Despite being better known, challenges in using the Mozambique Stock Exchange as a true funding alternative persist

Salim Valá, president of the board of directors of the Mozambique Stock Exchange (BVM), says that despite the many advantages that come from investing in the BVM, there are still many companies that are reluctant to be listed on the Exchange, for a variety of reasons.

In an interview with MZNews, the president of BVM mentions that companies have more visibility when they are listed on the BV. "With a BV there is greater appetite from foreign investments," Valá clarifies in a frank and open conversation with our reporter.

What is behind the low use of the Stock Exchange by the national business community, looking more to the private sector?

I would like to start by pointing out some of the main advantages that Mozambican companies, particularly those in the private sector, have by using the BV platform:

Despite the advantages mentioned above, we still have companies that are reluctant to be listed on the Stock Exchange, for a variety of reasons:

As can be seen, there are clear advantages to using the stock market, but there are also challenges related to the prevailing financial culture in the country. The work that we have been carrying out is in a long-term perspective. It aims to put the capital market in the place it deserves within the Mozambican financial system.

What mechanisms are being implemented by the Exchange to reverse this scenario?

We have carried out several actions of awareness, capacity building, interaction and dialogue with entrepreneurs, investors, among other key players.

This is all in the sense of getting to know BVM better, its objectives, advantages, services and available instruments, which give body to the daring.  

We have been interacting and clarifying to entrepreneurs that many of the reasons they give for not listing are unjustified: A company that does not need financing still has advantages in coming to the Stock Exchange by the greater visibility that your company now has, by the tax benefits it may have (stamp duty exemption and lower tax rate on dividends). 

And even when they do need financing, companies almost always turn to bank financing, and they rarely think of the capital market, where financing for companies has been done at relatively lower interest rates.

Companies often complain about the costs, but they are not that high considering the benefits to be gained. For example, a company that has a share capital of 1,000,000.00 MT pays 500.00 MT fee when it lists (0.05% fee), and annually pays 100.00 MT maintenance fee (0.01%) on the Exchange.

What the companies complain about, and here they may have a point, are other costs that are not of the Exchange, such as the costs of auditing the accounts (but we are working on that) and the costs of newspaper publications (in the Boletim de Cotações you don't pay for the publication).

What are the possible risks that come with listing on the BV by the private sector?

I don't know if we can talk about risks, but there is certainly a greater accountability of the company and its managers to the market and investors. A company that is listed on the stock exchange is subject to the scrutiny of public opinion.

When companies are listed on the stock exchange, they are required to provide mandatory information to the market, shareholders and other investors. They must publish the company's management reports and accounts, and must disclose all important facts about the company that are of interest to its shareholders.

That is why when a company comes to BV, it is considered as a credible, reliable and transparent company that follows good corporate governance practices, which makes the company much more careful and responsible with its "stakeholders", because it is exposed to the public and obliged to present regular information to the market.

Even the process of listing a company on the Stock Exchange is preceded by a wealth of documentation and the publication of a document called "Listing Prospectus", which contains all the information about the company, its activities, its assets, its governing bodies, its human resources, the company accounts, the projects underway, and the company's future prospects.

What should companies take into account before listing on BV?

Before listing on the Stock Exchange, and as I just mentioned in the question you asked me earlier, the company must take into account that its exposure will become public, that the performance of its company will be analyzed, that the management of the company will be evaluated, and not only by its shareholders, but by the market and public opinion.

The company listed on the stock exchange is obliged to provide mandatory information under the terms of the Securities Market Code, and that failure to do so can be criticized by the public and even penalized by the supervisory entity of the capital market in Mozambique, which is the Bank of Mozambique.

In addition, if a company wants to list itself on the Stock Exchange, it has to take into account that it must comply with the admission requirements of the stock market where it intends to list.

All companies can be listed on BV? What are the requirements?

All companies can be listed on the Stock Exchange, as long as they meet the listing requirements, regarding the market where they want to be listed, that is, the Official Listed Market (State and Large Companies) or the Second Market (geared towards SMEs).

Listing requirements are necessary to give investors greater confidence about the company being listed on the Exchange, and are more demanding for the Official Listed Market and less demanding for the Second Market.

However, BV has created a Third Market, in November 2019, for those companies that at the time of listing do not have the full requirements to be listed, giving them a 2-year (maximum of 3 years if duly justified) period to achieve them.

The listing requirements are different for each market, and are classified into legal, economic and market requirements:

En COVID 19 times, what are the added values that the private sector can have in using the capital market?

BV has promoted throughout its 22 years of existence, in the good and the bad economic times - like this pandemic - trying to give investors a better return for their savings, and to give companies a lower interest rate for their financing.

Of the 11 companies currently listed on the BV, two of them were listed already in the context of Covid-19, as attesting that even with the economic and pandemic crisis, entrepreneurs and investors continue to turn to the BV as a financing, savings, and investment tool. Several companies have turned to debt instruments such as corporate bonds and commercial paper to finance themselves, and this trend has not slackened with the advent of Covid-19.