Rwanda's exchange is latest to ride wave of interest in Africa

By Barney Jopson in Kigali

Published: April 10 2008 03:00 | Last updated: April 10 2008 03:00

It was a far cry from the opening of the New York Stock Exchange, but Rwanda's finance minister checked the clock was approaching 9am, took the hand-held bell passed to him, and gave it three evenly-spaced rings to signal the start of a new trading day last week on Africa's newest securities exchange.

Applause from a handful of officials and journalists rippled across the trading floor - an empty-looking office space gutted of its desks and cubicles.

The exchange is two months old and its beginnings on the fifth floor of Rwanda's tallest building, which has nine floors, are humble. But they had to be in a poor, land-locked country where economic and social life is being rebuilt from near zero after the 1994 genocide.

For the country's post-genocide government - which is widely praised abroad for its vision and lack of corruption - the exchange is vital to providing the Rwanda's private sector with long-term investment capital that is not available from banks.

The exchange also gives Rwanda a chance to ride a wave of interest in Africa among international fund managers and private equity groups, which has been driven by the continent's reputation for above-average returns that are not closely correlated with developed markets. There are now 16 stock exchanges in subSaharan Africa, excluding South Africa, with more than 500 tradable stocks and a combined market capitalisation of around $90bn, according to Goldman Sachs. In the past few months, these stock markets have significantly outperformed developed markets demonstrating the increasing desire of fund managers to invest in this part of the world.

Sub-Saharan stock markets, excluding South Africa, rose 11.3 per cent in dollar terms in the first quarter, according to Standard Bank. This compares with a fall of 9.5 per cent on the MSCI World index of developed markets over the same period.

Steven Goldin, a strategist at Standard & Poor's, said: "Africa, and sub-Saharan Africa in particular, really is the last frontier for investors, who see great potential for growth in this part of the world. The sub-Saharan region has seen positive returns of around 50 per cent over the last three years. More investors want exposure to Africa."

Standard & Poor's this week launched three new indices in Africa in response to this investor demand. The indices aim to capture about 80 per cent of the continent's total market capitalisation.

In Rwanda, Robert Mathu, executive director of the Capital Market Advisory Council, which runs the exchange in the capital Kigali, said: "This is a fairly new economy and following the war this government came in with a vision of the service sector being one of the key drivers of economic growth. To become a hub for financial services, a capital market is a must."

Dirk Harbecke, chief executive of African Development Co-operation, a Frankfurt-based group that has invested €13.5m ($21.4bn) in three privately owned Rwandan companies, said the exchange could present him with buying opportunities and an exit strategy.

"None of the big international investors will be first into the market," he said. "That will be more for people like us who have a better idea of how companies in the region are run. But if the exchange gets off to a good start then in one or two years they will come."

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