Gabon implementing new strategy for the CEMAC stock exchange

Gabon is home to the regional stock market of CEMAC, the Central African Stock Exchange (Bourse des Valeurs Mobilières d’Afrique Centrale, BVMAC). While the exchange has attracted many bond listings since it began operations eight years ago, equity listings and secondary trading activity remain limited. To address this, the regulator commissioned a study of the exchange’s development potential and associated challenges, and are now working to implement steps to help it take off.

The decision to create a regional stock market was made by CEMAC heads of state in 2003, leading to the inauguration of the BVMAC in 2008. The market is jointly owned by CEMAC-based financial institutions including brokerages, banks and insurance firms, and continues to develop, having inaugurated a new trading room in July 2016.

Since its inception 11 bond issues have been listed on the exchange, with a combined value of CFA439.6bn (€659.4m). The issuers include the governments of Gabon and Chad, regional and international donors and development banks, and a handful by private firms including Gabonese retailer Prix Import (in 2009), fuel distributor Petro Gabon (in 2011), Gabonese-based financial group BGFI Holding (in 2013) and non-bank lender Alios Finance Gabon (in 2014). In June 2016 Gabon’s government launched a third bond, issuing CFA135bn (€202.5m) of debt with a coupon of 6.5% and a maturity of five years.

There has been only one equity listing, that of SIAT Gabon, a subsidiary of Belgian agri-business firm SIAT, which conducted a CFA5.74bn (€8.6m) initial public offering in 2013. Investment activity is dominated by institutions, with financial institutions providing 67% of investment, non-financial firms 21% and individuals just 5%.

The value of trading on the BVMAC was CFA22.5bn (€33.8m) in 2015, more than double 2014’s CFA11.1bn (€16.7m). Trading levels have been muted in 2016 so far, standing at CFA740.2m (€1.1m) for the first six months of the year.

Listings Pipeline

The latest Gabonese government bond issue should be listed on the BVMAC soon, and there could be up to four issues on the market in 2016, which would be a record for the exchange, as Marcele Ondele, secretary-general of the Oversight Commission for the Central African Financial Market (Commission de Surveillance du Marché Financier de l’Afrique Centrale, COSUMAF), told OBG. He added that COSUMAF was in discussions with regional telecoms firms that could develop a strong presence. Pascal Houagni Ambouroué, director-general of the BVMAC, told OBG the government of Chad was also working on the launch of a new bond, and in 2015 BGFI was reported to be considering a share listing.

The fall in the price of oil since mid-2014, despite having had deleterious effects on Gabon’s economy – oil is the country’s main export and the source of most government revenues – could boost listings activity. “The logical consequence is that some companies will need new sources of financing; we want to capture that demand and bring them to the market,” said Ondele. This could include companies from the hydrocarbons industry itself. “Given the crisis in oil-reliant CEMAC countries, oil industry service firms are likely to come to the market as they will need long-term resources at low cost,” said Houagni.

Development Plans

The authorities have bold plans for the BVMAC, with COSUMAF aiming to raise regional stock market capitalisation to 20% of CEMAC GDP, from the current 0.4%, and achieve a total of at least 20 listed firms within five years. With this in mind the regulator, together with consultancy Roland Berger, conducted a study on the development of the market. Challenges identified by the study include the existence of two rival stock exchanges in the CEMAC region (the BVMAC and the Cameroon-based Douala Stock Exchange, DSX), lengthy listing procedures, a lack of training among market actors, high tariffs, the absence of a harmonised tax framework, and a lack of knowledge of fiscal incentives among potential issuers.

Findings

The study made nearly 40 recommendations for reforms, including achieving some form of convergence between the BVMAC and DSX, encouraging long-term savings (for example by harmonising the tax framework for investment income across CEMAC), encouraging member states to conduct privatisations via the bourse and to issue government bonds more regularly, and putting in place a programme of financial education to create a regional stock market culture.

The study identified five state-owned firms and four private companies as promising candidates for listings in the near term. One of them was BGFI, as was Gabonese food distributor CECA GADIS. The study named sectors such as agri-business and infrastructure as potential sources of listings.

The exchange is also working with Gabon’s government on an initiative that would push companies with a turnover of more than CFA2bn (€3m), including both local and foreign firms, to list on the exchange to help develop the market. “We want to demonstrate to such companies that the market is maturing and offers them an opportunity to integrate with local economies, including by seeking local financing rather than looking abroad,” Houagni told OBG, citing a similar move by Côte d’Ivoire’s government as a success. In May he said that the initiative remained at the discussion stage with the Ministry of Economy.

The existence of two separate stock exchanges within CEMAC has long been seen as a challenge to the development of local capital markets. There are also three security depositories in the region. There had been talk of a merger between the two institutions but Cameroon’s government has come out against this. “The idea is no longer for a merger, but for some form of convergence between the two institutions,” Houagni told OBG. The regional central bank is working on a plan to this effect; in 2015 CEMAC member states established a pilot committee to look at the question.

Outlook 

The outlook for the BVMAC’s development depends partly on the willingness of governments to conduct privatisations via the exchange and compel regional companies to list, as well as the success of efforts to bring about convergence between it and the DSX. Nevertheless, with a development roadmap now in place, the exchange is set to attract more listings and boost its capitalisation. “Once everything is in place the outlook for the market will be very bright,” Ondele said.