Robert Mathu, the Executive Director of Rwanda’s Capital Market Authority (CMA), started his career at the Nairobi Stock Exchange (NSE) in 1990. He was also involved in setting up the Dar-es-Salaam bourse. Mathu  equally assisted in the establishment of the Uganda Securities Exchange in 1996.
He possesses an MBA in International Banking and Finance from the University of Birmingham, UK and a Bachelor’s Degree in Commerce from the University of Nairobi. He speaks to AnnualMeetings Daily. Excerpts:

How would you  assess the Rwanda capital market?
The Rwanda capital market is a nascent market which has emerged out of necessity for the Rwandan economy to achieve two things. One is to enable firms to access long-term capital which is a key challenge in most of sub-Saharan Africa. Second is to help the Rwandan economy to integrate financially into the global financial market starting with the regional market and then going to the international market. This is because the capital market structure is an integral part of the financial system and it is important in that it attracts investors who in most cases are structured under the capital market legal framework. Without a capital market structure, an economy will find it difficult to attract specific types of investors. These include fund managers and pension funds among others. Without the capital structure, they are exposed as they do not have the prudential safeguard that are required by law for them to invest in any market.

A capital market is said to be as good as its regulatory regime. What is the experience of Rwanda?
Action speaks for what has been done in Rwanda. In the five years since the establishment of the capital market, we have been able to attract at least five listings on our market and two of them are domestic. The domestic listings came to the market as a result of the very successful privatization. We also have an appropriate regulatory framework for the debt market. So far we have not really had challenges. It gives solace that our market is moving in the right direction.

What are you doing to deepen the market and attract more listings?
Presently we are doing a lot of public awareness to attract both would-be investors; those seeking to raise money through our markets and corporate investors that may be listed elsewhere and would like to come to our market. Just informing the market that we have a functional capital market, we believe, is sufficient to attract more listings on our market. We also have the privatization programme which is one of the key growth drivers of our capital market. We are also looking at targeting the SME market. We have developed guidelines that are aimed at attracting the SMEs that may not be able to meet the full listing requirements through listing on the main stock exchange. So we have created a window that will accommodate small companies.

Kenya is just by the corner and it has a thriving capital market. Do you think that will affect the performance of the Rwanda capital market?
Yes it will affect our performance in a positive way in the sense that we do have what we call the East African Community capital market integration. We are at an advanced stage in coming up with a very strong regional capital market. Meaning that any investor, especially foreign investors looking for capital market assets to invest in, when they come to any of the countries in the Community, they will actually be coming to the whole region. This is due to the removal of any barriers to the free flow of capital, people, resources and joint development of infrastructure like railway, pipelines, opening up the ports e.t.c. This is going to mean that businesses in the region will be dealing with a bigger market, making it more attractive.

So, it will affect us in a positive way, since we have developed our capital market. As Nairobi thrives, Rwanda will also be a part of that success because we will not just be talking about Nairobi, but we will be talking about East Africa.

Equity finance is still low in Africa compared to debt financing. What is your long-term strategy to rebalance the financing needs of corporates?
The most important initiative to me is the development of the asset management industry. We need fund managers and we need as many as possible. More important also is the reform in the retirement benefit sector, which is the pension industry. This is taking place across many countries in the world. Many countries are in the process or about to start the reform process in their pension industry. This will ensure the liberalization of the pension industry so that the private sector can move in and you don’t have a single manager of pension in the industry. This will inject competition as well as efficiency by encouraging insurance companies and asset managers to partake. These entities are able to mobilize equity funds at a level whereby you will not leave it to the households to take care of it.

If I have 10,000 Rwanda francs, I will have no motivation to invest it because it cannot even buy me probably 100 shares in a particular stock I will wish to put it. But if someone sets up a fund management industry and mobilises small amount of money and put in a fund, it would buy shares. Then someone else will be able to come and sell us pension products. I will continue to contribute to the national compulsory pension but I will increase my savings base. The Sub-Saharan Africa has not been very successful in equity funding because of the reasons I have explained. Also those reasons are underpinned by the level of savings because income levels are low. This will also be driven by investments that will be able to generate jobs. When people get jobs we will have more disposable income and this will also ensure savings are deepened by financial services institutions by bringing more products to the industry.

Rwanda has improved a lot in the ease of doing business in recent years. To what extent is this impacting on the investment climate?
It is extremely positive. This is reflected in the level of growth in the economy and Rwanda’s growth rate has been very favourable. It is one of the fastest growing economies on the continent. It has also increased investment in the economy as the number of investors coming into the country has surged. The level of businesses that are flowing in to do business on a regional basis is phenomenal compared to just three years ago. The doing business ranking has had a positive effect on the economy.

To what extent does the government make use of the capital market to meet its financing needs?
The government has been responsible for developing the capital market in the expectation that it will also be able to use the capital market. To begin with we have a bond market programme where the government comes into the market both to develop the market and also to raise finances to support the budget. Last month we had a very successful bond issuance which was well subscribed. The government has also approached the international market where it issued a sovereign bond; that in itself is an indication that the government recognizes the usefulness of the capital market. The government has also been able to privatise two big assets— the Bank of Kigali and the brewery through the capital market. These are testimonies to the fact that the government is serious with the development of the market.