The Tunis Stock Exchange (TSE), the challenges it faces and its prospects are the main themes in an interview given to Africanmanager by Raouf Boudabous, Head of Promotion and Communication at the TSE.
Interview:
How is the current state of the Tunis Stock Exchange?
From the beginning of the year to date, the performance of the Tunis Stock Exchange Tunindex increased by 4% while it was up 10% at the end of August 2012. In the months of September and October, we lost almost a 6% increase due to the events that occurred during these two months, such as the attack on the U.S. embassy and the effect of successive ratings of the banking sector which have not favored Tunisia.
Alternatively, despite Q3 indicators which are generally positive for listed companies, financial markets reacted badly to the events that shook the country during the last two months.
Has this decline also affected IPOs?
On this level and during the last Board meeting held in September, approval was given to the admission of the third company in this year. It is the “Land’or” Company which will shortly increase its capital. There are also other applications received by the Exchange and which should be considered before the end of 2012. There will also be the introduction of Kia, part of which will be sold through a public tender. In general, things are good and all transactions that took place during this year have succeeded with very high response rate, which still shows confidence in the financial market including the financing needs of companies, auguring of a promising future for the Tunisian financial market.
At What stage would you say the process of sale of state shares in confiscated companies is?
Regarding confiscated companies, the sale of certain stakes and control blocks started for such companies as Ennakl and “Banque de Tunisie” (BT) whose tenders have already been launched. For Ennakl, three investors have expressed their interest to buy the state’s stake in this company. They include consortia like Poulina with Amen Bank and the Bouchamaoui Group with a foreign investor. These are potential candidates. The technical bid was approved. We are in the stage of financial offer. The tender of BT was also launched for the sale of 13% of its capital.
Regarding the company Kia, we are waiting for the party that will be assigned by the stock exchange. There will also be other IPOs of confiscated companies in the coming months.
These companies will open their capital through the stock market. Their sustainability will be ensured. Through the stock exchange, they will be able to continue to grow and raise capital from the public. This will also allow Tunisians to hold shares in companies that are very successful, diversify their portfolios with profitable businesses and improve their performance.
What are the main challenges which the Tunis Stock Exchange should face?
The main challenge is to strengthen the culture of the Tunisian market. It is an essential element in the development of the financial market. Without a stock-market culture, we cannot move forward and attract economic agents to take advantage of the Exchange.
Stock-market culture is a strategic axis for the development of the stock market, hence the organization of the Show “Investia 2012” which aims to strengthen the stock-market culture and show people that the stock market is not a mystery but rather an interface accessible to everyone.
An agreement to improve the stock-market culture of Tunisians was recently signed with the ICF Africa, at what stage is it?
We are in the early stages. The organization of the stock market show and the preparation of education materials are the first phase of this process. There remain educational games which target youth.
What causes this lack of stock-market culture?
There were traditions of investment in Tunisia. In fact, Tunisians are more familiar with banks and post offices. They prefer to go to these types of savings. Although investment in the stock exchange enjoys very significant tax incentives, people better know savings products of banks and the post office. The stock market, for them, is still a mystery and a field for insiders. There is a lack of knowledge of stock exchange products. It was discovered through a survey we conducted that people do not know about the stock market and they have a negative view on it while several people have made tremendous gains through this market.
Have the recent events that occurred recently in Tunisia such as the attack on the U.S. embassy really affected the stock market?
Of course, these events have indirectly affected the stock market. Indeed, the volume of foreign interventions in trade volume decreased by 7% while it was 11 or 14% annually. This decrease is due to the undermining of confidence both in the stock exchange and the national economy. Moreover, many investors are still waiting for the business environment to improve and become clear, the social climate to develop and the Tunisian economy to revive.
I believe that investment in general is slowing down because of this instability, which is bad for business. We need things and political visions to become clearer, to be able to revive economic investment.
What is the effect of the downgrading of Tunisian banks’ ratings by international agencies?
Fortunately, the central bank has taken things seriously and has decided to restructure the banking system and continue in this process through the implementation of several measures (good governance, rationalizing credits). Without a sound banking system, financial markets cannot function properly. There is a complementarity between sectors that contribute to the financing of the economy (stock market, banking and financial markets).
The banking system needs to recover and be solid so as the financial market will benefit of the infrastructure available to banks that have a large clientele. Investors also have many branches in the country.
What do you think about the last Circular of the Central Bank on the rationalization of consumer credit?
The BCT circular on streamlining the consumer credit is not very important to the GNP of banks. This will not affect the situation of banks, but it is a niche to rationalize because there is inflation, which has become increasingly rampant today. Therefore, banks should not participate in this inflation. However, the extent of rationalization in the context of inflation is a good thing, because if inflation remains rampant, the BCT will be required to further raise the money market rate, which will increase the financial burden on businesses.
How will the stock market contribute to the growth of the national economy?
The Tunis Stock Exchange, through the tasks it is entrusted with, seeks to attract investors to the capital market and direct financial resources to the financing of the economy, and thus the stock exchange can contribute to the growth of the economy by enabling companies to find the necessary capital with the lowest cost, in order to finance their investments and create wealth and employment. By developing the stock market, investments follow suit. If the stock market is good, investment recovers. It is in this context that the stock market can play a very important role. Banks today cannot give credit as before. So there is a tighter and tighter control. And then, the stock exchange can be reconstituted as a very important source of funding enabling companies to diversify their funding sources and achieve their growth in a healthier way.
What are the prospects for the Tunis Stock Exchange?
Prospects will be good for the next few years. All indications show that the market will have a good future in the coming years, since, today, we are aware that banks alone cannot finance the economy. Similarly, Tunisian firms have no choice. If they want to develop in a healthy way, they need to diversify their funding sources and find a financing tailored to their needs. Do not settle for a single source of funding not to risk stopping growth.
