3 East African exchanges to link before year-end 2020

Market integration across 3 East African securities exchanges is moving fast with a target of being live and online by 31 December 2020. According to a news report, Uganda Securities Exchange, Dar es Salaam Stock Exchange and Rwanda Stock Exchange are set to start trading as a single market after connecting their trading systems to each other and hooking to the EAC Capital Markets Infrastructure (CMI) Information Technology platform.

The Pakistan-based InfoTech Group is been contracted to provide the software connecting the trading platforms of the U to enable them to run as a single market in real time. A news release from 2018 says ” InfoTech was selected to deploy its Capital Market suite, Capizar ATS, along with a Smart Order Routing system. This would achieve a single market for both central banks and capital markets and will stimulate intra-regional securities trade and investment.”

According to the report in East African “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. Investors in the 3 countries will buy and sell shares of companies listed in any of the countries without going through different stockbrokers.”

 

World Bank project

The World Bank has committed $26.18 million for a 9-year Financial Sector Development and Regionalisation Project (EAC-FSRDP) 1. It supports financial sector integration among the East African Community (EAC) member States and was planned to as part of preparations for bringing in a single currency across the EAC, although the 2024 deadline for this is now being reviewed.

The World Bank project finishes on 31 December after the EAC Secretariat requested a 6-month extension for activities whose implementation was disrupted by Covid-19 pandemic. According to the World Bank website, $16m was the initial commitment, topped up with $10.5m in September 2016, and $24.7m has been disbursed as of September 2020.

The World Bank project has 6 components:

  1. Financial inclusion and strengthening of market participants ($4.3m)
  2. Harmonization of financial laws and regulations ($4.23m)
  3. Mutual recognition of supervisory agencies ($0.7m)
  4. Integration of market infrastructure ($3.75m)
  5. Development of regional bond market institution building ($12.1m)
  6. Project Management ($1.1m).

Missing Nairobi Securities Exchange

According to the report, the region’s biggest exchange, the Nairobi Securities Exchange, pulled out of the project in 2015 after expressing dissatisfaction on how the Pakistan firm was awarded the contracting citing procurement irregularities.

Geoffrey Odundo, chief executive of the NSE, was quoted: “We have not yet reconsidered our position in terms of our participation in this project but we have had a discussion with EASEA in terms of the progress of the project and how far they are. They mentioned to us that they have set the infrastructure and they are ready to go.

“They are supposed to share with us some information including the efficiency and the expected outcomes of the project for us to be able to make a proper assessment of the current status of the project before we can make any further decisions. But right now we have not made any decision to go back to the project.

According to the news report, the market capitalization of the NSE was $22.1 billion in June compared with $6.5bn on DSE, $5.1bn on USE and $3.5bn for RSE.

Ready in September

Celestin Rwabukumba, the chairman of The East Africa Securities Exchange Association (EASEA) and CEO of Rwanda Stock Exchange CEO is quoted by The EastAfrican reporter James Anyanzwa: “We are doing the final testing on our system for the CMI project. We are ready psychologically and technically we are working on those technicalities that are remaining. On the other hand Tanzania and Uganda are technically ready,”

“Everything should be ready by the end of this month and then we agree on the time of the launch because 95% of the work has been done. The launch cannot go beyond December because we cannot afford to go beyond that time.”

The report said the project has taken more than 5 years due to a payment dispute with the software provider and lack of integration between CMI software and the trading systems of the participating Uganda Securities Exchange, Dar Es Salaam Stock Exchange and Rwanda Stock Exchange.

AELP is different

The EAC market integration is separate from the African Exchanges Linkage Project, a joint initiative of the African Securities Exchanges Association (ASEA) and the African Development Bank (AfDB). The initial phase is promoting cross-border trading and liquidity in 7 stock markets with a combined market capitalisation of $1.0 trillion.

These exchanges are: Bourse Régionale des Valeurs Mobilières (BRVM – Benin, Burkina Faso, Côte d’Ivoire, Guinea Bissau, Mali, Niger, Senegal and Togo), Casablanca Stock Exchange (Morocco), The Egyptian Exchange (Egypt), Johannesburg Stock Exchange (South Africa), Nairobi Securities Exchange (Kenya), the Nigerian Stock Exchange (Nigeria) and Stock Exchange of Mauritius (Mauritius).

In March 2019, ASEA received a grant of $980,000 from the Korea-Africa Economic Cooperation (KOAFEC) trust fund via AfDB to facilitate implementation of the project.

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