Hungry for Truth, Peace and Justice

FACTBOX-Key political risks to watch in Rwanda =2

By Reuters
01 Jul 2010

REGIONAL STABILITY

Rwanda depends on the stability of its neighbours for the safe passage of its goods. All of its petrol, diesel and heavy oil, which fuels its electricity generators, must be transported by road from Mombasa in Kenya and Dar es Salaam in Tanzania.

Post election violence in Kenya in 2008 blocked the region's trade arteries for weeks. The turmoil sent food and fuel prices in Rwanda surging and inflation peaked around 23 percent in December 2008. 2008 Q1 dollar exports to Europe, Rwanda's largest market, dropped by one third against the previous quarter and 15 percent versus the previous year.

What to watch:

-- Kenya votes first on a new constitution in August and then in a presidential poll in December 2012. The new charter is central to political reforms aimed at averting a repeat of the 2008 post-election violence. Also any violence before or after Uganda's 2011 presidential poll could isolate Rwanda.

-- Conflict in eastern Congo. Rights groups fear too hasty a withdrawal of the 20,500-strong U.N. peacekeeping force in eastern Congo would trigger more violence there. [ID:nLDE64E0D1]

-- Burundi elections. Neighbouring Burundi is holding presidential, parliamentary and senate elections in June and July, in a test of the nation's political stability after more than a decade of civil war. Diplomats say any violence surrounding the ballots is unlikely to spill over into Rwanda.

EMERGING CAPITAL MARKET

Established in 2008, Rwanda's Over The Counter (OTC) stock market lists three Treasury bonds and a 10-year Commercial Bank of Rwanda bond. The only listed equity is the cross-listing of Kenya Commercial Bank . Its shares have seen a total turnover of $24,000 since cross-listing in June last year.

Bond market turnover has been around $1.13 million since Jan. 31 2008. The Capital Market Advisory Committee (CMAC) says uptake has been weak because government paper is being bought mostly by institutional investors who are holding on until maturity.

What to watch:

-- Issuance of more government bonds and new listings. The central bank will issue quarterly bonds to fund ambitious energy and infrastructure projects and also help ease the country's dependence on donor funding, which currently comprises around 40 percent of the budget. [ID:nLDE64H12M]

However the regulator says this would not significantly increase liquidity because of the relatively small volumes being talked about.

-- Regulator CMAC expects four Kenyan companies -- including Equity Bank , KenolKobil , TPS Serena -- will cross-list by the end of 2010 as part of a drive by leading Kenyan firms, notably the banks, into new markets such as Rwanda and South Sudan. Cross-listings such as Equity will boost the capitalisation of an embryonic market where domestic options are limited.

-- The government plans to sell a 30 percent stake in brewer BRALIRWA, 25 percent to the public and 5 percent to majority owner Heineken . The listing could take place either side of the Aug. 9 poll. [ID:nLDE63816A]

CMAC says the IPO reflects the government's confidence in the strength of the domestic economy. Officials predict double digit growth in two years, up from around 5.5 percent in 2009.

-- The sale of the government's 10 percent stake in telecoms firm MTN has been slated for 2011, CMAC says.

-- For now, Rwanda has no plans for a Eurobond. Last year, ratings agency Fitch gave Rwanda's long-term foreign and local currency Issuer Default Ratings at B- with a positive outlook and a country ceiling also at 'B-'.
(Editing by Helen Nyambura-Mwaura and Giles Elgood)

posted by Mamadou Kouyate @ 12:47 AM