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A new class for BRVM.

Summary: The West African Economic and Monetary Union has just been bumped to Frontier Market status, joining just five other African markets and throwing the regional stock exchange, the BRVM, into what CEO Edoh Kossi Amenounve hopes is a new era of growth

On 12 May, Morgan Stanley Capital International (MSCI) announced that the West African Economic and Monetary Union (WAEMU, or its French acronym, UEMOA) had been bumped up to its Frontier Markets Index, putting the Union's fast-growing regional stock exchange in the company of Nigeria, Kenya, Mauritius, Morocco and Tunisia's markets.

The exchange, the Bourse Regionale des Valeurs Mobilieres SA (BRVM), is already the sixth largest stock market in Africa, but its steady capitalisation and liquidity efforts over the past few years have helped push it from the 'standalone' MSCI Index that it was classified in just two year earlier.

Reaching Frontier Market status is just one notch in BRVM's ambitious plan to grow as both a capital market and a driver for its eight member countries' domestic business growth. Upon the announcement, BRVM CEO Edoh Kossi Amenounve called it an important step for investor confidence and WAEMU's continued strong economic growth.

Amenounve took some time to tell Banker Africa about the exchange's plans, including new strategies to bring in foreign investors and build capacity for SMEs.

What measures have been taken to attract international investors to the exchange? What is the ideal balance of foreign to local investors for you?

One of our key strategic actions is to attract international investors to the BRVM and the WAEMU zone. We seek such investors 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 holdings by international investors.

We have strengthened the promotion of our market internationally by organising road shows for international investors. These road shows took us to different international financial centers such as Paris, London, New York and Dubai. During the shows, we have emphasised the good opportunities offered by investment in the WAEMU zone--such as an average growth rate of six per cent in 2015 and good forecasts for the years to come.

Furthermore, the WAEMU regulations allow free repatriation of capital, dividends, and interest, etc. for international investors. We also continue to implement all of the needed reforms.

The current ratio is 25 per cent foreign and 75 per cent local investors which, from my point of view, is the ideal balance.

How have external global factors, like the drop in oil prices, impacted the BRVM and/or its listed companies?

BRVM and its listed companies have been protected from the effects of falling oil prices, as have the economies of the WAEMU countries when compared to other markets that include oil-producing countries. This can be explained by the fact that our economies are less dependent on oil than others. Furthermore, our currency, the CFA Franc, is pegged to the Euro [655.957 CFA = 1 EUR] and backed up by the French Treasury, which contributes to the monetary stability of our Union--that shares the CFA as its currency--when compared to other countries in the West African region.

At "BRVM Investment Days" in Dubai, you highlighted some of the challenges African markets face. Which of these are key for BRVM right now, and how are you approaching them?

BRVM has to continue to implement its development strategy, which aims to strengthen its liquidity and the growth of its capitalisation. To achieve these goals, we will focus on various strategic actions including firstly, the listing of new companies, particularly encouraging privatisation and the large companies' involvement.

Secondly, we will reinforce regional and international promotion through roadshows. Third, we are launching the SMEs and high-potential companies compartment [of the BRVM's listings] and fourth, we are creating incentives such as the launch of diaspora bonds.

Fifth, we are setting up a new market for the mining industry and start-ups. We are also reinforcing capital markets integration with ECOWAS [Economic Community of West African States] markets, Franc zone markets and the Casablanca Stock Exchange. Finally, we are launching a venture capital market.

By reaching these targets, we expect to have approximately 16 IPOs [initial public offering] by 2020, including four in the short-term.

How can regional companies be incentivised to list on the exchange?

Increasing the number of listed companies is a key goal that we are currently working on. To achieve this goal, we have signed agreements with the Chambers of Commerce and Industries in the different WAEMU countries and with private equity funds aimed at discouraging them from exiting the stock exchange.

The decision to come into the stock market is an internal strategic decision for a company at a certain stage of its development. All the same, we try, during our regional road shows, to educate decision-makers on the opportunities an IPO offers for a company.

What benefits does a regional exchange (rather than a country-specific one) offer, both for listing companies and for investors?

A regional market provides companies and investors with a wider, deeper, and more liquid market for the mobilisation of resources with cost savings to accelerate the development of our continent.

African stock markets are too fragmented. We must consolidate. For example, if the ECOWAS stock exchanges are grouped together, they will represent the second largest African trading group after Johannesburg.

In terms of size and growth prospects, how does BRVM compare to other stock exchanges in Africa? Where do you see it in five to 10 years' time?

BRVM is the sixth largest African capital market in terms of capitalisation, with $12 billion in 2015. We plan to be the fifth by 2020.

What opportunities are there for smaller or emerging companies to participate in the BRVM and grow?

BRVM is like an alternative window for SME financing in our region. This is one of their greatest difficulties. The upcoming opening of a dedicated compartment in our market will allow them to benefit from financing opportunities offered by the market for their growth.

What is your outlook on economic growth for the BRVM's member countries, particularly the smaller economies among them?

Over the past three years, the BRVM has been boosted by the strong economic growth in the region and the promising prospects for development that are driving emergence over the medium- term, as well as by the peaceful political environment which is strengthening democracy in our region.

The WAEMU economies are showing resilience to internal and external shocks, due to measures implemented by member countries and to many efforts to support economic activity.

WAEMU recorded significant growth in 2015--6.6 per cent, identical to 2014. It is expected to rise to 7.2 per cent in 2016. It was better than the rate of world economic growth [3.1 per cent] and the overall African rate [4.5 per cent]; it was even better than the Sub Saharan African economic growth rate [3.4 per cent] and those of ECOWAS [3.1 per cent].

This increase is mainly due to the recovery and strengthening of the economy in Cote d'Ivoire; good agricultural production and the increasing dynamism of the primary sector in general; the development of industry with a better supply of energy and building infrastructure; as well as a stable 1.3 per cent inflation rate, favouring more consumption.

By country, the rate of economic growth in 2015 is: 5.2 per cent in Benin; 4.4 per cent in Burkina; 9.5 per cent in Cote d'Ivoire; 4.7 per cent in Guinea Bissau; 4.9 per cent in Mali; 4.8 per cent in Niger; 5.4 per cent in Senegal and 5.8 per cent in Togo.

For 2016, the growth rates of these economies are expected to accelerate to: 5.8 per cent in Benin; six per cent in Burkina; 9.8 per cent in Cote d'Ivoire; 4.9 per cent in Guinea Bissau; 5.4 per cent in Mali; 5.4 per cent in Niger; six per cent in Senegal; and 5.8 per cent in Togo.

6th The BRVM's size compared to other African stock markets

$12 billion Capitalisation on the market in 2015

6.6% Average economic growth of WAEMU countries in 2015

BRVM is the sixth largest African capital market in terms of capitalisation, with $12 billion in 2015. We plan to be the fifth by 2020.

A'Edoh Kossi Amenounve, CEO, BVRM

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Publication:Banker Africa
Date:Jun 16, 2016
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