Article by Dr. Boubou Keita of Satis Partners – Mali
Financing the growth of SMEs is a major concern for the economies of the West African Economic and Monetary Union (WAEMU), dominated by these actors who are at the origin of the creation of many jobs. Financing difficulties in general and the cost of bank financing in particular, as well as the requirements in this area, lead many SMEs to seek other methods of financing their development.
The Union authorities, aware of this concern, have mandated the bodies of the Regional Financial Market (MFR) to set up a mechanism for SMEs to access the regional stock market.
In order to support the growth of SMEs, the Regional Stock Exchange (hereinafter referred to as “the BRVM”), Central Market Structure and the Regional Council for Public Savings and Financial Markets (hereinafter referred to as “the CREPMF”), regulatory authority for the regional financial market, have undertaken a series of actions intended to facilitate market access for SMEs, including:
– The creation of the Third Compartment of the BRVM intended to accommodate SMEs, called “BRVM Small Capitalizations”;
– The launch of the ELITE BRVM Lounge program intended to prepare SMEs for their IPO; and
– The adoption and publication of a certain number of texts, including in particular an instruction recalling the rules applicable to issuers making public offerings by admission of their securities to trading on the Third Sub-Fund of the BRVM as well as a instruction relating to the conditions of authorization and exercise of the listing sponsor activity on the regional financial market.
- The Third Trading Compartment reserved for SMEs
In order to facilitate SMEs’ access to the stock market, in 2017 the BRVM created a Third compartment for trading in SME securities. The creation of this compartment was accompanied by the launch of the ELITE Program for SMEs within UEMOA, called ELITE BRVM Lounge, the main objective of which is “to upgrade the most ambitious companies with a solid business model, a clear growth strategy and leadership in their field, so that they have the capacities required to raise the funds necessary for their development, if they are ready, via an introduction to the Third Compartment of the BRVM”.
Thirty companies from the UEMOA space are now admitted to the ELITE BRVM Lounge program. They are subject to the monitoring and preparation necessary for their IPO.
The creation of the Third Trading Compartment was accompanied by the relaxation of the share capital requirement in terms of public offering and the recognition of the listing sponsor activity.
The IPO through a Public Call for Savings operation will allow the company to access long-term resources by opening up its capital to the public. Its own funds would thus be strengthened. Moreover, once listed, the company could – successfully – raise resources on the MFR by capital increase (at a frequency to be defined) or by bond issue.
Through the listing of securities, companies listed on the Third Compartment will permanently appreciate their market value.
Listing on the BRVM also induces transparency in governance and in the company’s major management decisions. Thus, mechanically, a listed company will see its organization and governance come closer to international standards. It will thus be a pledge of credibility and reliability with potential national, regional or foreign investors for whom business management meeting high standards is a criterion in their investment options.
- Relaxation of the share capital requirement in terms of public offering
In the WAEMU area, the public offering is governed by the OHADA Uniform Act relating to the law of commercial companies and economic interest grouping and by the relevant provisions of the stock market regulations, in particular the Instruction n ° 36/2009 relating to the public offering on the financial market. According to the aforementioned Uniform Act, the public offering is reserved for public limited companies with a minimum share capital of CFAF 100 million. Therefore, only companies fulfilling this condition will be able to apply for the admission of their securities to trading in the Third Compartment. This requirement constituted an obstacle to the access of SMEs to the financial market due to the fact that their capital was well below the prescribed legal standard. A relaxation in this area was therefore necessary.
It is in this spirit that the UMOA Council of Ministers has undertaken to lower the amount of minimum share capital required for companies wishing to make public offerings on the regional financial market. During its ordinary session held in Abidjan on September 21, 2018, the Council of Ministers set the amount of this share capital at 10 million FCFA. With this decision, the legislator intends to “greatly relax the conditions for applying for the regional financial market for eligible companies, in particular for the 3rd compartment of the BRVM”.
- The listing sponsor: an expert at the service of SMEs
The listing sponsor is a major player in the new financing system for SMEs. Its activity consists in particular of evaluating the aptitude of the candidate company for admission to the Third Compartment, of verifying the relevance of the IPO project in relation to the financing plan and the strategy of the candidate company, of shedding light on this last on the legal and regulatory obligations incumbent on it. Management and intermediation companies, credit institutions as well as audit and / or financial advisory firms duly approved for this purpose are admitted to exercise this activity.
Companies applying for admission of their securities to the Third Compartment must be assisted by a listing sponsor.