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AfricaAugust 1 2019

Mozambique’s bourse takes a giant step with hydropower listing

The Maputo stock exchange hopes a hydropower IPO will be a turning point for the country’s wider economy. John Everington reports.
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Mozambique’s stock exchange, the Bolsa de Valores de Moçambique (BVM), is celebrating its 20th anniversary in 2019. The exchange marked the milestone with the initial public offering (IPO) of a stake in HCB, operator of the Cahora Bassa hydroelectric dam, the largest in southern Africa. 

Yet while the IPO, the country’s largest in several years, is expected to be the first of many, the BVM remains a shallow market at heart. 

The sale of HCB shares was announced in November 2017 by Mozambique’s president, Filipe Nyusi, on the 10th anniversary of the transfer of its ownership from Portugal to Mozambique. 

Reserved solely for Mozambican investors and institutions, the HCB IPO – only the fifth in the exchange’s history – is described by BVM CEO Salim Valá as a landmark for capital markets in the country.

“HCB is one of the most important and symbolic local companies for Mozambican people,” he says. “The offering is very important for the country in terms of financial inclusion, and it is a pedagogic process for the public.”

On the road

Following the formal announcement of the IPO in May 2019, HCB conducted a nationwide roadshow for the offering, seeking to educate the public about capital markets and the stock exchange, ahead of a subscription period which ran from June 17 to July 12.

The sale was co-ordinated by Banco Comercial e de Investimentos (BCI) and Banco BIG, with Mozambicans able to subscribe to shares through branches of all the country’s major banks, as well as via smartphones. 

While an initial tranche of 687 million shares, representing 2.5% of HCB’s capital, was put up for sale at 3 meticais ($0.05) each, a further 412 million shares (equivalent to an extra 1.5%) were made available due to high demand, raising a total of $52.7m. More than 16,000 investors from 142 of the country’s 154 districts subscribed to the offering. 

The BVM will be hoping that HCB’s listing provides fresh impetus to the trading of stocks in the country, on one of Africa’s smallest bourses. BVM had only 51 listed securities at the end of 2018, with 42 of those either treasuries or corporate bonds. Just eight companies had listed shares on the bourse ahead of the HCB IPO. The bourse has a market capitalisation of about 96.6bn meticais in mid-July 2019.

“With the beginning of trading of HCB shares, we believe that we will see the stock market’s liquidity rise, [and it will] capture new investors, increase the trading volume of the exchange, and awaken the interest of new companies to the [attraction of] capital markets and the stock exchange,” Mr Valá said in a speech announcing the results of the subscription offer on July 17. 

Paulo Sousa, CEO of BCI, says that his bank is in advanced discussions with other companies looking to list, declining to give further details. 

“There is a law for big projects that establishes the requirement to list on the stock exchange, and companies are starting to see the BVM as a source of funding, so other companies will come to the market,” he adds. “Some companies have shown interest in attracting private equity funding, with an exit strategy connected to the possibility of trading shares on the stock exchange. So there are enormous incentives for companies to be there.” 

Work to do

Mr Sousa and other senior bankers admit that capital markets in Mozambique remain in their infancy, despite the impact of HCB’s listing.

“You can’t have capital markets working without having an economy,” says João Figueiredo, CEO and chairman of Moza Banco. “It’s a risk for your company if you list. If there’s no proper secondary market you will be in the hands of one or two investors that will make bids. We’re on a very first step base regarding capital markets.” 

While conceding there is much to be done, Mr Valá insists that BVM will be a contributor to the growth of the economy. The bourse is planning to create a new market to enable start-ups to list on the exchange, and also intends to open trading on the exchange to foreign investors.

“Before I became BVM’s CEO in November 2016, everyone was saying how the growth of the stock exchange is connected to the growth of the economy,” says Mr Valá. “But my opinion is that we need to change the terms of the equation. We must not wait for the growth of the economy [to grow ourselves], but we must be part of it, to contribute to the economic growth of the country.”

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Read more about:  Africa , Mozambique , Regulations
John Everington is the Middle East and Africa editor. Prior to joining The Banker, John was the deputy business editor of The National in the UAE, and has also worked for Dealreporter, Arab News and The Telegraph. He has also covered the telecom sector in Africa and the Middle East, living and working in Qatar and the UK. John has a BA in Arabic and History and an MA in Middle Eastern Studies from the School of Oriental and African Studies (SOAS) in London.
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