Interview: Walid Saibi
In what ways can the government facilitate foreign investment on the Tunis Stock Exchange (Bourse des Valeurs Mobilières de Tunis, BVMT)?
WALID SAIBI: There are no obstacles to foreign investment in the stock exchange on paper. The exchange’s technical, legal and regulatory framework is in line with international standards. Furthermore, there are several investment opportunities in regional companies operating across multiple sectors that have a positive outlook. However, in reality foreign portfolio investments in Tunisia remain relatively low, below the levels of what is expected in Middle Eastern and North African markets. There are two main obstacles to foreign investment on the BVMT. The first is related to Tunisia’s economic situation, and more specifically the depreciation of the dinar against the euro and the US dollar. This has eroded positive returns on the local currency. The second barrier is the stock exchange’s lack of visibility on an international level. Indeed, the BVMT is currently included in the MSCI Frontier Markets Africa Index but has not yet been integrated into the MSCI Emerging Markets Index. Because of this, the BVMT is not on the radar of a wide array of investment funds, the risk appetite of which is higher and liquidity requirements lower. It is therefore necessary to increase marketing and communication efforts at the international level. Additionally, it is essential for listed Tunisian companies to improve their visibility by participating in international events and conferences.
How can institutional investors be encouraged to take more risks and invest on the stock exchange?
SAIBI: The presence of institutional investors in the BVMT is strategic rather than financial. The situation has evolved favourably since 2015, in large part due to the Caisse des Dépôts et Consignations, which launched a dozen mutual funds. Despite these additional products, institutional demand remains below expectations. A legal review of the structure of the investment catalogue of institutional investors and an increase in the required proportion of investments in listed securities could boost the participation of institutional investors. It is also important to educate such investors about the returns that the BVMT can generate over the medium term.
What can be done to attract the participation of more sectors in the stock exchange?
SAIBI: Several important sectors of the economy, such as tourism, textiles, trade, food, electromechanics and telecommunications, are not well represented on the BVMT. The diversification of the stock market could be enhanced by introducing tax incentives, launching a communication and information plan for professional organisations, and revising approvals by the Capital Market Authority, the deadlines of which can be dissuasive for small and medium-sized enterprises (SMEs).
To what extent can the BVMT become an alternative to traditional bank financing for SMEs?
SAIBI: SMEs largely finance investments through conventional banking, with capital markets accounting for only 10% of all borrowing in Tunisia. In light of the high borrowing rates for SMEs, it is necessary to make the stock exchange an accessible alternative to bank credit. To this end, Tunisia must increase both the supply and demand of SME offerings. On the supply side, we can introduce tax incentives for SMEs that chose to raise funds through public offerings. Collaboration between the BVMT and venture capitalists could also help convince SMEs to go public. On the demand side, the operating framework of the alternative market should be limited to institutional investors with medium- and long-term investment horizons that are adapted to the needs of SMEs. The listing of SMEs will also improve corporate governance, as listing requires that there is an internal audit and management control structure within the company.
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