(Business in Cameroon) - The Douala Stock Exchange’s fees are discouraging compared to those of loan establishments. Furthermore, approved as ISPs on the financial market, banks have no reason to see investors choose DSX over the bank sector.

Did you know? According to inside sources, to launch its 200 billion FCfa bond on the Douala Stock Exchange (DSX) in 2010, the Cameroon government had to pay its consortium of arrangers 500 million FCfa. To this amount, you have to add stock market entry fees, fees to be paid to the Financial Markets Commission for the go-ahead, placement commissions to pay to investment service providers (seven banks pocketed 2.5 billion FCfa, according to the FMC), the share for the central trustee, a budget for a huge communications campaign, and all that without counting that, at the end, the issuer must pay the underwriters at a predetermined interest rate (6% in the case of cash). 

Such a massive sum would be out of reach for most of us. To give you some idea of the scale of the spending that an issuer wishing to raise funds on the DSX must bear, Ecofin Agency was able to gain access to a document prepared by the SGBC for the SAFACAM account. The document in question details estimated operational costs for the public offering that was recently launched by the Bolloré Group company. There, it is indicated that to place 2.8 billion FCfa in shares, “the initial public offering fees are 116.6 million FCfa before tax, of which 8 million in centralisation commissions to DSX, 1.4 million for the annual subscription fees to the central trustee, 14.4 million in authorisation fees to be paid to the FMC, and 45 million FCfa in payments to various financial intermediaries involved in the process.” 

The same document specifies that “after SAFACAM is listed on the stock exchange, the issuer will have annual fees to pay primarily to DSX and the central trustee. These comprise annual fees charged by DSX at a rate of 0.75% of the average capital of the securities listed, the annual subscription or membership fee and operational fees on the securities (paying dividends, identifying shareholders) billed by the CAA (central trustee). The issuer will also have to pay market fees to the ISP of its choosing.”  

The game that ISP banks play

In total, it is a considerable sum that wouLd discourage most issuers. Following the move by this loan establishment, which once planned to raise 15 billion FCfa on the Douala Securities Exchange, it had to throw in the towel after the financial market regulator, the FMC, submitted a bill for 200 million FCfa for the operation. Facing these exorbitant costs on the Cameroonian financial market compared to that of West Africa for example (37 businesses are listed on the BRVM, of which 31 are from Ivory Coast), many Cameroonian businesses choose the banking market for a simple reason: “The investment exit fees on the DSX are not as competitive as those of the bank sector,” argues Albert Florent Bengala, General Manager of Cenainvest in an interview with the weekly publication Le Financier d’Afrique, a risk capital company that sprang up on the street in Cameroon. Mr. Bengala also believes that to encourage companies to go to the DSX, now is the time to reduce the fees investors have to pay.

As one financial markets expert points out, the fact that Cameroon has ISPs that are banks and not true trading companies like the BVMAC (BGFI Bourse or EDC) will not make things any easier for DSX. Indeed, as one reliable source asserts, it is not inconceivable that banks operating as ISPs in Cameroon do not turn away potential issuers from the DSX to offer loans at rates that are significantly more competitive on the banking market. This enables these ISP banks to fatten their loan portfolios to the detriment of DSX’s development. With real trading companies such as authorised intermediaries, this kind of unfair trading would be reduced as the market depends on the survival of these very stock-trading companies.