Mozambique: Stock market helping to finance small companies – boss

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Mozambique: Stock market helping to finance small companies – boss

8:08 CAT | 14 Mar 2024

File photo: Lusa

The head of the Mozambique Stock Exchange (BVM), Salim Valá, says that stock market listing is already facilitating financing, especially for small companies, which dominate the Mozambican business sector.

“There are various difficulties in accessing credit, issues that are exacerbated the smaller the company, which is why micro, small and medium-sized companies have the greatest difficulty in financing themselves,” Valá emphasised in an interview with Lusa on Tuesday.

Among the difficulties, the president of BVM points to the lack of real guarantees demanded by the banks, the absence or lack of quality of the business plan, unorganised accounting, the absence of an audit of the company’s accounts or non-compliance with the rules of good corporate management.

That’s why, says Valá, “sensitising and training companies and their managers to incorporate their companies into the value chain of major projects” turns out to be “just as important for facilitating access to credit, just as the interest or inflation rate is relevant for that same access”.

“It’s not only through the debt component that companies can finance themselves on the capital markets. Companies being listed on the stock market can facilitate access to finance, because the fact that a company is listed on the stock market is a guarantee that it fulfils legal, financial, accounting and market compliance requirements, making it easier for domestic and foreign investors to want to invest in the company,” he emphasises.

Large companies “have, from the outset, all the requirements to be listed” on the stock market, says Valá.

“The same doesn’t apply to the majority” of micro, small and medium-sized companies, which led BVM to create a segment for these companies, which make up the majority of the country’s economic agents and the largest source of employment for the Mozambican population, and which was named the “Third Market”, he added.

In this specific stock market, Valá said, companies that do not fulfil all the requirements for listing on the Official Quotations Market, which is “geared” towards the state and large companies, or for listing on the “Second Market”, which is mainly for small and medium-sized enterprises (SMEs), but which nevertheless fulfil the legal requirements for the company and its shares, “can be listed on this new stock market, making a public commitment to fulfil the missing requirements within a maximum of three years”.

“By listing on the stock market, companies gain greater visibility, show that they are not afraid of public scrutiny of their results and management and gain greater credibility with investors,” he emphasises.

“It is a fact that of the eight companies listed on the BVM after the creation of this market, seven entered via the Third Market, and in 2023, the first company to be listed on the Third Market, Rede Viária de Moçambique (Revimo), moved to the Official Listings Market, as it had met all the requirements for listing on this market, thus showing the relevance of this market to the concrete situation of the Mozambican economy, which is dominated by around 98% micro, small and medium-sized companies,” adds Valá.

At the start of 2023, BVM had 12 listed companies and over the course of the year it saw four more join the portfolio, all directly on the “Third Market”. In addition to the 16 currently listed on the three markets, BVM plans to have four more companies listed in 2024 and, by the end of 2025, the first bank.

Source: Lusa