Demutualisation: The Key to improving African Stock Market Performance

EXCLUSIVE INTERVIEW with Dr EDOH KOSSI AMENOUNVE, Chief Executive, Bourse Régionale des Valeurs Mobilières (BRVM) and the Central Depository/Settlement Bank (DC/BR). He also the Chairman of the West African Capital Markets Integration Council (WACMIC). Dr AMENOUNVE has led major financial market reforms in Africa and shares his views on demutualization and capital markets integration in West Africa as well as the growth prospects of the Francophone West African countries with Capital Markets in Africa. 

Many thanks for speaking to us, to start off, please tell us how long you have been the Director General of BRVM and what have been your biggest achievements and challenges so far.

Dr. AMENOUNVE: I took the position as Director General of BRVM in October 2012. The first action we have taken with the Board of Directors was to define the main strategic actions to improve our market performance.

The biggest challenge for us is to position our market among African Capital Markets. The biggest achievements we have made so far are the transition to continuous trading (in September 2013), the listing of two new companies, the rapid growth of market capitalization (6 to 12 billion USD in 03 years) and value traded (175 to 500 million USD in 3 years).

The BRVM’s Capital markets mission is to organize the Securities Market, disseminate market information as well as promote the markets, what does the Bourse do to meet the objectives of this mission statement in terms of its strategy and development?

Dr. AMENOUNVE: First of all, our strategy consists of promoting the market through awareness and communication focused on accelerating the dissemination of market culture within our Union. So, we organized BRVM Days in WAEMU countries and BRVM Investment Days in Paris, London, New York and Dubai.

We had close dialogue with listed companies to invite them to disclose more information to the investors. We concluded strategic partnerships with private equity funds, sovereign funds, market data vendors, chambers of commerce and so one.

In 2015, the BRVM composite Index was the African best performer with a return of 17.8% (4.7% in US dollar terms). What do you think accounted for this strong performance even as many other equity markets continued to suffer from the effects of current volatility and challenges in the global economic outlook?

Dr. AMENOUNVE: For the first time since its creation, BRVM ranks first among the top-performing African stock markets in terms of market all shares index. This performance is related to the rapid economic growth in Côte d’Ivoire during the past 3 years (8 to 9% in average) and to the strength of growth throughout the West African Economic and Monetary Union (WAEMU) (5 to 6% in average).

This position of BRVM is also the result of our regional and international promotion strategy during the last three years. Finally, it can be linked to the advantages stemming from the integration and monetary stability of our region.

In September 2014, May 2015 and October 2015, BRVM organized Investment Days in Paris, London and New York respectively. What was the targeted aim and can you share the outcome of these events, please?

Dr. AMENOUNVE: The attraction of international investors towards BRVM and WAEMU is one of our key strategic actions. We seek to have them to increase the efficiency of our market and make it more attractive. Obviously, the outcomes are already there to see with the high level of increase in value traded and holding by international investors.

In order to make Exchanges more efficient, there is a clamour towards the demutualization of several African stock exchanges. BRVM is one of these demutualized African exchanges; please can you share your view on the demutualization of exchanges?

Dr. AMENOUNVE: Demutualization is the key to improving the performance of African stock markets. As you have mentioned, BRVM has adopted demutualization since its creation. The stock market environment has changed significantly under the combined effect of technological change and communication, but also of changing economic models. Demutualization can contribute to greater efficiency and improved management.

A key hindrance in the development of African capital markets is liquidity, as a result of low IPO’s. Please can you underscore the ways governments and African exchanges can increase the number of IPOs and improve liquidity.

Dr. AMENOUNVE: It is clear today that the number of IPOs in African markets is lower than the potential of which African countries abound. Steps must absolutely be taken to improve this. This could include more privatization, encouraging big private companies to seek listing, encouraging Private Equity Funds to exit from the stock exchange etc.

As the current Chairman of the West African Capital Markets Integration Council (WACMIC), please share with our readers any major developments with regards to achieving integration of the markets across the West African region? 

Dr. AMENOUNVE: The integration of the West African capital markets is ongoing with several achievements to date. Recall that the ECOWAS Treaty already stated that the region must have an integrated capital market for development.

Let me remind your readers that three major phases will lead to the integration of ECOWAS capital markets: 1) sponsored access has already been achieved between Ghana and Nigeria on July 15, 2015 with one transaction. To date we have registered 7 transactions between the two markets. This first phase is designed to formalize the relationship between brokers that can trade equities on markets other than their own through local brokers; 2) the common passport that will allow qualified brokers to intervene directly on all stock exchanges of ECOWAS through a single license; and finally 3) the common platform of trading symbolized by a single stock exchange order book at the regional level.

It is an irreversible process that can lead to the second largest stock market in Africa after JSE.

Given the current volatility and challenges in the global economic outlook as a result of slow growth in China and commodity price slumps what is your outlook for the Region in 2016?

Dr. AMENOUNVE: BRVM will be as resilient as the economies of the WAEMU countries. The GDP growth in our region is expected at 7%. BRVM will continue its growth in terms of market capitalization (15 billion USD), value traded (800 million USD), and new listings (2 to 3 in 2016).

Thank you very much for granting this interview.

This interview was featured in the INTO AFRICA June edition which focused on African Fixed Income Markets and titled Africa’s Bonds: Coming of Age.