Encouraging multinational firms to raise corporate bonds seen as key to deepening capital markets

Top level panelists at the ongoing World Economic Forum in South Africa have suggested far reaching solutions for deepening the African capital markets which include encouraging foreign players in telecom, oil and gas and other sectors to raise corporate bonds in domestic markets where they operate.

The panelists including the Governor of Central Bank of Rwanda, Rwangombwa John and Du Toit Hendrik of Investec Asset Management Limited who discussed ‘Where next for African Capital Markets’ advised that it is not necessarily the issue of compelling multinational companies to list in the capital markets but supporting them to use capital market to create activities in the markets they operate.

In his view, Du Toit Hendrik of Investec Asset Management believed that compelling foreign entities in African markets to list in the capital markets will make them to tinker with their determined capital structure. He advised that regulators should not embrace this idea so that the entities can continue to operate in the markets.

One of the participants at the forum, Abdulrazaq Isa, the CEO of Waltersmith Petroman Oil Limited, Nigeria believed that if, for instance the oil and telecom companies begin to issue corporate bonds in markets like Nigeria there will be significant growth in the capital market.

He said though there is the issue and claim of liquidity but believed that if oil companies begin to issue bonds in Nigeria, international investors will begin to buy the bonds.

“There are emerging champions in Nigeria that once we begin to grow them and they get listed we can begin to grow the size of our capital market”.

He told BusinessDay that it is not a situation of compulsion but foreign entities need to be made also to see the value proposition in the idea of corporate bonds as “both parties benefit, the Nigerian economy and the companies benefit and everybody wins at the end of the day”.

Also speaking at the forum, Maria Ramos of Barclays Africa Group was interested in tackling obstacles such as cost of transferring funds within regions and removing barriers to easy movement of people across borders.

The Governor Central Bank of Rwanda, Rwangombwa John who spoke on the necessity of regional integration as another solution for deepening capital market said it is interesting that there are good ideas on how Africa can develop the capital market in the continental. According to him, the key point is “regional integration and integrating our markets and how we move towards that remains a challenge but it is achievable”.

He believed that political will has a lot to do to push towards that integration. He further said political will means that various regulators and governments need to come together to harmonise regulatory environment and legal frameworks and convertibility and movement of capital and personnel across borders”

In deepening the African capital markets, the group CEO of United Capital Plc, Ouwa Toyin said it is encouraging to know that there are significant opportunities for African capital market growth but there are impediments which are surmountable with political will and “we need to remove the impediments”

Experts have always believed that integrating West Africa’s capital markets for instance “will not only empower the economies as a more formidable competitor to other emerging markets but also help tackle the challenges of depth, breadth and liquidity. This will help create a much larger market for local and international businesses in the region. Integration could also usher in a wave of product innovation as expertise is utilised from across the region to churn out innovative products for different categories of businesses and investors”