Update 2 – Zimbabwe Stock Exchange automation successful

The Zimbabwe Stock Exchange (ZSE) started successfully trading on its new automated trading system (ATS) on Monday 6 July and volumes were picking up during the week. This is a long-awaited change as the stock exchange moved away from call over and paper-based systems.
ZSE CEO Alban Chirume and a couple of Zimbabwean stockbrokers confirmed to AfricanCapitalMarketsNews that was working well. Monday had started slowly, as expected, but once orders were being matched successfully and there were no problems, volumes seemed to up on Tuesday and today (8 July). Chirume described it as a “major transformation” for the ZSE, founded in 1896. Stockbrokers were upbeat, saying their clients local and international had been waiting for this.
There was a false start on 3 July, originally announced as the launch day, when the “close coupling” linkage between the ATS and the settlement system gave some teething problems. This was resolved by Monday and the settlement system seemed to be working well after that.
The news comes as a relief to brokers and dealers, who can now trade from their own offices and do not need to spend time travelling to the Zimbabwe Stock Exchange building. Earlier this year the ZSE had moved out of its city-centre office and into its own premises.
Chirume said the ZSE staff were cheering as the first trade went through.
The ATS is supplied by InfoTech Middle East LLC and the settlement is run by Chengetedzai Depository Company Ltd, which is using Depo/X system supplied by CMA Small Systems from Sweden to run the central securities depository (CSD). The only securities which can now be traded are those which have been dematerialized, which means that paper share certificates have been replaced by dematerialized entries on the CSD computer. However, all the ZSE shares are now dematerialized apart from Border, which is under judicial management.

UPDATE – Zimbabwe Stock Exchange delays automated trading

According to an announcement today, 3 July, the Zimbabwe Stock Exchange says it did not launch electronic trading today as planned and the launch has been delayed indefinitely. The ZSE says: “Erring on the side of caution, it was decided to resolve a technical issue to ensure a seamless completion of the settlement processes. Further updates on ‘go live’ will be issued by the ZSE in due course.”
The ZSE has been trading securities using “callover” sessions since 1896 and had announced yesterday it was ready to launch online trading today through a new automated trading system (“ATS”) installed by InfoTech. It says it had opted for a close coupling model between the ATS as the front end of the trading cycle and the central securities depository (“CSD”), which has a mandate for settlement of both scrip and cash.

Zimbabwe Stock Exchange launches electronic trading 3 July

Electronic share trading is due to go live today, 3 July, at the Zimbabwe Stock Exchange (ZSE) with new trading hours for the exchange. According to an announcement yesterday all registered stockbrokers meet the requirements and will be able to provide uninterrupted services and the new platform trades only the securities that are dematerialized at the central securities depository (CSD) Chengetedzai Depository Company.

The new automated trading system (ATS) has been supplied by InfoTech, an IT firm headquartered in Singapore with offices in Pakistan, United Arab Emirates and Ghana. It replaces the call-over through which stockbrokers traded shares in Zimbabwe since the bourse was established in 1896 including stockbrokers gathering in a room once or twice a day to discuss trades on a list of securities.

According to the ZSE announcement: “The new electronic platform enables participants to conduct their business from various locations by accessing the ZSE through the Internet. The ATS operates on agreed rules which are in-built in the system and therefore guarantees adherence to price and time priority principles in the interest of market fairness and transparency”.
zimbabwese50502_tradingboard
Newsletter ATS Watch published on 2 July says the ATS hardware was installed in May 2015 including servers and disaster recovery servers. It has “close coupling” links to the CSD: “Given the need to ensure real time exchange of information, the ZSE opted for close coupling and the vendors of both the CSD and the ATS worked for at least six months to ensure that the interface for close coupling was provided.”

Training ran from 8-26 June, led by Ejaz Anwar (Project Leader), Dilshard Ahmad and Muhammad Asghar from InfoTech. Martin Matanda, Operations Executive of the ZSE, is also the project manager leading a team of consultants and IT staff. Training was given to staff of ZSE, the Securities and Exchange Commission of Zimbabwe and the CSD and there was separate training for all other market participants, mainly stockbrokers. Trainees learned how to enter orders and generate reports. Participants also talked to the system vendors and this led to refinements being made to the system to ensure that it is fully customized to the Zimbabwe capital market. Mock trading has also been held.

Other key changes in trading include:
1. New trading times (local time): Monday to Friday (except public holidays)
Continuous Session – 10:00 am to 12:30pm; Market closes – 12:30pm
2. Continuous trading during open sessions, which means multiple prices could be established and traders will have more flexibility
3. The ATS can only trade dematerialized securities that are loaded at the CSD via Chnegtedzai’s Depo/X facilities
4. Algorithms will discover the prices, so that an order can be filled at different prices depending on the book
5. Circuit breakers on price with lower and upper price limits (percentage) for each counter on the ATS, based on the previous closing price. These limits can be set for all counters or for each counter
6. Real-time data throughout the “open” phase, accessible to market participants and other stakeholders for a fee

New listing
Manufacturing and construction Masimba Holdings on 8 June separately listed its plastics manufacturing subsidiary, Proplastics, on the ZSE through a dividend-in-specie, according to a news report. It is the second listing on the ZSE in 5 years after Padenga Holdings which also listed through a dividend-in-specie following its unbundling from Innscor Africa in 2010. The last initial public offering (IPO) of shares was Zeco Holdings in 2007.

The latest listing of 60,000 shares at 3c follows a successful restructuring exercise by listed Masimba that resulted in the group unbundling the plastics manufacturing from the construction business. The aim is for both entities to attract capital and strategically position themselves in line with their core business, to unlock shareholder value and Proplastics focus on it business.

Dar es Salaam Stock Exchange aims for IPO and self listing Q1 2016

Dar es Salaam harbour (Credit: Tom Minney)

Dar es Salaam harbour (Credit: Tom Minney)

Tanzania’s Dar es Salaam Stock Exchange (DSE) aims for an initial public offer (IPO) of its shares within 6 months followed by listing itself on the exchange. It has published a call for lead transaction advisor, sponsoring stockbroker and other experts to express interest by 21 July.

CEO Moremi Marwa told Reuters on 1 July that the aim is to improve governance and raise funds for expansion: “We expect to pick a lead transaction adviser probably within a month and the whole process of launching the IPO should take around six months to be completed.” The quantity of shares to be sold will be decided later. Funds would be used for upgrading trading infrastructure, among others.

The African bourse has 21 listed companies and total market capitalization of TZS 23.9 trillion ($10.9 billion) at 30th June. This includes 14 domestic listed companies with market cap of TZS 9.9trn. It also has listed bonds (corporate and government) worth TZS 4trn. There is potential for more listings for companies to raise capital through equity or bonds, according to Reuters which notes that lending rates at banks can be 18%-30%. In 2014 Tanzania scrapped controls on foreign ownership of shares in an effort to stoke demand on the bourse. Bloomberg notes that in 2014 the index gained 64%, making the exchange Africa’s best performer.

According to Marwa’s quarterly statement liquidity in the second quarter was up to TZS 285bn from TZS 278bn in the first quarter, representing 9% liquidity ratio on an annualized basis: “During Q3, 2015, we expect at least three listings: Mwalimu Commercial Bank, PTA Bank (for corporate bonds) and YETU Microfinance.” He added that priorities include introducing mobile and Internet trading on the platform; encouraging more listings; public education and awareness; integrating and synchronizing the DSE’s central securities depository (CSD) with that of Bank of Tanzania for government bonds trading.

Dar es Salaam Stock Exchange Ltd was incorporated in 1996 as a mutual company limited by guarantee. According to the website it has recently changed into a public company limited by shares and is renamed Dar es Salaam Stock Exchange Public Limited Company.

According to the DSE website: “The objective of these changes is to enhance DSE’s operational, financial and governance structures and capabilities so as it can efficiently execute its mandates in line with DSE strategic objective: i.e. to be the focal point for long-term capital raising by private enterprises and public sector within the economy via provision of efficiency infrastructure, systems and listing platform for multi-financial products.

“The invitation is for Expression of Interest (EOI) by eligible firms to provide the following consultancy services:
1. Lead transaction advisor
2. Co-sponsoring stockbrokers
3. Legal advisor
4. Reporting accountant
5. Public relations firm
6. Lead receiving/collecting bank.

The Nairobi Securities Exchange has successfully sold 38% shares in a $7.1m IPO which was oversubscribed many times in August 2014, and it self-listed soon afterwards. South Africa’s JSE Ltd did the same in 2006.

London Stock Exchange allowed to give Hong Kong brokers direct access

The London Stock Exchange has been licensed by Hong Kong’s Securities and Futures Commission to operate as an alternative exchange operator. This means that brokers based in Hong Kong can join as direct members of the LSE and trade for Hong Kong clients in LSE-listed stocks and fixed-income products, provided they meet requirements. They will also get access to the LSE derivatives market, according to this Reuters story.
LSE chief executive Alexander Justham said on Monday (15 June), according to a report in South China Morning Post: “The SFC license is an important move for the London Stock Exchange to further develop our business related to Hong Kong and Chinese companies.”
He expects the new links would encourage more mainland firms to list for trading on the LSE as well as more dim sum bonds, which could create more competition for Hong Kong Exchanges and Clearing. He said: “The London Stock Exchange is not a competitor to Hong Kong but we could have a cooperation relationship.”
Two Hong Kong financial firms are members of the London Stock Exchange through branches in London and 57 mainland Chinese firms are listed. The LSE signed a memorandum of understanding with 4 companies – Agricultural Bank of China, Bank of China, China Construction Bank, and Haitong Securities – to help bring more Chinese firms to list in London.
London is developing as a trading hub for yuan.
The LSE has a list of its 883 members based in various countries around the world.

Africa Progress Panel urges triple energy win – for people, power and planet

APP_KA_quote

Africa is a potential low-carbon superpower and can show the world how to fight poverty, grow economies and fight climate change at the same time. It is a crucial message for 2015, when critical climate talks will set the future direction of the world’s weather and world leaders commit to achieving sustainable development goals.

Kofi Annan’s Africa Progress Panel today (5 Jun) issues its report Power, People, Planet: Seizing Africa’s Energy and Climate Opportunities. It calls on governments, private investors, and international financial institutions to unlock the Africa’s vast potential for renewable and a low-carbon energy and fight poverty by delivering universal access to electricity by 2030. The report is available for download here.

Source: Africa Progress Panel

Source: Africa Progress Panel

The report says Africa does not have to choose between economic growth and low-carbon energy development. Just as the continent leapfrogged decades of telecoms development with cheap rollout of mobile telephony, Africa has the sun, wind, water and geothermal resources to fire up energy without damaging the world climate.

Power against poverty
Many Africans cannot escape poverty because 621 million of them do not have access to electricity and they pay a heavy price in resources, time and environmental decline for energy such as firewood, which they use for lighting and cooking. A rural woman in northern Nigeria spends around 60 to 80 times more per unit of energy consumed than a resident of New York or London.

“Our report calls for a 10-fold increase in power generation by 2030,” said Mr Annan, adding: “Africa needs to utilize all of its energy assets in the short-term while seizing the opportunity to put in place the foundations for a competitive, low-carbon energy infrastructure.”

The Africa Progress Panel report highlights the scale of Africa’s energy deficits. Power shortages cut the region’s growth by 2-4 per cent a year, holding back job creation.

Electricity consumption in sub-Saharan Africa (excluding South Africa) is less than that of Spain. On current trends it will take until 2080 for every African to have access to electricity. The APP report identifies Ethiopia, Kenya, Rwanda and South Africa as emerging front-runner countries in the global transition to low-carbon energy.

There is a $10 billion-a-year opportunity in tackling deficits and the report authors estimate that households living on less than US$2.50 a day collectively spend this amount on energy-related products, such as charcoal, candles and torches.

Source: Africa Progress Panel

Source: Africa Progress Panel

“This is market failure on an epic scale. Low-cost renewable technologies could slash the cost of energy, benefiting millions of poor households, creating investment opportunities, and cutting carbon emissions,” said Mr Annan. “African governments should take responsibility for tackling corruption in energy utilities, strengthening energy governance to facilitate private investments, and increasing investment in energy infrastructure.”

The report urges African governments to redirect the US$21 billion spent on subsidies for loss-making utilities and electricity consumption for the rich, towards connection subsidies and renewable energy investments geared towards the poor.

It estimates the energy-sector financing gap will be US$55 billion each year until 2030. The panel members call for strengthened international cooperation and a global connectivity fund to reach an additional 600 million Africans by unlocking private investment and expanding public investment in on-grid and off-grid energy provision. Aid donors and financial institutions can do more to unlock private investment through risk guarantees and mitigation finance.

Time to end “climate negotiations poker”
Africa brings a message of hope for December’s climate talks, set for Paris. The world’s leaders must commit and act to implement agreements to cut emissions and limit global average temperature increase to 2OC above pre-industrial levels. Africa contributes the least to man-made climate change and already endures the worst effects such as droughts, floods, falling crop yields and rising temperatures. A bigger increase would mean these changes could spiral out of control within a few years.

The African Progress Panel report challenges African governments and the international community to scale-up the level of ambition ahead of the summit. It recognizes that the EU, the US and China have raised their levels of ambition but says current proposals fall far short of a credible deal for keeping global warming within the 2ºC limit. It condemns Canada, Australia, Russia and Japan for effectively withdrawing from constructive engagement of climate.

APP member Bob Geldof contrasted the “comfort blanket mood music” surrounding the Paris climate summit with current policies: “G7 and G20 governments tell us they want a climate deal. Yet the same governments – the UK, the United States, Germany, China, Brazil and India – are spending billions of dollars of taxpayer’s money subsidizing the discovery of new coal, oil and gas reserves. They should be pricing carbon out of the market through taxation, not subsiding a climate catastrophe that threatens the lives of millions of Africans and jeopardizes our children’s future.”

“This is a moment for bold global leadership and decisive action by governments around the world,” said Mr Annan. “Playing poker with our planetary and the lives of future generations is not a smart move.”

Announcing the winners – African Banker Awards

All the winners with Omar Ben Yedder (source - IC Publications)

All the winners with Omar Ben Yedder (source – IC Publications)

Congratulations to the winners of the 2015 African Banker Awards announced in Abidjan on 27 May. It is always a privilege to be a judge and I am very impressed with so many of the excellent business ventures and projects, including billion-dollar infrastructure plans and connectivity for tens of millions of Africans. Competition is very hot and all of the short-listed entries for this year’s ninth awards were excellent.

Morocco’s Groupe Banque Populaire triumphs as 2015 African Bank of the Year and Ghana’s Albert Essien, Group CEO of Ecobank, wins the award for African Banker of the Year. Tidjane Thiam, from Cote d’Ivoire and the first African CEO of a FTSE100 company, wins the African Banker Icon award and Nigeria’s Jim Ovia, Chairman of best-performing Zenith Bank wins the Lifetime Achievement category.

Groupe Banque Populaire has recently taken a major stake in West African group Banque Atlantique and helped to turn around its performance significantly. Essien inherited a bank in a precarious position last year, but has managed to steady the ship and bring in some important shareholders to strengthen Ecobank’s capital base. Thiam is the CEO of Prudential insurance and shortly to become CEO of bank Credit Suisse.

The awards were hosted by African Banker magazine at a gala dinner in Abidjan, Cote d’Ivoire, with over 500 people there including Ministers, Central Bank Governors and the CEOs of some of Africa’s leading Banks and financial institutions.

Here is the full list of winners:
African Bank of the Year
Groupe Banque Populaire – Morocco

African Banker of the Year
Albert Essien, Group CEO Ecobank (ETI)

Lifetime Achievement Award
Jim Ovia Chairman, Zenith Bank – Nigeria

Finance Minister of the Year
Hon. Claver Gatete – Rwanda

Central Bank Governor of the Year
Prof Njuguna Ndung’u – Kenya

African Banker Icon
Tidjane Thiam, former Finance Minister of Cote d’Ivoire and CEO of Prudential

Best Regional Banks in Africa

Best Bank in North Africa
Attijariwafa Bank – Morocco

Best Bank in West Africa
Orabank

Best Bank in Central Africa
Groupe BGFI Bank – Gabon

Best Bank in East Africa
Bank of Kigali – Rwanda

Best Bank in Southern Africa
Banco de Comercio e Investimentos – Mozambique

Best Retail Bank in Africa
Standard Bank – South Africa

Investment Bank of the Year
Rand Merchant Bank – South Africa

Award for Innovation in Banking
Millennium BIM – Mozambique

Socially Responsible Bank of the Year
BMCE Bank – Morocco

Award for Financial Inclusion
Fondation Attawfik – Morocco

Deal of the Year – Equity
Seplat IPO, Standard Bank

Deal of the Year – Debt
$850m Commercial and ECA Backed Financing Package for the Ethiopian Railways Corporation, Credit Suisse

Trade Finance Deal of the Year
$1.3bn Petroleum Export Limited Syndicated Pre-export Facility, Commercial International Bank (CIB) – Egypt

Infrastructure Deal of the Year
CENPOWER – KPONE IPP, Africa Finance Corporation – Nigeria

Best Islamic Finance Initiative
Senegal Sukuk, Citi and ICD

MasterCard International supported the event and MasterCard Division President for Sub-Saharan Africa, Daniel Monehin said: “We believe that the African Banker Awards understands precisely what excellence in banking means – one only has to consider the Award winners and nominees tonight. This is why we are proud to support these Awards, where we recognize and commemorate our banking colleagues who have, in the last year, provided us with outstanding examples of progress towards our shared goal of banking excellence.” Ecobank/Nedbank, Banque Internationale pour l’Afrique au Congo (BIAC), Banque Altantique, Groupe Banque Centrale Populaire, GT Bank and Coris Bank International also supported the Awards, along with ECAir, Sopra Banking Software and Travelex.

Omar Ben Yedder, Publisher of African Banker thanked the sponsors and the judging panel which this year included Ade Adebajo, Consultant, Debt Capital Markets – Africa; Koosum Kalyan, Chairman, EdgoMerap Pty Ltd; Tom Minney, Editor, African Capital Markets News & African Growth Partners Ltd; Alain le Noir, CEO – Finances Sans Frontières; Zemedeneh Negatu, Managing Partner – Ernst & Young Ethiopia; Michel Losembe, President – Congolese Association of Banks; Paul Derreumaux Honorary President – Bank of Africa Group and Christopher Hartland – Peel, Principal – Hartland-Peel Africa Equity Research.

Ben Yedder said “We have a fantastic crop of winners once again and they are widespread in terms of countries. East Africa won two coveted awards: the Minister of Finance and Central Bank Governor categories for Rwanda and Kenya, respectively. Morocco had a strong showing with four awards. Mozambique did well winning two awards in the most innovative bank and best bank in Southern Africa categories. It is great to see banks and financiers rise to the challenge to keep innovating and having a positive impact on Africa’s growth. The growth story will depend on a strong and resilient banking system, one that is both bold and responsible. We see plenty of these qualities amongst our winners tonight.”

Launch of Africa Progress Panel report 5 June

APP_2015_countdown_9APP_KA_quote

For more information, see Africa Progress Panel. The ground-breaking Africa Progress Report Power, People, Planet will launch 5 June – energy poverty, the effects and future of climate change, and Africa’s vast sustainable energy.

Putting aside billions – Africa’s sovereign wealth funds

Sovereign wealth funds are sprouting across Africa – 15 countries have created funds in the last 20 years, managing a total of $159bn at the end of September 2014.

Angola, Nigeria, Senegal and Ghana all started funds in the last 3 years and and funds are discussed, expected or being born in: Kenya, Liberia, Mauritius, Mozambique, Namibia, Niger, Uganda, Sierra Leone, South Sudan, Tanzania, Uganda, Zambia and Zimbabwe.

A key research event at Chatham House in September 2014 identified some principles of African SWF Demand, Development and Delivery.

Governance for sovereign wealth funds

Funds with strict rules should limit politicians’ discretion and they can ensure that money is earmarked for public investments. For instance Ghana has a rule that oil revenues must fund “development-related expenditures”. In many cases this funding can be done through the governments’ budget and oversight systems, which otherwise funds might undermine and bypass.

A key target is to ring-fence resource revenues to prevent mismanagement or corruption. Organizations such as the Extractive Industries Transparency Initiative had campaigned about billions of dollars being siphoned off oil and gas revenues in countries such as Nigeria and Angola, and some $10bn withdrawn from Russia’s National Welfare Fund without justification. Resource funds also offer governments greater autonomy, power and political leverage.

Sovereign wealth funds debate at Chatham House (source: Chatham House)

Sovereign wealth funds debate at Chatham House (source: Chatham House)

Africa’s new arrivals – learning from the past

Ghana has long exported gold and cocoa but in 2007 was delighted to discover large petroleum reserves. Mona Helen Quartey, Deputy Minister of Finance, said they wanted to avoid the pitfalls and asked for advice before opting for wide consultation and accountability: “We held a national forum and did a survey in all 10 regions to get the opinions of Ghanaians on how to manage petroleum revenues; it was a very, very broad consultation. The survey had thematic areas such as: revenue collection and allocation; how much to spend and how much to save; managing the fund and transparency and accountability.”

The resulting Petroleum Revenue Management Act 2011 established the Ghana Stabilization Fund which only allows withdrawals when oil revenues are low, and the Ghana Heritage Fund to provide an endowment for future generations when petroleum reserves are depleted and withdrawals only after 15-year intervals. The funds were worth almost $450m in June, according to the Deputy Minister.

Ghana is a great example of independent oversight, according to Andrew Bauer, Economic Analyst with the Natural Resource Governance Institute (NRGI): “There is public interest and an accountability committee which includes chiefs, journalists and accountants to report twice a year on whether fund rules are being followed.”

Victoria Barbary, Director of Institutional Investor’s Sovereign Wealth Center, adds plaudits: “The imperative is to think about strength of institutions, when there is a strong state, legislation and building by consensus. Ghana has done exceptionally well, making sure there is that trust element in managing money.”

Existing and Emerging SWFs in Africa. Source: Sovereign Wealth Center

Existing and Emerging SWFs in Africa. Source: Sovereign Wealth Center

New arrivals – Angola and Nigeria
Other new arrivals include Fundo Soberano de Angola, set up with an initial endowment of $5bn from oil. It has signed up to the Santiago Principles for SWF governance, and aims to diversify across various infrastructure and asset classes with one third for interest-bearing assets, a dedicated hotel fund and plans for infrastructure projects across sub-Saharan Africa. According to its chairman, José Filomeno de Sousa dos Santos, the Ministry of Finance has set up boards of directors and supervisors to look at detailed quarterly reports including bank statements, and an audit has recently been done by Deloitte.

Nigerian Sovereign Investment Authority (NSIA) set up by an Act to invest surplus income from excess hydrocarbon reserves, including the savings between budgeted and actual oil prices. It started with $1bn and has three funds: Stabilization fund, Future generations fund for long-term investments, and Nigerian infrastructure fund.

Barbary says public confidence and trust will be key for new funds: “In countries across Africa strong institutions are lacking and there is lack of public trust in politicians to manage the money well and to the benefit of the whole polity. Resource-rich countries in Africa that have just come out of civil war, for instance Liberia and Sierra Leone, are thinking of setting up natural resource funds.” However, Tanzania is working closely with the NRGI to create a resource charter and educate policy-makers and non-governmental organizations, building public accountability and trust.

Expert advice is available from many sources, including the World Bank and a team from the US Treasury which built its skills on managing US assets and then decided to share the learning. Africans are increasingly skilled at managing their financial sector, whether as diaspora members returning after star turns in the world’s financial institutions or as students of professional finance qualifications.

These skills will be particularly important when funds invest domestically, for instance trying to emulate successes of Singapore and Kuwait in bringing high-paying technology and other jobs into the country, according to Michael Maduell of the Sovereign Wealth Fund Institute. Infrastructure investment in Africa also presents challenges, although the field is developing fast. The NRGI’s Bauer warns: “It takes as much capacity to manage the manager as to manage the money.”

World Bank economist Håvard Halland says there is a risk of political meddling when fund managers are asked to trade off financial and social returns on parts of their domestic portfolios. This could compromise the independence of the fund management, the wealth objectives of the fund as well as the quality of investments. To reduce these risks, the fund should invest only in minority stakes in partnerships with qualified private investors or foreign SWFs, who can also bring additional expertise. “Only a narrow range of infrastructure investments are appropriate for SWFs under these constraints. Investments that do not have a commercial or quasi-commercial return, such as schools and hospitals, should go through the government budget. Rates of return on domestic investments need to be benchmarked against the return on foreign assets with no fixed allocation to domestic investments, and possibly allowing for a clearly defined markdown from the benchmark rate only if the investment has significant positive externalities”.

African SWFs are likely to grow fast in the short-term as countries that have oil and gas are keen to get it out and sold while world prices stay relatively high, as longer-term prospects are not good.

The funds are already a key force in building Africa’s economies, infrastructure and even capital markets. Getting their objectives, management, governance and investments right is vital for the welfare of future African generations.

Annex 1 – 6 steps to good governance and how Africa’s sovereign wealth funds measure up

Africans should be asking these questions about their sovereign wealth funds (SWF):

1. Set clear fund objectives: Examples include saving for future generation, stabilizing the budget, earmarking natural resource revenue for development priorities.

2. Establish fiscal rules for deposits and withdrawals that align with the objectives. Botswana avoids such rules. Where funds are allowed to invest domestically, including in social spending, they should work with national budget processes. Angola’s sovereign fund can bypass normal budgetary procedures.

3. Establish investment rules, There have been notorious problems worldwide, one of Africa’s worst examples has been the Libyan Investment Authority under “brother leader” Gadhafi, when his son Saif al-Islam Gadhafi had almost sole discretion to manage approximately $65bn and billions went to close acquaintances. In October 2014 LIA went to the High Court in UK to sue Goldman Sachs for $1bn for nine 2008 transactions that were worthless by 2011, alleging Goldman exploited the fund’s limited financial experience but made $350m profit, claims which Goldman denies. Chad’s fund was repurposed for military spending. Some funds such as Botswana block domestic investment, Angola is among others which see it as core.

4. Clarify a division of responsibilities between the ultimate authority over the fund, the fund manager, the operational manager (day-to-day), and set and enforce ethical and conflict- of-interest standards.

5. Require regular and extensive disclosures of key information and audits. Fund transparency is increasing, for example the rigorous transparency requirements of the Sao Tome and Principe National Oil Account and public scrutiny of its operations. By contrast, Botswana is still “opaque” despite signing the Santiago Principles and both Equatorial Guinea, another signatory, and Libya “keep nearly all information about their activities secret”.

6. Establish strong independent oversight bodies to monitor fund behaviour and enforce the rules

(Source, Natural Resource Governance Institute, New York)