Burundi: A new step towards establishing the Capital Market
RegionWeek Newsletter Vol III, Issue #122 | Wednesday, September 9, 2020
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Dear RegionWeek Reader,
Today, my team and I would like to invite you to explore the latest developments in the process of implementing the Burundi Capital Market.
This Wednesday, September 9, Members of Parliament met in plenary session to analyze and adopt the bill governing the Capital Market Regulatory Authority in Burundi. The Minister of Finance, Budget, and Economic Planning was the guest, he responded to questions after presenting the explanatory memorandum.
As it appears in the memorandum, the Capital Market Regulatory Authority “ARMC” in a french acronym will have the mission of protecting investors, ensure a fair, efficient, and transparent market, and reduce systemic risk. It will be a public institution with its own assets and financial autonomy.
Minister Dr. Domitien NDIHOKUBWAYO explained that the Capital Market Regulatory Authority will have the power to make regulations governing the exercise of any capital market activity by an authorized or approved person. It will also have a mandate to impose requirements in terms of assets on authorized persons.
1. Burundi Capital Market Project timeline
The project consists of the creation of the Burundi Capital Market Regulatory Authority as well as institutions involved in the securities market, including major institutions such as the stock exchange and market intermediaries.
In 2009, the National Committee responsible for drawing up the Financial Sector Development Plan was set up. Three years later the Council of Ministers validated the financial market development plan. In the middle of the 2015 crisis, proposals for legal, regulatory, and institutional frameworks were validated.
It was in 2017 that structures dedicated to the establishment of capital market institutions were put in place within the Burundi Central Bank (BRB).
In 2018 Specialists in treasury securities, and operationalization of the secondary market for treasury securities were appointed.
Finally, in 2019, there was the Promulgation of the law governing the capital market of Burundi, it governs the capital market and establishes oversight mechanisms to protect investors, ensure market fairness and efficiency.
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2. The legal framework
Even though law governing the capital market of Burundi already exists, and beside the bill governing the Burundi capital market regulatory authority voted this Wednesday, September 9, there a still a draft decree governing the Burundi Capital Market Panel that needs to be published.
Other key draft regulations in the pipeline include:
1. Regulations on Corporate Governance,
2. Regulations on the management of complaints,
3. Regulation on the granting of approval and license,
4.Regulation on the central securities depository,
5. Regulations on the public offer of movable assets,
6. Regulation on information providers,
7. Regulations on collective investment organizations,
8. Code of Conduct for Journalists in the Capital Market;
9. Business conduct regulations.
The capital market currently operational in Burundi is the Treasury securities market. It is governed by a State-BRB(Burundi Central Bank) Convention of June 22, 2006 (amended on November 26, 2018) on the issues and transactions of Treasury bills and bonds. Additional Instructions from Burundi Central Bank support the convention.
There is a primary market in which banks participate overwhelmingly, but also a secondary market where securities issued on the primary market are traded. This market offers attractive investment opportunities for agents with financial capacity.
The major challenge for players in this market remains to raise public awareness to encourage them to invest and thus make their savings profitable.
3. The implementation Process so far
The tasks in the context of implementing the Burundi Stock Exchange were structured into three categories, the general organization, the market, the post-market, and the IT part.
What has already been done
The process of setting up the Stock Exchange in Burundi started with the Analysis of the environment, and the choice of functional options. Then the preparation of the Market Rules with the negotiating and transmitting specifications. The Post Market Regulation with the conservative and compensating specifications is almost completed. At the IT level, there has already been an analysis of the needs in terms of software and IT support.
Current Tasks
The current activities are mainly the creation of central structures, but also the contacts with the issuers for the preparation and the introduction. At the market and post-market level, the creation and contacts of commercial players and start-up players are already underway.
Tasks to be done
One of the main tasks that have not yet been undertaken is updating the tax policy. It also remains to decide on the values at start-up as well as to clarify the start-up instructions. From a technical point of view, it remains to make technical tests, training as well as the simulation before the official launch.
4. When will be the official launch?
Even though there is no official launch day known yet, experts agree on the fact that the official launch is for soon. Burundi Capital Market is expected to be able to play a key role in the process of privatization of public enterprises, the recapitalization of banks in need of capital, and in providing local communities, public and private enterprises with a privileged platform to raise stable funds and diversify their funding sources.
On April 20, 2020, the Investment Promotion Agency (API) in collaboration with the Bank of the Republic of Burundi (BRB) organized an awareness workshop on the capital market and investment at the City Hill Hotel in Bujumbura, in order to sensitize stakeholders on the imminent existence of the capital market in Burundi, the legal and regulatory framework that governs it, its operation and the investment opportunities that this market will generate.
Within the East African Community, only Burundi and South Sudan have not yet established the Stock Exchange Institutions.
Thanks for Reading!
Fabrice Iranzi, RegionWeek.com
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