SIERRA LEONE STOCK EXCHANGE LAUNCHED

UNCLAS SECTION 01 OF 02 FREETOWN 000299

SIPDIS

DEPARTMENT FOR AF/W (JHUNTER)

E.O. 12958: N/A
TAGS: EFIN EINV PGOV SL
SUBJECT: SIERRA LEONE STOCK EXCHANGE LAUNCHED


1. Summary: The Sierra Leone Stock Exchange was launched by
President Koroma on July 17, 2009 amidst great fanfare. The
decision to form a stock exchange in Sierra Leone was made in
1999, with a technical committee formed in 2001. However, due
to the lack of expertise and strong financial institutions,
plans did not progress. The stock exchange was finally
created through the Other Financial Services (Amended) Act
2007, and was registered as a Company Limited by Guarantee.
Though starting small, the creation of the stock exchange
represents a significant step forward for the country's
financial sector. End Summary.

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STOCK EXCHANGE OPERATIONS
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2. The Sierra Leone Stock Exchange replaces the interim stock
trading facility, which was created in 2007, and will serve
as a regulated market and help to create liquidity in shares.
It will also generate greater transparency by regularly
publishing vital information about companies listed on the
official list of the exchange. The stock exchange will have
responsibility for both the primary and secondary markets,
and ensure that all partisans conduct their business
according to the rules and regulations. The Director General
of the exchange has the power to investigate and, when
necessary, discipline anyone who breaks those rules. There is
a fifteen percent withholding tax which is also the final tax
on dividend income for all investors, both resident and
non-resident. The stock exchange also levies a three percent
commission on every transaction.


3. The Securities Act is under review, and the stock exchange
will continue to be guided by the interim regulations created
in the 2007 Other Financial Services (Amended) Act until it
is enacted. The rules for listing a company on the exchange
include being registered as a public limited company in
Sierra Leone, have capital greater than Le 100,000,000 (USD
33,334),and an operational history greater than three years.
The dealing members of the interim stock trading facility,
First Discount House and Capital Discount House, are
continuing as the sole dealers for the formal exchange.

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PROSPECTS FOR THE STOCK EXCHANGE
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4. The Sierra Leone Stock Exchange has received significant
support from the Commonwealth, the Central Bank of Sierra
Leone, the Nigerian-based West African Institute of Financial
and Economic Management (WIFEM),and the Nigeria Stock
Exchange. At present only one company, the Sierra Leone Rokel
Commercial Bank (previously Barclays Bank),is listed. Two
brokerage companies are operating with three traders apiece.
Though a modest start, speakers at the opening noted that
Tanzania and Malawi began with only a few companies listed in
their Exchange, but were able to develop tremendously in a
short time. Nigeria started with less than 7, but now has
approximately 315 listed in the Nigeria Stock Exchange. It
was also stated that all countries, including China, saw a
tremendous boost in their economies five years after
establishing a Stock Exchange.


5. Three to four more companies are expected to be listed
within the calendar year. Twenty more companies, primarily
government parastatals that are being privatized, are also
planned for inclusion over the next several years. Foreign
companies can be listed as well, but none have shown a firm
interest yet.

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CHALLENGES AHEAD
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6. The Sierra Leone Stock Exchange is presently operating
from the ground floor of the Bank of Sierra Leone, which
brings their autonomy into question. An independent
regulatory body needs to be established to allay the fears of
investors. The government also needs to promulgate a law that
encompasses the legal framework of the Exchange's operations.


7. The exchange lacks financial capital, and currently
operates with a one year loan from the Central Bank.
Income-generation is commensurate to the small volume being
traded, resulting in a small staff of seven: of the seven,
only three (Director General, accountant, and assistant
accountant) hold substantive positions. The staff has
frequently voiced concerns about their futures when the
Central Bank loan expires. Further financial support will
likely be required to keep the exchange afloat until more
companies are listed.

FREETOWN 00000299 002 OF 002



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COMMENT
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8. The official launch of the stock exchange comes after
years of stalled progress. The stock exchange was "launched"
in 2007 by the SLPP government, but despite promises to
quickly replace the interim trading facility within a few
months, it languished. The formalization of the exchange is a
promising step forward, though it will probably be several
years before it can operate without external support. End
Comment.
PERRY