The benefits for existence of a Stock Exchange in a Nation

Stock market are places where governments and industries can raise long term capital and investors can buy and sale various types of financial instruments that are quoted into the stock market. Such instruments many range from cash based instruments such as equities (or shares), bonds — government bonds, corporate bonds, local government bonds, eurobonds; to derivative based instruments such as options, warrants, and futures. Stock exchanges growth in derived from their capability to respond to the demand for finance investment and ventures that need capital to finance their conduct of production, commerce and trade. For ages, capital markets have been pre-eminent, raising funds for investment both in domestic markets as well as in overseas markets. Stock market have been used as platform that facilitates individuals and institutions to provide loans to governments and businesses via issuance of debt instruments, this process also enables the development of a thriving secondary market for these instruments in which investors sell their financial securities to other investors.
Much early industrialisation was financed by individuals’ and partnerships, but as capital requirements became large, it was clear that joint-ownership in enterprises was a necessity — under this model, numerous investors were brought together into a joint ownership in a commercial enterprise with the promise of a share of profits as well as investment growth. That’s how manufacturing enterprises, railways, dock companies, mining, brewing, insurance companies, etc were financed via issuance of shares and bonds which are then traded in the stock exchanges.
From the start of the nineteenth century to-date stock exchanges have prospered and expanded largely, there has been alliances such as amalgamations, mergers and acquisition of stock markets with or over others. For the last 30-years, especially in responding to globalisation, economic liberalisation, and the accelerating wave of privatisation new stock markets have appeared in developing countries where they have become the forefront of most developing countries’ tools of financing economic progress. Even countries that still spouses communism such as China and Vietnam, now have thriving and increasingly influential stock exchanges designed to facilitate the mobilisation of capital and savings for its employment to productive endeavours — with return going back to capital providers, while the society benefits with the increase of productivity, employment, and economic well-being.
Today, the important contribution of capital markets to economic well-being is recognised even across various African capitals. Stock exchanges in Africa has increased from three about two decades ago to 27 exchanges from 25 countries, currently. Some stock markets, particularly those prior to 1980/90s, came into existence following demands from the business community and investors in companies who wanted a platform that will enable them to buy and sale shares in a more efficient manner. Some markets, and this true for most of African stock exchanges, came into being in response to the World Bank and IMF’s Structural Adjustment Programs during the 1990s as part of the qualifying conditions for such programs, i.e. the need to liberalise economies, its markets and trade. Because of this source of their existence, among other few possible reasons, African stock markets, with just a few exceptions, have not been treated, by governments, private sector or the donor community as primary engines for financing economic developments, especially in mobilising long term sources of financing to finance productive investments. As an example, the wave of privatisation, as part of Structural Adjustment Programs, was mostly driven outside capital markets, the consequence of which has been economically weak exchanges, without adequate supply of securities in the markets place. As it turned out, this was a big lost opportunity for creating vibrant stock markets in Africa, lost opportunity for financial inclusion, literacy and the much talked (but highly needed), broad-based economic empowerment.
In turn business enterprises from the private sector has also been relatively slow in embracing the stock markets model as a facilitator for long term sources of capital. But, what relevance does stock markets have?.
Apart from facilitating the funding of enterprises growth or project development due their efficiency pricing of capital, stock markets have many other benefits, we will mention a few:
One of the key economic problem for a nation is finding a mechanism for deciding what mixture of goods and services to produce in order to satisfy various needs and wants of its people. One extreme situation is where the government is propelled to determine the types, sufficient quantity and prices of goods and services that the country should produce and consume. The alternative, is where the nation decides to let the market determine what should be produced and which entities should produce it and at what price. Under this second scenario, which is currently opted for most economies, a stock market is able to assist in the choice process through allowing the flow of capital to areas where they can be efficiently allocated. If the stock market is efficiently run and well regulated — it avoid abuses, negligence and fraud, such stock market can lead to capital being allocated into sectors which are appropriate for the objective of maximising economic well-being of the society. Otherwise, the non-existence of the stock market in a country or the existence of a non-vibrant and poorly regulated stock markets can deprive sectors and companies with better prospects and with greater potential for economic development of the nation from being as such.
As I have been indicating in these articles, stock exchanges helps the nation and the business community with it to be more transparent in their conduct — this then facilitates the improvement in its corporate behaviour. For example, in most cases, the directors of companies that are listed in the stock market are encouraged to behave in a manner which is conducive and is aligned to its shareholders’ (and other stakeholders) interests. This is achieved through a number of pressure points i.e. stock exchange’s listed companies are required to disclose a far greater range and depth of information than that is normally required by the accounting standards or the Companies Act. This information is then disseminated to the wider audience which becomes the focus of scrutiny as well as much press and public comments — therefore the board of directors and management of listed companies have fiduciary duties to ensure they produce as much information they possibly can, indicating not only good operational and financial performance but also report on matters of sustainability, good corporate citizenry, and social responsibility.
Furthermore, because of matters of continuos listing obligations, listed companies are also required to ensure the information they produce is accurate and is also timely produced. Prior to being admitted for listing onto the exchange, authorities (the capital markets regulator and the stock exchange) insist on being assured that the Board of Directors and management team of the potential listing has sufficient range of competences, knowledge and skills to guide and manage the company to achieve its objectives as indicated in the prospectus. Such kind of requirements by authorities, shareholders, the media, analysts, and the public, induces and encourage directors and management of listed companies to adhere into a set of discipline and good corporate behaviour, which in the after all is good for business sustainability and the society at large.
Listing into the exchange enhances the public profile and status of the listed companies. Government agencies, banks, suppliers, creditors and customers generally have more confidence in listed companies than for non-listed companies. Banks and other financial institutions for example are willing and more likely to provide credit to listed companies at lower interest rates, compared to companies that are not listed. The enhanced level of confidence and the perceived lower level of risk emanates from these companies activities that are subjected to much detailed scrutiny. Additionally, the publicity surrounding the process of listing may have a positive impact on the image of the company in the eyes of customers, suppliers, employees and this in often cases lead to a beneficial effect on the operations of the business.
For shareholders, the benefit of listing comes from the availability of an efficient and less costly process of selling their investments if and when they want to sell. Anchor shareholders and founders sometimes may wish to liquidate the proportion of their holdings, doing so with the stock market is made is easier because the process, time and financial resources required in pursuing and concluding such a transaction is short and minimal. At any given moment, shareholders know the value of their holding in a company they have invested into, even if they do not have the intention of selling at the moment. These benefits, coupled with fiscal benefits, provided by our government to issuers and investors in the local markets should encourage more companies to list into the exchange and more investors to use the exchange for their investment objectives, which so far, not so much the case.

The Prospects for funding Development Projects via Capital Markets

One of the key reasons for countries to establish and nurture the stock exchanges is to enable such an institution to become platforms that facilitates capital raising for business enterprises and governments’ development projects.
This then says, if there is a stock market in a country that is minimally used for financing businesses growth and development projects, it is fair then to say, there is something very wrong somewhere? – can the wrong be indecisions? or in the wrong decisions? or in the general lack of knowledge (by policy (or decision) makers and implementers) about the role and the significance of stock markets for socio-economic growth? Or, are there legal and regulatory framework challenges that make it harder for stakeholders to consider using the stock market to fund their development and growth? – Anyways, whatever the reason could be, the bottom line is something is wrong which requires absolute efforts by all to try and address it.
In recent days, DSE has been making efforts to increase (or create) awareness, to educate the public, and to improve market’s efficiency; however, despite these efforts, the response has not been as great. Statistics indicates that: DSE’s domestic market size i.e. domestic market capitalization relative to Gross Domestic Product (GDP) is still about 10 per cent of GDP, the level of market turnover/liquidity is also still in the lower end (despite a growth of more than 15 folds from previous years) and the number listed companies or securities are relatively few, given the size of our economy, its potential and its people — we have 25 equity listed companies and 3 outstanding corporate bonds. There is neither municipal bonds, nor infrastructure bonds or bonds issued by the State owned enterprises (SOEs) or parastatals that are listed in our local stock market. I understand there are commercial, structural and regulatory related factors that makes it difficult for local governments or government parastatals to raise capital for issuing instruments such as shares or bonds — but, this challenge seats in the matter of decision or the lack of it.
Often times I hear my fellow countrymen in leadership, management and political positions: mayors, development officers, economists, accountants, academicians, executives, members of parliament, etc indicating that one of the key reasons for most development programs failure in implementation, on time and in the right magnitude, is the lack of funds or delayed availability of funds from the government. That, as a result of this, power generation plants, new powerful transmission lines, upgraded power distribution lines, water supply facilities, upgraded railway lines or expansion of ports and airports facilities, big enterprise projects, etc are delayed or failed to be implemented. We are told, the first five year development plan (FYDP-I) was partly implemented mainly because of lack of financing. But then, my understanding of what I hear is that the lack of funds to most of us is just a question of perception – we tend to perceive and think or align our thinking along the lines of traditional sources of funds, the traditional play book for development project funding, for a very long time has been: government subventions, grants and concessionary loans, FDIs and in few cases bilateral borrowing arrangements with commercial and development agents – what about the capital market? What do other countries do with the existence of stock markets when it comes to funding business enterprises and development projects?
As an example, can’t our: power utility company, or water supply company or SOEs with mandates for development of our infrastructure projects, or local governments with a need to construct a new bus terminals, or a modern shops and market, etc — access and/or mobilise public money through the capital market to finance their expansion or upgrade or growth? Of course they can, why? because it can be done — the central government does it, local governments can do it, SOEs can do it and private business enterprises can do it. Let me share some statistics to consolidate my argument as it relates to availability of funds:
From July 2015 to June 2016 — there were Tsh. 7.8 trillion that were directed towards buying financial instruments both at the central bank’s (Bank of Tanzania) government papers auction and in the secondary market at the Dar es salaam Stock Exchange; almost 95 percent of these funds originated from local institutions and local individuals. For clarity, even through some of these funds were rejected because of over-funding or over-subscription, but the real picture was as follows: Tsh. 5.2 trillion was directed towards the Primary Market for Treasury Bills; Tsh. 1.4 trillion was towards Primary Market for Treasury Bonds; Tsh. 97 billion was through Initial Public Offerings for equity and corporate bonds; Tsh. 734 billion was directed towards Secondary Market equity trading and Tsh. 421 billion Secondary market bonds. Get me right — this doesn’t mean that these activities attracted or consumed all the savings that are out there.
So, if local a government has a good infrastructure projects that provide a good combination of development and commercial orientation, I can not reason, why they should not be well financed. The same applies to power, water and other utility companies, they can make use of the capital market for their growth and expansion.
Last week, the Chairman of CEOs Roundtable Mr. Ali Mufuruki, published a powerful think-piece, about his vision of Africa’s industrial transformation via renewable energy such as solar power. He envision Tanzania to be the centre of that transformation. In reading his article, and looking at it from the possible financing angle, Ali seemed to indicate that going forward, FDIs may become hard to attract unless some conditions such as ideal global market conditions or if we continue the path of continuing to export resources in raw forms in order to satisfy global markets. But his idea is that for us to transform our economies we need to start producing internally, we then consume and export — in reading his think-piece, I was wondering to myself, if this is the case, then is he also suggesting that players in that future he envisions, should transform the manner in which they perceive access for funding, i.e. we should consider to improve the vibrant of the local financial market so that it becomes a good platform for capital formation attracting both local and foreign capital to finance these projects? And I was wondering why is that, currently, our power generating and other utility companies, both public and private are not accessing local public money via the capital market?
By the way, other (regulated) utility companies in the region have been using their local capital markets to access public funds, by issuance of both shares (via IPOs and Rights issue) or bonds (corporate or infrastructure) to finance upgrades and/or expansions of power projects. Umeme of Uganda as well as Kengen and KLPC of Kenya are cases at hand – these are all utility companies and are listed in respective stock markets – and in the process these companies have been required to practice good corporate governance, become more transparency, be accountability to their stakeholders (especially their shareholders) and also operate more efficiently. These companies, in addition to performing their core functions: power generation, transmission and distribution; they operate efficiently and somehow profitable enough to pay returns to their shareholders and bondholders in the form of dividends and interests. And who are their shareholders – governments, its local citizens, local financial institutions, pension funds and of course foreign investors.
The good thing about all these is that such entities can access funds from different financiers, local and foreign – which helps minimize the potential of long bilateral negotiations and arrangements with individual financiers, and minimizes the level of lack of transparency in their transactions. On the positive side this process provides better, timely and efficiently priced funds. So, banks, asset managers, pensions funds, insurance companies, corporates and retail investors can all fund such an entity or a project easily, efficiently, transparently and timely. Let’s take the case of Umeme of Uganda – this is an energy distribution network company that few years ago sold part of their shares to the public and got listed into Uganda Securities Exchange (and later cross-listed into the Nairobi Securities Exchange). During IPO, Umeme raised equivalent to about TZS 100 billion; and who are Umeme’s key investors: fund managers and pension funds such as NSSF Uganda, Investec Assets Management, Farallon Capital, Coronation Fund, IFC, Allan Gray Africa Fund, and a whole lot of other institutional and individual retail investors.
The same applies to Kengen, a power generation company which was listed in the Nairobi Securities Exchange in 2006 and ever since it has been issuing bonds and shares to raise funds to finance their upgrades and expansions projects. Last this year Kengen raised about Ksh. 15 billion (equivalent to Tsh. 270 billion), by way of rights issue, this follows another successful capital raising exercise via bond issuance a few years ago that enabled Kengen raise equivalent to about Tsh. 250 billion to finance power capacity expansion. This is similarly to KPLC. We can do the same, if we choose to.

The financial market for economic growth

In my recent past pieces, I have tried to explain the importance of connecting economic growth and the need for a vibrant financial market that is both inclusive of money market (banking sector) and capital markets. As an economy, following the financial sector and economic liberalisation policies which we adopted since late 1980s/early 1990s we have made some relatively good progress in the money market (banking sector) aspect. We currently have over 50 banks whose total asset size is about 25 percent of Gross Domestic Product (GDP) — although this is comparatively on the lower side, but there has been evidently good progress.

On the other hand, the capital markets have made even less progress — understandably, these two (banking and capital markets) are not the same and can not be directly compared, they have different distinguishing features, risks and maturity transformation issues. Banks being financial intermediaries whose assets are mostly medium term, illiquid and somehow risky, whereas its liabilities are generally short term, liquid and perceived as safe — under normal circumstances, banks’ major challenge is therefore on managing their maturity and risk transformation emanating from maturity and risk mismatch.

By their vital mandates, strategic and business operations model, banks do provide loan finances to businesses and households, banks are also particularly well placed to monitor their borrowers’ cash flows through the movements in the bank accounts of the people and corporates to whom they lend — somehow makes it easier for banks to identify and manage some of risks. And, in order to attract funds which they then on-lend to business and households, banks can raise finance by: (i) taking and creating deposits, (ii) issuing other capital raising instruments (such as bonds and commercial papers) and also by (iii) increasing equity investment via retaining profits or issuance of new shares to their equity investors. By their prevalence as well as their strategic and operating model, the banking aspect of financial markets is well understood and used by many, compared to the other aspect of the financial market i.e. the capital markets.

As for the capital market — much as finances raised are long term in nature, mobilised from individuals and institutions who are not only savers but also have investment motives, this entails an immediate degree of risk where funds are invested but whose outcome depends on how well the business is governed and managed, there is also a relatively lesser degree of safety — funds invested can either grow or decrease in value. On the positive side, especially on the savers/investors perspective the capital markets provides a high degree of liquidity, particularly if the capital market is vibrant enough and where resources (time and money) required to raise finances by the issuer and liquidate an asset are relatively minimal. There is an upside potential for savings and investment increment emanating from capital growth and dividend income. This sub-industry requires investment banks, stockbrokers and dealers, investment advisers, fund managers and custodian banks as essential intermediaries to facilitate its existence and in enabling a vibrant market.

In our local capital markets, where there is a very minimal investment banking activities, mutual funds, corporate finance and transactions advisory activities and services coupled with a stock exchange whose domestic market capital is less than 10 percent of the country’s GDP, and with only about two dozens listed companies and less than 100,000 active stock market investors; definitely more is required — in terms of creating more awareness to various stakeholders, in terms of encouraging business to use this long term businesses financing model, in terms of policies and legislative actions that enhances the use of capital markets for enterprises and projects financing as well as using this tool for savings and investment purposes.

Building on the background above, in today’s article I intend to explain further the relevance of a broad-based vibrant financial market to an economy and why this consideration to our society is important, especially now – read on:

A growing economy requires investment to add into the stock of capital (plant and machinery, the built infrastructure, inventories and buildings, including offices and housing) which, when harnessed to the labour force and supply of raw materials, produce the output that we call Gross Domestic Product (GDP). And that investment is financed from the supply of savings from both home and foreign savers.

Savings can be transferred to investors, whether businesses or households, in several ways. Businesses can retain profits to reinvest rather than distributing them as dividends, they can sell new issues of shares or bonds directly to savers; or they can borrow from banks. Equity, bonds and banks finance are the essential building blocks of the methods companies use to finance themselves — although they be combined in a complex ways. Several factors influence the form in which savings are transformed into investment, including tax treatment of different forms of saving and the willingness of different savers to take risk. But perhaps the most important concerns is the difficulty of assessing and monitoring the potential and actual profitability of investment projects. Equity finance (whether the sale of new shares or the retention of profits by companies) requires careful and continuously monitoring of a company’s activities. In contrast, one attraction of debt financing (whether bond or bank loan) as opposed to equity finance is that monitoring is required only when the borrower fails to make scheduled repayment.

Companies sizeable enough and willing to be listed in the stock exchange produce annual accounts showing profits as well as assets and liabilities, which are verified by independent auditors and scrutinised by many analysts. Savers who do not wish to rely on such public information can choose to invest in an array of financial intermediaries, such as mutual funds, collective investment schemes, unit trusts, hedge funds, pensions funds or [life] insurance companies. In that case, savers are relying on the judgement of the fund or assets managers of these intermediaries. Perhaps the most famous of example of such a manager is Warren Buffet and his friend Charles Munger, whose company Berkshire Hathaway, has an inevitable track record of purchasing shares in businesses that are well run and profitable. People who bought shares in Berkshire Hathaway, and held into them have seen their investments steadily rise. Someone who invested US$ 1,000 in Berkshire Hathaway in 1985 would by the end of 2015 have an investment worth about US$ 165,000. This a compounded annual growth rate of almost 17 percent in the past 30-years. By relying on the judgement of Buffet, Munger and their colleagues, investors did not themselves need to monitor the businesses in which they were investing.

Over the past century, financial intermediaries have grown significantly as the wealth of the middle class has generally increased across the globe. Substantial amount of wealth are now invested through pension funds, hedge funds and mutual funds. In other countries, such as Sri Lanka, retail/individual investors are discouraged to invest in their own, they are rather encouraged to invest through fund managers who posses the competence and skills to research, analyse and invest in a more informed fashion compared to retail investors.

What this says is that we need more fund managers, more investment advisers, more corporate finance and transactions support services advisers, we need more collective investment schemes, which can mobilise retail savings and intermediate them for productive investment activities in various sectors — either it is in real estate sector via Real Estate Investment Schemes (REITs) or in manufacturing and processing industries, or in agriculture, etc.

Harnessing optimism for industrialisation and economic development

Recent projections about Africa’s economic growth paints a grim picture about its development. Some projections indicate that there will be weakening of most economies and a slow down in Africa’s Gross Domestic Product (GDP) growth, from the average of growth of above 5 percent that Africa has been enjoying for the past two decades to a moderate growth of about 4 percent in 2016, this is according to a recent International Monetary Fund (IMF) report. The report indicates that: “…countries such as Ghana and Kenya will face fiscal challenges…”. It further advises countries, especially highly commodity relying such as Ghana, Nigeria, Angola, Zambia to diversify and enact structural reforms for investments to continue flowing in these economies.

The report advises African economies to refocus on sectors that can continuously attract foreign and domestic capital such as infrastructure projects for power and transport, according to the report African economies needs to also create conducive business environments that will attract more trade and investments in sectors such as manufacturing. Examples of countries such as Ethiopia and Rwanda that have made use of low-cost productive labour to pursue industrial development especially in the textile, footwear and leathers products has been specifically mentioned.

Then why a slow down in economic growth in Africa? — to start with, the global economy is experiencing modest growth; turbulence on financial markets, the fall in energy prices, the slowing down of growth in China and the recent Brexit are major contributors. For Africa — the slow down in economic growth in China, and to some extent Europe, our over-dependence on commodity export, low demand and low prices for commodities have extended impact in our slow growth. This says that we need further diversification.

For Tanzania, our GDP projection for 2016/17 is 7 percent, similar growth level to what we have been experiencing in the past two-decades. Will we be able to sustain such growth projection despite the above situation to the continent? Well, today, the world is awash with pessimism, with people who project the current situation in the lens of darkness, brutality, nasty and tough. Yes, most economists have a shared position, which says, with any growth rate that is less than double digit, it is definitely difficult for our country to achieve the middle income level economy in the next decade (as projected); furthermore, the economic growth rate of 7 percent we have experienced in the past two decades have not been able to structurally translate into people’s daily lives, GDP per capita is less than what it was in the 1960s/‘70s, peoples’ social and economic conditions continues to be poor and lives are unnecessarily shortened — BUT, wouldn’t we find the reason to be optimistic?

It is possible to sustain our 7-percent growth projections, and we might attain what has been projected despite the surrounding grim situation both at global and regional level. However, for this to be achieved — it is necessary that we create a political economy and the supporting environment that is more inclusive, we should focus and prioritise into sectors whose job creation capabilities are large — we should target to efficiently utilise all factors of economic development more productively — better use of land, uplifting the skills of our people in line with market demand, encouraging domestic financial resources mobilisation, deploying foreign capital efficiently and also making better use of both domestic and imported technologies. Sectors such as agriculture, manufacturing and infrastructure development easily comes into my mind. It is in situations like these, that President F.D. Roosevelt came with the “New Deal” during 1930/‘40s in the USA — the wisdom, policy decisions, legislative actions and the capability to focus on sectors that are meant to create employment of almost all factors of production (land, labour, capital and entrepreneurship) and encourage economic growth via government’s investing in infrastructure projects such as construction of rail roads, roads, ports, airports, dams, irrigation schemes, industrial production, etc; these, if coupled with a conducive business climate and smart, well trained and skilled manpower as well as competent, disciplined and committed leadership to oversee their implementation, I can not see why we should not be optimistic.

The 2015 Global Competitive Index (GCI) Report, and the World Bank Enterprise Survey (2012/’13) have both indicated that Tanzania continues to perform poorly in aspects such as conducive business environment, reliability of power as well as poor policies governing infrastructure; these hinders our investment attractiveness and so if we have to tirelessly focus at reducing the unnecessary bottlenecks and bureaucracies, while in the same vein improving the level of liberty and efficiency in our resources utilisation, also if we can encourage the rule of law to efficiently operate, if we can encourage deployment of the most productive investment assets within our society and if we can encourage equality while rewarding productivity — we have all the reasons to be optimistic.

During the past over two-decades, Tanzania, like many African economies had focused almost solely in the commodity and other natural resources boom to propel our growth, to the extent that we largely undermined the potential and prospects of the manufacturing sector to create a broad-based and inclusive growth. The result of this choice has been moderate economic growth that has also left many behind in the process of the country’s growth and development — creating an economy that is less inclusive. Manufacturing sector, coupled with its backward and forward linkages, its vertical and horizontal spillover value chain have the capacity to catalyse the structural transformation needed to underpin the highly envisaged inclusive economy. The sector can lead into the creation of non-seasonal jobs and can largely reduce the level of unemployment of key factors of productions and resources such as land, labour, capital, entrepreneurship and technology.

The Five Year Development Plan II (FYDP-II 2016/17-2021/22) that was recently launched in Dodoma and whose implementation has just started, with the 2016/17 plan and budget focuses on industrialisation, this is encouraging because of the fact that throughout modern history, industrialisation has been the most effective driver of structural poverty reduction, mainly owing to its capacity to expand job creation opportunities, boosting society’s innovation, adoptability, productivity and increasing living standards of the people within communities. With a different approach and tools to implement the FYDP-II as compared with the FYDP-I, probably also learning from the recent experiences of Ethiopia and Rwanda, then we should be optimistic that we will seriously embark of industrialisation which will carry us forward into the middle income economy in the next decade or so.

Reading from the plan, the government has clearly stipulated its role — it intends to focus on putting the necessary infrastructure: roads, railway system, increase the access and availability of power/energy, building industrial parks, Special Economic Zones, Economic Processing Zones, etc. The government also plans to create a more conducive and equitable business environment; nurturing researches and encouraging technological development, upgrading and usage; supporting skills development and learning processes as well as accumulating capabilities necessary to bring about efficiency.

Given the government’s competing priorities and limited financial resources — mobilisation of financial resources for implementation of the above may understandably be a major challenge, as has been with the FYDP-I and other previous development plans. That is why efforts to improve access to financial services and in creating a vibrant financial market that will enable the government and private enterprises to access public capital in order to facilitate implementation of such plans/projects is very vital. In the past, the one area that has large potential for domestic financial mobilisation and capital formation but has received little attention in our socio-economic development is the aspect of capital market. Capital market as the financing tool have the capability to make— people, as principals, come together under a common-shared goal, mobilise their financial resources and trust others among them to be agents and enablers for achieving the intended goal. This mechanism encourages specialisation, efficiency and productivity.

Yes I stay optimistic, we have the necessary resources to take us there: we are richly endowed with natural resources: abundant land, enormous amount of fresh water bodies, many tourism attractions, access to the trading and investment world via the Indian Ocean, a population of about 50 million people, 80 percent are under the age of 35 years with capabilities to be productively deployed, if well skilled.