Tanzania, Rwanda And Uganda Race Ahead To Forge A Single Stock Market.
Uganda, Rwanda and Tanzania are set to start trading as a single market before the end of this year (2020) after interconnecting their trading systems and hooking to the EAC Capital Markets Infrastructure (CMI) Information Technology platform. Investors in the three countries will buy and sell shares of companies listed in any of the countries without going through different stockbrokers. Currently, Ugandan stockbrokers take the largest share of stock trading commission at 3.28 per cent of the value of the transactions, not only within East Africa but in the entire African continent.
Three East African countries have joined forces to implement a World Bank-funded financial project that aims to connect regional stock markets electronically. This means they can operate as a single market with a view of reducing the cost and time of trading in shares of companies listed on markets across the borders. In Rwanda and Tanzania brokerage commission on equity trading are regulated at 1.5 per cent while in Kenya the applicable commission is limited to Ksh100 (1$) for odd lot transactions up to Ksh3,000 ($30) and 1.8 per cent for odd lot transactions in excess of $30. The East Africa Securities Exchange Association (EASEA) said the project that has dragged for more than five years largely due to payment dispute with the software provider and lack of integration between CMI software and the trading systems of the participating states — Uganda, Tanzania and Rwanda — will remove obstacles on stock trading in regional markets, spur activities and boost liquidity in underperforming markets once operational.
Pakistan-based InfoTech Private Ltd had been contracted to provide the software connecting the trading platforms of the Uganda Securities Exchange, Dar es Salaam Securities Exchange and Rwanda Stock Exchange to enable them to run as a single market in real time. Kenya, which runs the largest stock market in the region in terms of market capitalisation and number of listed companies pulled out of the project in 2015 after expressing dissatisfaction on how the Pakistan firm was awarded the contracting citing procurement irregularities. The market capitalisation of the Nairobi Securities Exchange (NSE) for the six months period to June 16, 2020 stood at $22.1 billion compared with DSE, USE and RSE whose value of listed shares stood at $6.5 billion, $5.1 billion and $3.52 billion respectively. The EAC Capital Markets Infrastructure project is part of the World Bank’s $26.18 million project which was approved in March 2011 to lay a foundation for the financial sector integration among the EAC member states ahead of the implementation of a single currency regime whose initial 2024 deadline is a subject of review.
The nine-year project referred to as Financial Sector Development and Regionalisation Project (EAC-FSRDP) 1, which is coming to an end on December 31, 2020 after the EAC Secretariat requested for the extension of the programme by 6 more months to complete activities whose implementation was disrupted by Covid-19 pandemic. The project consists of six components including integration of market infrastructure ($3.75 million), development of regional bond market Institution Building ($12.1 million) and Project Management ($1.1 million). Kenya’s reluctance to re-join the project undermines the spirit of East African Community which wants to promote a single currency regime which intends to facilitate cross border trade in the region. Across the continent managers of African stock exchanges have also started the process of procuring a software that will link seven stock markets with a combined market capitalisation of $1.25 trillion electronically as part of the initial phase of the African Exchanges Linkage Project. The project, a joint initiative of the African Securities Exchanges Association (ASEA) and the African Development Bank (AfDB), seeks to promote cross-border trading and liquidity in African stock exchanges.