Despite its small size, between January 3, 2020 and March 18, 2020, Rwanda’s capital market generated almost US$10 million compared to less than US$5 million in volumes traded between January 3, 2019 and March 29, 2019 while in the primary market at least US$125 million during the same period up from US$35 million the same period last year.
The COVID-19 pandemic has delivered devastating effects in several sectors of the global economy, and Rwanda is no exception, but the country may provide future lessons on how it managed to cushion her capital market.
Located in Rwanda’s business district of Kigali city, Africa’s newest capital market through its young stock exchange, the RSE has provided the investing community with a new picture of how the capital market ecosystem is likely to evolve in the post COVID-19 pandemic.
Analysts consider the traditional capital market as archaic, chaotic, noisy and prone to votalities.
However, Rwanda’s capital market founded on a strong soft and hard infrastructure, pristine, forward-looking aspirations and riding on the country’s resilience appears to have survived a crash in this difficult period.
However, some industry experts say this is a pretentious and premature conclusion because “we are nowhere close to the end of the pandemic.”
Rwanda Stock Exchange (RSE) is preparing for listing of a first cement maker, Cimerwa Ltd., under the most challenging operating environment that saw Rwanda’s economy go into a total lockdown.
On March 21, 2020, Rwanda went into a total strategic lockdown.
Several sectors of Rwanda’s services economy took a direct hit in a bid to flatten the curve of the spread of COVID-19.
It is instrumental to note that Rwanda’s action against the pandemic was considered one of the most austere in Africa and in the same stance as China, South Korea, Estonia, Slovakia and a few others.
At the time of announcing the lockdown, Cimerwa Ltd. listing transaction teams were getting ready to execute their plan. Despite the sudden disruption due to the pandemic, everything rolled down as planned.
Taarifa has learned from sources within the industry and government officials familiar with the matter that the deal was meticulously planned and successfully executed.
Cimerwa Ltd., located in Bugarama, Rusizi district, South-Western border of Rwanda, is the country’s largest and only integrated cement maker.
The government of Rwanda owns 16.55% stake through its sovereign wealth fund, the Agaciro Development Trust Fund (AGDF) Corporate Trust.
Under strict terms of confidentiality Taarifa has seen an information memorandum for the deal which indicates that in September 2019, Cimerwa Ltd. had revenues of US$62 million and net income of US$3.2 million.
The company produces the clinker concentrate, packs and sells cement for general and civil construction. In the past 20 years, Cimerwa Ltd. emerged as the most dominant cement maker in the market and a major catalyst of the country’s ongoing construction boom.
The information memorandum for the deal also states that some of its products are exported to neighboring countries such as the DR Congo and Burundi.
Cimerwa Ltd. production plant has an installed capacity of 600,000 tons per annum with a current 80% utilization.
The deal provides an opportunity for the government of Rwanda to offload its 15.66% stake for sale held by AGDF Corporate Trust in the company to the public through a listing on the RSE.
Rwanda Social Security Board (RSSB), Rwanda Investment Group (RIG) and Sonarwa Holdings Ltd. are also offering their shares in Cimerwa Ltd. worth a combined 33.64% for sale in the same deal.
Technically known as “listing by introduction” the Cimerwa Ltd. transaction is a first of its kind in Rwanda apart from the dual listings that have come from the region.
According to deal makers, the transaction is meant to make it possible for other firms to access the local capital market due to its affordability pricing model, cost effectiveness and simplified processes.
The deal now seems to offer Rwanda and the global investing community with how the future of capital markets will most likely operate in the post coronavirus economy.
According to the information memorandum for the deal, the total number of shares on offer in the transaction constitutes up to 49% of the issued share capital of Cimerwa Ltd.
“It is a done deal dusted and delivered despite the vagaries of the COVID-19 pandemic,” said one of the lead transaction advisers working for the deal while preferring to remain anonymous.
The planned listing of Cimerwa Ltd. at the RSE is happening at a time when COVID-19 continues to hit the regional capital market for the last 3 months.
Nairobi Securities Exchange (NSE) emerged as the biggest casualty. Its main index in mid-March hit a 17-year low.
Statistics indicate that the pandemic cut shareholder’s wealth by more than US$700 million in just a month at the Kenyan bourse.
Analysts argue that the sell-off is part of a global trend as investors dump stocks. Ugandan and Tanzanian bourses faced similar unforgiving wraths.
Under this disruption and in total defiance of odds staked against it, Rwanda’s stock market showed resilience not only in East Africa, but globally, despite its size. It has remained stable.
Experts say that it even performed better in some indicators compared to the same time last year.
Its traded volumes doubled in the first quarter of the year 2020 compared to same period last year.
Despite its small size, Rwanda’s capital market traded about US$10 million between January 3, 2020 and March 18, 2020, compared to about US$5 million traded between January 3, 2019 and March 29, 2019.
For the same periods, its primary market registered about US$125 million, up from US$35 million.
“Our situation was more of stability than volatility. Actually our market has been on an upward trend gaining in some indices,” Celestin Rwabukumba, the RSE CEO says.
Currently, RSE statistics indicate that the All Share Index (ASLI) was up by 10.58 % while the Rwanda Share Index (RSI) went down 1.5% at the end of Quarter 1, 2020 and the total market capitalization was up 10%.
From the first case of the pandemic in Rwanda, the ASLI went slightly up 0.01% while the RSI went slightly up by 0.11% one month down the road.
Rwabukumba explained to Taarifa how Rwanda’s capital market is able to stay stable in the wake of the coronavirus pandemic.
“The RSE is indeed a unique operation. It is Africa’s newest and perhaps one of most agile and prone to adapting to abrupt and today’s far reaching disruptions. It is no surprise as it was built on the bed-rock of Rwanda’s resilience and ability to survive on limited resources and increasing need for innovation,” he said.
Rwabukumba brief and guarded statement reveals something much more advanced and futuristic.
Unlike other securities exchanges of the region, Taarifa’s investigation can confirm that the RSE is run by a lean core staff of less than 10, currently mostly working from home.
Licensed stock brokers at the floor of the RSE are known to be orderly, 90% automated, disciplined and less menacing than their counterparts in Nairobi, Kampala or Dar es Salaam. This form of agility provides a unique insight into how the future holds for global stock market.
Simply, the RSE is perhaps the only securities exchange in the world that was able to fit in with the disruptions to the new conditions of working from home occasioned by global efforts aimed at curbing the spread of the COVID-19.
The Rwandan government, perhaps reading from this unique opportunity at the RSE, jumped in and quickly hired a transaction team to prepare Cimerwa Ltd. for listing by way of introduction.
“This transaction is unique in a number of ways. It is meant to be finalized by end April 2020 even as the world is grappling with challenges of the coronavirus pandemic,” Jack Kayonga outgoing CEO of AGDF Corporate Trust is on record as telling the gathered transaction team early this year.
The first kick off meeting held at Cimerwa Ltd. Headquarters in Kimihurura, in the Gasabo district, and the second meeting that was held at AGDF Corporate Trust Headquarters in the Nyarugenge district, served to be the only meetings that physically brought the teams together.
Subsequent meetings were carried out online in strict observation of the newly imposed lockdown rules.
Within five weeks, the price discovery process for Cimerwa Ltd. stocks was successfully done.
The requisite approvals from Cimerwa board of directors for major elements of the transaction were swiftly approved according to Cimerwa Ltd. CEO, Albert Sigei.
“So much was at stake at Cimerwa Ltd. in the year 2020 and the transaction provided the impetus we needed to facilitate its smooth transition from private to listed firm. It is quite refreshing that the listing process has gone according to plan and all is set for its listing by way of introduction.”
Despite carrying out all the preparatory process to detail, the execution of the actual listing process awaits the ultimate press on the button.
The CEO of Rwanda Development Board (RDB), Clare Akamanzi says that the government continues to monitor the situation before a green light is given.
“The plan was to list Cimerwa Ltd. in April 2020. We however are watching and weighing our options to make further decisions when it will be necessary,” Akamanzi told The East African.
She also told Taarifa that the listing will eventually take place after COVID-19 pandemic eases adding that ”while Rwanda is convinced all is set on its side, with nothing to worry about, however, it is cognizant that investors are focused on COVID-19, so this is not best timing.”
While Rwanda’s stock market is tiny in comparison to her neighbors, those watching closely can confidently say that it is indeed providing a playbook and insight into the future mechanics in case capital market plummets again around the of the world.