STOCK MARKETS: The three countries – Uganda, Rwanda, and Tanzania are creating a system that will electronically merge their stock markets.
This is a World Bank-funded financial project to connect regional stock markets via electronic means. Uganda, Rwanda, and Tanzania are interconnecting their trading systems and hooking them to the EAC Capital Markets Infrastructure’s (CMI) Information Technology platform.
When the merger is completed; investors in all 3 countries can buy and sell shares of companies that are listed in any of the states without going through different stockbrokers. This means that it will be possible to do business with the same stockbroker to work for you in any of the three different countries.
Talks on the merger did not just begin. It has been ongoing for over a decade. The delay has mainly been due to a dispute with the software provider.
The Chairman of the East African Securities Exchange Association (EASEA), Celestin Rwabukumba, said they hope to finish preparation by the end of September this year since 95% of the work is completed. She is hopeful that they will launch by December 2020.
Aim of a joint-stock market
A merged stock market will ensure that there a reduction in cost as well as time of trading in shares listed on the various markets.
The Bright Africa 2019 report by RisCura indicated that the highest stock trading commission in Africa is taken by Ugandan stockbrokers. They take 2.28% of the value of every transaction they broker.
These costs majorly comprise brokerage commission; clearing and settlement fees; exchange fees; and also a range of other regulatory charges. Most East African stock markets have recorded low trade volumes; as well as high market liquidity due to their expensiveness.
When the three bourses are merged and the cost goes down; shareholders in the sub-region will no longer look to do business elsewhere.
Why the Nairobi Securities Exchange is not part of the merger
Kenya is one of the largest stock markets in Eastern Africa. However, the Nairobi Securities Exchange (NSE) pulled out from the project in 2015.
This was because the NSE cited irregularities with the procurement process of awarding a contract to Pakistan-based InfoTech Private Ltd. The Pakistani-based firm is providing the software connecting the trading platforms.
SOURCE: BUSINESS INSIDER AFRICA