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Mozambique Financial Market 4th European Financial Congress Sopot - Poland June 2014 Presentation Structure I. About Mozambique II. Economic Overview III. Capital Markets Structure and Products IV. Capital Market Performance V. Capital Market: Challenges and Perspectives About Mozambique Geographic Location and Language • Mozambique is located in the Southern Africa • Has an area of 799.380 Km2, of which 2.515 Km constitutes the Indian ocean coast line • Language: Portuguese • Population: 23,5 millions About Mozambique Political & Demographic Review • Mozambique follows a multi-party political system with general election in every 5 years • After the 1992 Peace agreement that marked the end of the civil war the country has been enjoying a political stability • The democratic governance and the national reconciliation have been contributing enjoy a good business environment • As per the Global Peace Index of 2013, the country was ranked at 48th position in the world in terms of political stability Presentation Structure I. About Mozambique II. Economic Overview III. Capital Markets Structure and Products IV. Market Segmentation and Performance V. Capital Market: Challenges and Perspectives Presentation Structure Macroeconomic environment and the Basic Indicators • Mozambique has experienced in the last 10 years a robust economic performance. Nominal GDP (USD Millions) Exchange Rate (USD/MZN) GDP Real Growth (%) Average annual Inflation (%) 2010 9.544,3 33,0 7,1% 12,4% 2011 12.533,9 29,1 7,3% 11,2% 2012 14.516,1 28,1 7,2% 2,1% 2013(est.) 15.369,7 30,5 7,0% 4,3% • The real gross domestic product (GDP) growth rate was 7% in 2013, falling shy from the predicted 8.4% due to the floods that occurred in the beginning of the year, though it is predicted to reach 8% by the end of 2014, keeping Mozambique in the top 10 fastest growing economies in Africa. • This growth is driven mainly by the primary sector which was 10.4% with major contribution from the extractive industry with 33%, followed by the tertiary sector which was 8.6%, also driven by the transport and communications with 15.5%. Economic Overview Macroeconomic environment and the Basic Indicators • The secondary sector also had a positive growth because of the construction sector, contributing with 8.6% of the GDP; • Inflation rate also tend to remain below 10% in the coming years since it dropped to one digit in 2012; • This is meanly due to the implementation of sound and prudent macroeconomic policies, political stability and the structural reforms being undertaken; • The agriculture is one of the major economic sector contributing to around GDP with 20%. Others are industry trade and transports and communications; • Mozambique grew at an average annual rate of 6%-8% in the decade up to 2013, one of Africa's strongest performances; Economic Overview Macroeconomic environment and the Basic Indicators (cont.) • The strong and sustained economic growth, has relationship with natural resources, specifically coal, gas and aluminium. Electricity, cotton, tobacco, and shrimp are also other important export resources; • According to the World Bank, the emerging extractive industry could provide the means for Mozambique to reach the status of a middle-income country by 2025; • Additionally, it is expected that revenues from these vast resources, including natural gas, coal, titanium and hydroelectric capacity, could overtake donor assistance within five years; • The government is now focusing on boosting the rest of the economy. Economic Overview Macroeconomic environment and the Basic Indicators (cont.) • Being a member of the Southern African Development Community (SADC) and one of the signatories of the SADC free trade protocol, together with the privileged geographical location of the country, Mozambique is well placed in to further economic development; • Though agriculture sector has been contributing to the economy in the recent years in around 20% to 25% of the GDP, in recent years sectors like mining and banking are growing in a steady rate; • Foreign Direct Investment reached USD 5.9 billion in 2013; • International reserves increased by USD 404 million over the year; Economic Overview Financial System Structure in Mozambique Economic Overview Macroeconomic environment and the Basic Indicators (cont.) Looking at the financial system as whole: • There are efforts by the government to make credit more accessible, access to credit by the private sector and individuals remains difficult and expensive; • Currently, interest rates for loans range between 17% and 22% per annum; However: • Despite the lack of depth in the financial industry, the financial sector has been growing, and overall financial intermediation has deepened as banks’ branch networks have expanded to sub-urban and rural areas. There are currently 20 commercial banks, including 2 new banks that came into the market through acquisition of already existing banks. Presentation Structure I. About Mozambique II. Economic Overview III. Capital Markets Structure and Products IV. Market Segmentation and Performance V. Capital Market: Challenges and Perspectives Capital Markets Structure and Products The Mozambique Stock Exchange - Background • Opening: October 1999 • Public entity under the umbrella of the Ministry of Finance • Supervised by the Central Bank of Mozambique designated the Capital Markets Authority • Managed by a Board of Directors and an Audit Committee • Responsible for the management of the secondary securities market, and has sought, throughout its existence, to develop, broaden, consolidate and empower the Mozambican capital market on an on-going basis. Capital Markets Structure and Products The Mozambique Stock Exchange • Objectives: ü Diversify the existing financing alternatives; - Market Segmentation and Products Treaded ü Promotion of savings and its conversion into productive investment. • Type of securities comprise of: ü Shares and bonds issued by national or foreign entities; ü Domestic and foreign public funds and similar securities; ü Any other securities which by their nature and characteristics, may be admitted to listing: § § Commercial Paper Participating Securities Capital Markets Structure and Products The Mozambique Stock Exchange -Key Milestones Capital Markets Structure and Products The Mozambique Stock Exchange - Market Share and Products Traded Capital Markets Structure and Products The Mozambique Stock Exchange • - Autonomous Services Central Securities Depository: • Established in 2006; • To be operational in the beginning of the second semester of 2014; • Main Innovation: registration and centralization of listed and non-listed securities in the country; In this first stage it will work as a service provided by the BVM, hence, also falling under the umbrella of the Central Bank as the Capital Market’s supervisory authority; • • In 2013, the BVM was designated the National Numbering Agency of Mozambique; Capital Markets Structure and Products The Mozambique Stock Exchange - Major partnerships and cooperation • Multilateral Partners • • • • • • ASEA – African Securities Exchanges Association; CoSSE – Committee of SADC Stock Exchanges; WFE – World Federation of Exchanges; World Exchange Congress; OIC Exchanges; World Exchange Congress. • Bilaterals Partners • • • • SADC Stock Exchanges Euronext Lisbon; Comittee of Angola Capital Market; Perspectives: London Stock Exchange, Brasil (BMF&Bovespa), South Korea, Japan (Tokyo), Poland. Capital Markets Structure and Products The Commodities Exchange • Established in 2012; • Main objectives: create a chain of products potentially tradable; • Assure food security in the country; • Improve the quality of commodities domestically produced; • Help in the price discovery process; • Diversification of markets. Capital Market Performance I. About Mozambique II. Economic Overview III. Capital Markets Structure and Products IV. Capital Market Performance V. Capital Market: Challenges and Perspectives Capital Market Performance Current market Capitalization Evolution - Mozambique (1999 – June 10th, 2014 Market Capitalization (1999 – June 10th, 2014) (MZN Millions) Capital Market Performance Market Capitalization Dimension Capital Markets Structure and Products The Mozambique Stock Exchange - Market Capitalization: World versus Emerging Markets • Market Capitalization: Global and Emerging Markets Capital Market Performance Market Capitalization Dimension Mozambique Emerging Markets World (% of GDP) Capital Market Performance Potential Market Capitalization Trend Source: Global Finance Stability Report, April 2013 Presentation Structure I. About Mozambique II. Economic Overview III. Capital Markets Structure and Products IV. Capital Market Performance V. Capital Market: Challenges and Perspectives Capital Market: Challenges and Perspectives Key Success Factors and Challenges • • • • • • • • • • Macroeconomic Stability; Development of the Financial Sector; Quality of the Institutions; Protection of the Investors; Automation of Financial and Banking processes; Demutualization of organizations; Companies Profitable Strategy; Development of Regulation and Supervision of Financial Market; Interconnection of Regional Markets; Attracting Investment by Institutional Investors and Foreign Investors. Capital Market: Challenges and Perspectives Key Success Factors and Challenges (cont.) Capital Market: Challenges and Perspectives Key Success Factors and Challenges (cont.) Capital Market: Challenges and Perspectives Opportunities Drivers • In 2011 the Public-Private Partnership Law was approved by the Government, and established that all megaprojects in Mozambique should be listed at the Mozambique Stock Exchange at least 5% to 20% of the shares; • Mainly, these megaprojects shares are intended to be acquired by Mozambican investors, looking for the empowerment of Mozambican people; • It is expected that by the end of 2014, a Brazilian mining company, VALE Moçambique, will be the first megaproject company to be listed at the Mozambique Stock Exchange with 10% of the capital shares, representing a market capitalization of around USD 400 Millions. Capital Market: Challenges and Perspectives The Major Opportunities’ Drivers Estimated growth of GDP and its Weight, 2013 4% 22% 24% World 3.3% 3.4% 0.0% 1.9% 1.6% 8% 7.1% 3.1% 19% 8% 4% 3.4% USA and Canada Latin America and Caribbean European Union North Africa and Middle East Sub-Saharian Africa CEI Asian Countries in development Japan Australia 5.6% 2% GDP Growth Weight in the World GDP 3.0% 2% In 2013, emerging markets, Sub-Saharian Africa in particular, 5.6%, detach in the context of the the world economic growth Capital Market: Challenges and Perspectives The Major Opportunities’ Drivers GDP Growth, 1992-2017 Capital Market: Challenges and Perspectives The Major Opportunities’ Drivers - Potential Sector Growth in Africa, 2013-2015 (%) Capital Market: Challenges and Perspectives The Major Opportunities’ Drivers - Top 10 African destinations with the IDE highest growth, 2007-2012 THANK YOU ! 4th European Financial Congress Sopot - Poland June 2014