companies active in key sectors of the Algerian economy – namely energy, the financial sector and telecoms – still belong to the public sector. Other factors limiting the willingness of businesses to list on the national exchange include the lack of a real capital markets culture among managers. This definitely poses a limit to greater transparency and to a successful permanent screening of the market. Further tax incentives could also help to develop the national capital market and encourage listings.
On the positive side, our banking sector is experiencing an abundance of liquidity, and banks are therefore willing to offer loans on very advantageous terms.
What can be done to encourage new listings?
BERRAH: The real measure of success is the creation of a market specifically dedicated to SMEs; this has to be done in order to create favourable conditions for this specific type of company. Plans are under way to create a fund that can support these businesses with the costs involved in initial listings. Further initiatives increasing reliability and accountability, as well as encouraging fiscal rectitude and bold decision-making at the management level would also encourage listings.
What needs to be done to boost the quality and quantity of listed securities in the market?
BERRAH: This will take a lot of effort. With regard to quality, it is important to improve the level of financial reporting through the publication of all relevant information. The efforts of professional financial analysts and the establishment of several credit rating agencies should also help to raise the quality of listed securities.
On the quantitative level, a national programme of securities listing is currently being developed to help the market reach a critical threshold that would enable normal functioning. It is important, in this context, to encourage major private groups, SMEs and state-owned companies to open their capital to the public. With regard to corporate governance, efforts will focus on transparency and evaluating management decisions.
To what extent are training needs being met?
BERRAH: Currently, we have only approved seven intermediaries in stock exchange operations, and their services are primarily limited to the collection and trading of orders, reflecting the current state of the national stock exchange and the number of securities. However, the professionalisation of market stakeholders is a major element in the draft of the financial market reform bill. Reform emphasises training for skilled positions, as well as implementing complete business structures for the front, middle and back offices. We are developing training programmes in cooperation with the Association of Banks and Financial Establishments, including one designed for financial analysts.
What are the priorities in terms of modernisation?
BERRAH: As we undertake our project of financial market reform, we have been preparing to acquire a new stock exchange platform, and possibly a new settlement system. This is a key part of the modernisation plan.
Another main point of reform is updating the regulatory framework governing the financial markets, adapting it to international standards and domestic conditions. Previously, the legal framework was set up by the actors in the market. Laws often fell into disuse before their application, so there is a need to modernise legislation. Furthermore, regulations should be based on principles as opposed to being prescriptive-based.
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