Cape Verde boosts bourse with three stock floats and new bond market

20 February 2006

Praia, Cape Verde, 20 Feb – Cape Verde is moving ahead with three new stock floats of fuel and pharmaceutical companies, and a new state bond market in order to boost its financial market, which the government believes to have the potential to attract foreign investors.

Veríssimo Pinto, president of the Cape Verde Stock Exchange (BCV) told Macauhub in an interview that preparations were being made for a share float of Enacol, a fuel company and of Inpharma and Emprofac, respectively manufacturer and distributor of medication.

“We are convinced that demand will greatly exceed the amount available. They are solid companies, in profitable sectors and with favorable historical profitability themselves. After the float, these companies will be immediately listed on the exchange,” he said.

The new listings follow those of Banco Comercial do Atlântico (25 percent of its capital), Caixa Económica de Cabo Verde (60 percent) and Sociedade Cabo-verdiana de Tabacos (22 percent).

With the new listings as well as, “the creation of the state bond market and a potential return of funds we will have quite a liquid market,” Pinto told Macauhub.

According to Pinto, there is a considerable margin for increasing the current volume of transactions, which in the first two months of this year averaged a daily 20 million Cape Verdean escudos (181,000 euros).

“We are convinced that we have the necessary conditions for boosting an active stock exchange, in order for it to become a source for financing companies within a framework of getting a healthy capital structure,” Pinto said.

This structure, he said, “should combine the companies’ own resources, obtained through share floats, with resources from elsewhere, such as issuing bonds,” and it is “crucial for companies and national groups to have access to mechanisms that make organic growth possible and which allows them to flourish within an economy that is increasingly global.”

The “challenge” that is now faced, the BCV president said, is to guarantee “that investors have access to a broad, deep, liquid, transparent and efficient market.”

In1998 a first attempt at restructuring the BCV was carried out, by attracting companies and investors, but which did not have the desired effect.

According to Pinto, the lack of success was due to the inefficiency of the auction system, which has now been changed, the business model and a lack of financial intermediaries.

Given the high running costs, even though the BCV was practically inactive, “the government had no alternative but to close it down, until such time as a new efficient and effective working model,” Pinto said.

Re-launching the market, at the end of last year, took place after, “a number of legislation initiatives to transform Cape Verde into a competitive financial platform, based on attractive tax legislation as an alternative to other solutions,” he said.

The aim was also for the models for creating this platform to be, “different from the practices considered harmful by the OECD,” and that it be “served by a modern infrastructure,” which was supported by the pan-European capital market Euronext, and Lisbon’s Higher Institute of Economics and Management (Instituto Superior de Economia e Gestão – ISEG).

Between 1998 and last year, the Cape Verdean government revised and introduced several diplomas, including the market regulator which, according to Pinto, “is in the spirit of the Passport for the Organization for Economic Cooperation and Development (OECD)”.

“This means that funds from Cape Verde can be invested in any OECD country,” he told Macauhub.

“We have made efforts to restructure the stock exchange, in line with the best international practices and directives, all the platforms are credible and some are even used by Euronext Lisbon and Interbolsa. We are members of the most significant international institutions which govern issues about financial markets,” Pinto said.

For the stock exchange president, “the market is being scrupulously structured in line with corporate governance and investor protection principles. Cape Verde is known internationally for the good governance and modernity of its institutions.” (macauhub)

MACAUHUB FRENCH