African securities exchanges and their role in the future

Here are some extracts and paraphrasing from the opening remarks of Oscar Onyema, CEO of the Nigerian Stock Exchange and President of the African Securities Exchanges Association’s excellent 2015 conference, hosted by the Johannesburg Stock Exchange’s warm hospitality. The conference started on 16 Nov and finished the next day.

Trading volumes and structures
African securities exchanges trade multiple asset classes from equities and bonds to exchange-traded funds (ETFs) and derivatives. 23 nations make up ASEA. In 2015 year to date, African exchanges collectively have traded over $325.0 billion in equities, $1.2 trillion in bonds, and $438.0bn in ETFs and others. They have market capitalization of over $1.3trn.

Several African exchanges are demutualized, while others are in the process of demutualizing. The exchanges are becoming active players in the global exchange business, and the conference theme “Evermore” is about sustaining that growth position, and becoming a real platform for growth in the African economy.

The role of the capital market remains a critical one. It is time to ask the tough question: “How we can sustain the positive growth trajectories of our performances as African exchanges, given the globalization of the securities business?”

It is my strong belief that one of the things that Africa needs to sustain its growth is a solid capital-markets ecosystem that will attract investment and unlock the potential that exists on the continent. How do we, as capital market businesses, operate and grow in a sustainable and socially responsible way? I would like this conference to deliver better understanding of: 1) how best to pursue social values, without losing sight of the traditional financial objectives of our businesses; and 2) the correlation between the health of our economies and the value of our capital markets, bearing in mind peculiar strengths that we could leverage individually and collectively as we press forward.

Africa’s strengths
One of Africa’s greatest strengths is its population of 1.1bn people, 200 million of whom are aged between 15 and 24 years, making Africa the continent with the youngest population in the world. The current trend indicates that this figure will double by 2045. African exchanges are already positioning themselves to do a lot more to service the increasingly sophisticated needs of our growing middle class. Our customers will be looking to sustain and grow their wealth, and will be looking to work with us in preparation for the transfer of that wealth. Therefore I encourage all of us as capital market players to ramp up on our efforts, as we prepare ourselves to meet our clients at their points of need.

We have a combined total of just-over 1,600 listed companies, but this number is negligible compared to the actual number of successful companies operating on the continent, or the over 1.5 million businesses registered in Africa.

I propose we find new ways to engage with business leaders in order to communicate more clearly the vital role we play in facilitating long-term financing, mobilizing resources, and directing the flow of savings and investments efficiently within our economies.

Exponential benefits accrue from risk-sharing initiatives. Internationally, integrated stock markets improve resource allocation and accelerate growth by facilitating liquidity. Although profitable investments sometimes require long-run commitments to capital, savers prefer not to relinquish control of their savings, and preferably not for long periods of time. This is where liquidity comes in to ease the investor’s tension. It does this by providing investors with assets that are easily liquidated at any time, while simultaneously allowing firms permanent access to capital that is raised through equity issues.

Exchange linkages across Africa
There is no better time than now to intensify our efforts in ongoing initiatives that foster the advancement of regional integration and cooperation. Sub-regional integration efforts such as WACMI in West Africa, CoSSE in Southern Africa, and EAC in East Africa must be encouraged.

We must also begin to study how to effectively link the entire region. Hence, the African Exchanges Linkage Project (AELP) which is a jointly owned mandate between ASEA and the Africa Development Bank (AfDB), is a step in the right direction. It is aimed at addressing the lack of liquidity in African capital markets by creating linkages across key regional markets to reduce fragmentation and information asymmetry.

All of these efforts to deepen the continent’s markets will aid in pushing Africa’s economic transformation, and enhancing national competitiveness. But we must be careful never to lose sight of the real objective of these initiatives, which is to stimulate opportunities for the investment community, and expose issuers to deeper pools of capital, and a wider community of analysts and investors pools.

Weak corporate governance is often found responsible for many of the corporate failures in Africa. As securities exchanges, we operate powerful platforms through which we can influence and promote sustainable business practices. We must increase our contribution and participation in developing our national codes of corporate governance, by setting strong listing and maintenance requirements, and ensuring adequate disclosure of listed companies’ corporate governance arrangements.

Leapfrogging technology
Africa is becoming known as the continent that leapfrogs traditional stages of growth or development. We have seen this in the telecommunications industry where despite insurmountable challenges with communications infrastructure, the impact of mobile phone technology in Africa has been phenomenal, and is now revolutionizing many other sectors of our economy. When it comes to mobile phone technology, Africans are doing great things and leapfrogging the West, ironically driven by a lack of infrastructure.

Mobile payment systems experienced phenomenal growth in Kenya because many Kenyans did not have bank accounts, but they had mobile phones. Here in South Africa, the innovation of mobile commerce where you can order something on your phone and pick up from a locker is growing in popularity, and the driver for this is the limited number of physical malls. As a result of poor infrastructure in the health space, Africans are yet again turning to mobile technology for health information on platforms such as Mobile Alliance for Maternal Action (MAMA).

This trend is no different in how quickly the continent has embraced innovations in renewable sources of energy. Between 2010-2012, Nigeria’s renewable power production posted the world’s fastest growth, at more than 15% a year, according the World Bank. I therefore call on my colleagues in the capital market space to do no less in the capital market.

Let us be aware of our opportunities and tremendous capabilities and get involved in understanding what emerging technology can do for our sector, from blockchain technology to advancements in cyber security

Africa’s securities exchanges summit next week

Africa’s securities exchanges gather for their flagship conference in Johannesburg from 15-17 November. The 19th African Securities Exchanges Association annual summit is hosted by Johannesburg Stock Exchange. The association ASEA draws together 25 securities exchanges and ASEA President Oscar Onyema, CEO of the Nigerian Stock Exchange, says the theme – “Africa Evermore: Growth for sustainability” — emphasizes that Africa’s capital markets are stable, have huge potential and are growing.

Oscar Onyema, CEO of Nigerian Stock Exchange

Oscar Onyema, CEO of Nigerian Stock Exchange

The association has as objectives to develop its member exchanges and enhance their global competitiveness. Those at the conference are the major players in capital markets, including listed companies, trading participants, regulators, government representatives, technology providers, legal advisors, and institutional investors from Africa, Europe, and Asia. It’s an ideal opportunity to network and exchange information with industry leaders from across the continent.

Capital markets should be the key channel for the massive investment to fuel Africa’s economic growth of the coming 20-30 years, including finance for business, for infrastructure and for a social and development gains.

Onyema says ASEA’s mandate is not just to promote Africa as a sound investment destination which offers better returns than more developed markets but also to highlight that Africa has strong regulatory structures and that the capital markets and policy-makers are committed to transparency and governance as fundamental to a healthy business environment.

Zeona Jacobs, Director of Marketing and Corporate Affairs at the JSE and ASEA Executive Committee Member, says: “ASEA has been successful in attracting capital inflows to key markets in Africa by positioning them as key engines of economic growth and opportunities for business development. The conference highlights the important role its members have in advancing the exchange market and raising Africa’s global competitiveness in this sector.”

Themes and speakers

The conference agenda covers key topics for Africa’s exchanges including
• How the economic health of African countries affect the capital markets, with perspectives from issuers and investors as well as the exchanges
• Role of exchanges as corporate citizens
• Sustainable stock exchange
• Sovereign wealth fund and how they see African exchanges
• Is increasing liquidity and transparency a pipe dream?
• Friend or foe – prop trading firms in Africa
• How do African markets become more influential in shaping the global regulatory environment?
• Challenges and opportunities of commodity derivative exchanges
• Do we need a pan-African clearing house?

Speakers include the leaders and top executives of many top African exchanges as well as global exchanges such as Nasdaq, key banks, international and African stockbrokers, private equity and asset managers, IT providers to Africa’s exchanges, data and information vendors, government officials and leading regulators

Your writer on panel

Your writer is honoured to be sharing a panel talking about the key post-trade sector and also securities exchanges integration: “Does Africa need a need a pan-African clearing house serving all its exchanges across asset-classes?”, moderated by Leila Fourie, Director: Post Trade and Information Services, JSE, with speakers Terry Gibson (External Post Trade Consultant, MillenniumIT) and Selloua Chakri (Head of Market Structure Strategy, MEA, Bloomberg L.P.).

Soaring trading on Nigeria’s FMDQ market for fixed income and fx

Nigeria’s booming fixed interest and currency securities exchange FMDQ OTC Plc (“over-the-counter” market) recorded market turnover of NGN93.9 trillion ($471.7 billion) for the 8 months to 31 August. This includes all products traded on the FMDQ secondary market as well as trade executed between dealing members, dealing members & clients, and dealing members & the Central Bank of Nigeria (CBN).

According to a recent report in Vanguard newspaper, treasury bills transactions accounted for NGN31.7trn (34%) of the total trading; repurchase agreement/buy backs were NGN21.354trn (23%) turnover; and foreign exchange (forex) NGN19.84trn (21%). The top 10 dealing members accounted for NGN67trn, 71% of the turnover; 3 dealing members accounted for NGN27.9trn (42%) of the broker trading.



Major listings in July included NGN26bn ($130m) FCMB Financing SPV PLC series 1, 7-year 14.25% fixed-rate unsecured bond under a ₦100trn debt issuance programme. This came after the listings of NGN4.8trn of bonds issued by the Federal Government of Nigeria (FGN) and quotation of NGN2.8trn of treasury bills. Other key listings have included a NGN30.5bn bond by UBA and a NGN15.54bn bond by Stanbic IBTC.

Other instruments traded in the 8 months to August:

  • Unsecured placements – NGN9.2trn
  • FGN Bonds – NGN6.1trn
  • FX Derivatives – NGN5.5trn
  • Money-market derivatives – NGN101bn
  • Eurobonds – NGN33bn
  • Other bonds – NGN18bn.

The figures exclude primary-market auctions in T-Bills, Bonds and FX.

According to CEO Bola Onadele Koko, revenue in 2014 was NGN1.75bn, compared to NGN155.65m in 2013, based on transaction income only for one month, December 2013. The bourse aims “to be No. 1 in Africa in the fixed income and currency markets by 2019”.

The FMDQ concept was promoted by the Financial Markets Dealers Association (FMDA) in 2009 and sponsored in 2010 by the Bankers’ Committee, chaired by the CBN with the Nigeria Deposit Insurance Corporation (NDIC) and all the banks and discount houses operating in Nigeria as its members. The committee resolved to set up a self-regulated organization licensed by the Securities and Exchange Commission (SEC) to operate all the over-the-counter inter-bank market activities in fixed income and currencies.

FMDQ was incorporated on January 6, 2011 with a NGN100m contribution by the CBN and equal contribution of NGN15m by each of the 25 banks and 5 discount houses to the company’s initial capital. On 6 Nov 2012, SEC registered FMDQ as an OTC securities exchange and self-regulatory organisation. It started operations a year later, 7 November, 2013.

By 31 Dec 2014 there were 26 FMDQ-licensed dealing members made up of banks and discount houses licensed to make markets in debt securities, money-market instruments and currencies on FMDQ. It was due to add specialist dealing members to deal in treasury bills and FGN Bonds. There were 13 licensed associate members, including SEC-registered inter-dealer brokers and brokers, as well as clients including institutional investors/asset managers, pension fund administrators and corporate treasurers.

From 2014 annual report

From 2014 annual report


IMF cuts African growth forecast

Africa’s growth is slowing dramatically, says the International Monetary Fund, and it could get worse if the global economy does not grow. The IMF says economic growth for 2015 is likely to be 3.75% and 4.25% next year, the lowest level in 6 years and down from last year’s 5% average growth.

In its October 2015 report African Economic Outlook: Dealing with the Gathering Clouds, the IMF writes: “The strong growth momentum evident in the region in recent years has dissipated. With the possibility that the external environment might turn even less favourable, risks to this outlook remain on the downside.”

There are many that are flourishing, including Cote d’Ivoire, forecast to grow at 9% this year because of an investment boom that followed the end of a brief civil war in 2012. It just had a very peaceful election and President Alassane Ouattara, a former IMF official, is widely expected to win.

In real growth terms (page 81) Ethiopia is Africa’s fastest-growing economy this year with 8.7% growth, followed by Democratic Republic of Congo (8.4%) and Cote d’Ivoire (8.2%). Ethiopia is second fastest next year with 8.1% forecast, just after Mozambique (8.2%).

The fund blames a slump in commodity prices and cheap dollars returning to the US and out of African credit markets for the lower overall growth. Hardest hit are the 8 countries that export oil from sub-Saharan Africa, where the prices are far lower. Top producers Nigeria and Angola will see revenues falling fast, while . weak minerals prices, power shortages and difficult financing conditions are slowing growth in countries such as Ghana, Zambia and South Africa. It said commodities revenues are forecast to remain depressed for several years.

According to a report by Reuters, Antoinette Sayeh, head of the IMF’s Africa department, said governments should work quickly to diversify revenue sources by improving domestic tax collection: “Mobilizing more revenues is an urgent matter – as is being more exacting in choosing expenditure. It’s a difficult patch, but we definitely think that countries can move out of the very difficult terrain and grow more robustly.”

The fund urges governments to increase productivity: “To sustain rapid growth the region will need to diversify away from commodities, increase export sophistication, and integrate into global value chains.”

Low interest rates, especially by issuing Eurobonds on international fixed income markets since 2007, has meant African governments have borrowed and public debt levels have risen. Sayeh warned governments to be “very careful” in how they managed dollar financing to ensure it is invested wisely. Some governments, such as Ghana, have been accused of frittering away Eurobond revenues on state salaries. Sayeh said Accra was doing “reasonably well” in its efforts to curb public spending under a $918 million IMF programme agreed in April.

She says that Zambia has not yet asked IMF for financial help. It is also struggling with the rising cost of servicing USD debt after the value of its currency fell 50% this year.

The Fund also notes that Sub-Saharan Africa has among the highest levels of inequality—both income and gender—in the world, even after accounting for the lower levels of per capita income in the region. There is growing international evidence that such inequality can impede macroeconomic stability and growth

Highlights from the report
In most low-income countries, growth is holding up, as ongoing infrastructure investment efforts continue and private consumption remains strong. The likes of Côte d’Ivoire, the Democratic Republic of the Congo, Ethiopia, Mozambique, and Tanzania are projected to register growth of 7% or more this year and next. But even within this group, some countries are feeling the pinch from lower prices for their main export commodities, even as lower oil prices ease their energy import bill. On average, activity for this group is now projected to expand by 6% in 2015, some three-quarters of a percentage point lower than foreseen a year ago.

• The region’s 8 oil-exporting countries, conversely, are being hit hard by the continued weakness in oil prices. Falling export incomes and resulting sharp fiscal adjustments are taking their toll on activity, now expected to expand by 3½% this year, down from the 7% expected before oil prices started falling. Headwinds are particularly strong in Angola and Nigeria, but also among oil exporters in the Central African Economic and Monetary Community (CEMAC).

• Several middle-income countries are also facing unfavourable conditions. A combination of supply shocks (for example, curtailed electricity production in Ghana, South Africa, and Zambia), more difficult financing conditions in a context of large domestic imbalances (Ghana and Zambia), and weaker commodity prices (Botswana, South Africa, Zambia) are set to lower growth.

Moreover, there is a risk of still lower growth if the external environment continues to weaken. Existing vulnerabilities, especially on the fiscal front, could also come to a head if the external environment were to turn even less favorable, via further declines in commodity prices, stronger growth deceleration in China, or a disorderly global asset reallocation.

Debt crunch
With gross external financing needs in excess of 10% of GDP in many of the larger economies (Ethiopia, Ghana, Kenya, Senegal, South Africa, Tanzania), it might at best become increasingly difficult and expensive to cover these needs, and at worst, impossible to do so, forcing an abrupt adjustment.

Where fiscal deficits are particularly large and external costs have already risen substantially, recourse to domestic markets is also becoming increasingly difficult, as in Ghana and Zambia. This has pushed domestic borrowing costs up— crowding out the private sector in the process and restraining the emergence of new, more diverse, domestic sources of growth.

inflation is now inching up in some of the largest sub-Saharan African economies, in contrast with the trend of recent years. Average inflation in the region is expected to reach 7% this year and 7¼% next year. In some countries, specific factors such as electricity tariff hikes (South Africa), the elimination of fuel subsidies (Angola), and rising food prices (Ethiopia, Tanzania) have also pushed inflation up. However, inflation in most other countries remains contained, particularly in the CFA franc zones, where it ranges from 1 to 3%.
some central banks have intervened in the market to contain exchange rate volatility, and others, most notably oil exporters, have drawn on their external buffers to smooth the adjustment to lower commodity prices (Figure 1.12). Some countries, including Angola and Nigeria, have also introduced administrative measures to stem the demand for foreign currency, significantly hampering the conduct of private sector activities in the process.

Banks could well see a worsening of the quality of their assets. Recent analysis suggests that financial stability indicators in natural-resource-rich countries, such as bank profitability or nonperforming loans, tend to deteriorate and the probability of systemic banking crises tends to increase in the wake of negative commodity price shocks

Power block
Infrastructure bottlenecks have long been an impediment to attracting new activities and fostering trade integration.8 These bottlenecks have come to the forefront even more acutely recently for a wide range of countries. Load shedding and electricity shortages, triggered by delays in upgrading aging power plants and filling the power generation gaps, have become a regular occurrence in Ghana and South Africa, with particularly acute effects in the manufacturing sector. Worsening conditions in electricity supply have also been severely hampering activity in a few other countries (Comoros, Madagascar, Nigeria, and Zambia).

These difficulties are in stark contrast with encouraging progress made elsewhere in the region, as past investment is now bearing fruit. In Kenya, the doubling of geothermal generation capacity in the second half of 2014 led to a 20% increase in overall capacity and a 25% decline of electricity cost (IMF 2015b). The coming onstream of new hydropower plants in Ethiopia is contributing to a further increase in electricity availability for the entire east African region, and will do so even more in the next few years—supporting the emergence of new activities. In west Africa, a new dam put in service in Guinea in the summer of 2015 will also allow electricity exports to neighbouring countries.

Cross-exchange trading between Ghana and Nigeria stock exchanges

A trade in July was one of the first examples of cross-border trading, where a broker in Ghana was able to buy shares on the Nigerian Stock Exchange through links with a Nigerian broker. It points the way for closer capital market integration in West Africa, where economic links are already strong.

According to this story on Bloomberg, the trade was executed by Ghana’s CAL Brokers Ltd and Nigeria’s United Capital Securities Ltd. CAL Brokers bought 100 Dangote Cement and 6,000 Guaranty Trust Bank shares from United Capital Securities. It bought the shares for its own portfolio to sell later, paying commission and money transfer costs.

“Investors can now tap into bigger pool of funds,” Geoffrey Maison, a research analyst at CAL, told Bloomberg in an interview. “Investors from Ghana can look out for opportunities on the Nigerian Stock Exchange or BRVM if they can’t get stocks to buy here.”

Wole Shonibare, Deputy Group CEO/ Managing Director, Investment Banking at United Capital PLC wrote: With signed memoranda of understanding (MOU) (recognized by each regulator in the two jurisdictions) in place, Ghana and Nigerian dealing members (broker-dealers) were able to trade among themselves via Sponsored Access. The first trade which was completed on 15 July 2015 was facilitated by the Nigeria Stock Exchange (NSE), in conjunction with the Ghana Stock Exchange (GSE) with the actual trade conducted by United Capital Securities. This first trade has successfully developed the framework for subsequent trades in the market.

More than 180 securities are listed on the Nigerian bourse, while Ghana Stock Exchange has 35 equities and the Bourse Régionale des Valeurs Mobilières SA or BRVM, a regional stock exchange bringing together eight countries from a base in Abidjan, Cote d’Ivoire, has 39 deals. Ghana and BRVM have been seeing lower trading volumes.

Four West African exchanges including the Sierra Leone stock exchange are busy with a staged integration process under the West African Capital Markets Integration Council (WACMIC), set up in January 2013 to harmonize the regulatory environment for issuing and trading securities and to develop a common platform for cross-border listing and trading. WACMIC is made up of Chief Executives of the regulators (securities commissions) and of the securities exchanges. Adu Anane Antwi, director general of Ghana’s Securities and Exchange Commission told Bloomberg the council had been working on rules and technicalities of cross market trade since 2012.

The current phase is.known as “sponsored access”. Maison said broker can ask a dealer in another country to execute trades on its behalf, Maison said. Previously, an investor wanting to buy equities in another country would have to go through an audit before opening an account with a broker.

Antwi said: “Even at this first stage if you’re interested in a Nigerian stock you don’t have to go to Nigeria to find a broker,” Antwi said. “You can buy the stock by talking to a broker here.”

Next step will be “direct access”. Traders will be able to execute transactions in other markets. The final is a common board to display prices across the 4 markets. This is facilitated as the exchanges have automatic trading and allow direct market access (DMA)

According to United Capital’s Shonibare: This landmark transaction is important and beneficial to West Africa and the African financial markets in many ways. Liberalizing capital transactions across any region is the first step for integrated capital markets. Over the years, African financial markets have been left vulnerable to volatility resulting from massive portfolio inflows from countries that share little economic similarities with the region, causing a significant bout of macroeconomic instability in the domestic financial markets. The Ghana-Nigeria deal is expected to be a precursor to greater capital flows within a sub-region that already operates a liberalized trade environment.

In the near term, market operators intending to participate in this laudable initiative would need to scale up their IT support for trading securities as transactions can only be done electronically while orders would require an order management system that is synchronized with the local Stock Exchange. There is need to provide information about investment opportunities across markets within the region as this will help boost inter-market dealings by investors and assist market operators increase their revenues. Stronger Settlement system is also important. Additionally, there is need for a more robust banking system across markets such that investors can make payments in local currencies where orders are originated irrespective of the market they are trading into as this will help increase the volume/value of trades. Finally, there is urgent need to pass the enabling laws that would allow electronic trading and direct market access to take place in the various exchanges within the region.

Ethiopian Commodity Exchange gets online trading platform

ECX buyers and sellers make deals. (Photo credit - John Humphrey. From

ECX buyers and sellers make deals. (Photo credit – John Humphrey. From

The Ethiopian Commodity Exchange (ECX) has unveiled an online trading platform that has capacity for nearly 5,000 times more transactions than its current “open outcry”. Since the ECX was started in 2008 trading has been done on a trading floor in its Addis Ababa headquarters by dealers trading directly with each other, and about 200 transactions a day could be done.
Initially, dealers using the eTRADE Platform would be based at the ECX HQ’s trading centre. However, eventually market players will be able to trade electronically from anywhere. The platform will be gradually rolled out to newly built ECX trading centres in regional cities Hawassa, Humera, Nekemte and, in the near future, an additional 4 centres. The ECX has trained and certified more than 445 ECX trading members and representatives who are qualified to trade on the platform.
The trading platform has been under construction for the past 2 years and was developed in-house at the ECX. It was unveiled on 8 October and, on launch day, a record $400,000 of coffee was traded according to this news release.
A test run was done on 20 July with trading in local washed and unwashed byproduct coffee. ECX says 2,390 metric tonnes of farm produce has been traded on the platform so far with a trade value of ETB 120 million (about $5.7m).
ECX chief executive officer Ermias Eshetu said: “The inauguration of this eTRADE platform sets a new course for Ethiopia and brings with it unparalleled economic and social benefits. The platform inevitably breaks the physical and time barrier of the current open-outcry trading platform and provides the ECX with vital economies-of-scale to trade a number of additional new commodities.”

Transforming life for small farmers
The Investment Climate Facility for Africa (ICF) and other partners have been supporting the programme, according to this news release. William Asiko, CEO of ICF, said the platform would bring a revolution to Ethiopia’s agriculture sector: “The modernization of ECX will help to improve the business environment for stakeholders involved in the commodities sector and give Ethiopian agricultural products a competitive advantage.
“But for farmers, this modernization will be life-changing. It will enable farmers to get better pricing for their produce, thereby creating a more equitable distribution of wealth that has far-reaching social implications.”
The ECX was founded with the aim of improving agricultural marketing – a large part of its success is due to the large network of warehouses, quality controls and logistics up and down the country, and its main aim is to empower smallholder farmers, including through better information about prices. The current Government 5-year Growth and Transformation Plan II, launched from July 2015, sees state-run ECX serving 24 “agro-centres” with increased storage and warehousing facilities and better transport links.
Ermias, who became CEO in January after coming from Zemen Bank, said in April that the Government is establishing an enterprise to oversee the upgrading of warehousing, which will rely on a mixture of public and private capital. Donors including the World Bank and Bill & Melinda Gates Foundation are considering supporting what will require “huge investment,” he said.
One key tool for ECX has been its short message service (SMS) and interactive voice response (IVR) notifications of market data to farmers and others. This was introduced in 2011 in Amharic and English and gives real-time access to commodity prices. The SMS service processes 800,000 transactions a month and the IVR handles 1m calls a month, according to the news release. An upgrade was unveiled on 8 October which expands to Oromiffa and Tigrinya languages and introduces menu-based services (USSD) and new interfaces.

ECX mulls trading securities
Earlier this year it was also considering whether it could trade securities, including stocks and bonds, as part of its 5-year expansion plan. Ermias told Bloomberg in April: “We want to be a marketplace for any kind of stock, be it derivatives, agricultural commodities, financial instruments. That’s the ultimate vision.” He added that formal discussions have not yet begun on trading securities.
“With the two components, logistics and scalability, we will be able to introduce multiple commodities to the market,” he said. “ECX must offer the truly transparent marketplace for anything that’s going on in the Ethiopian economy.”
He said the market could move from coffee and sesame seeds, which account for more than 90% of volumes and are the two biggest generators of foreign exchange in Ethiopia, to sugar and grains such as corn and then add equities, government debt, power and metals.
Bloomberg cites Yohannes Assefa, the director of Stalwart Management Consultancy, a Dubai-based group working on Kenyan and Tanzanian exchanges, saying that ECX has capacity to expand beyond agricultural commodities within 12 months: “The existing platform is robust and the regulatory system is mature and well managed.”
The main problem would be changing government regulations, and Yohannes warned this “may require serious internal consultation before a change of policy.”

Exporters want futures
Bloomberg adds that coffee exporters such as Fekade Mamo, general manager of Addis Ababa-based Mochaland Import and Export, criticize the ECX for not allowing futures trading to hedge positions in a volatile global market. Ermias said it would take more than a year to build necessary steps for this, including insurance options for farmers in case they can’t deliver, better access to credit and the strengthening of the legal system.
Donors including USAID and the United Nations have supported the ECX when it was launched in order to boost efficiency of food markets in a nation where millions regularly went hungry. It had strong support from the Government, which decreed that exporters of coffee – Ethiopia is Africa’s biggest producer – must buy from traders on the bourse before they can export and within a year the ECX was the main route for coffee exports.
In 2014 it traded ETB 26.2 billion birr ($1.3bn) worth of goods.

ETB 1.6m for trading seat
In May the 17th trading seat was auctioned and won by an individual, Abayneh Zerfu, who bid ETB 1.6m ($76,000), according to this story in Addis Fortune newspaper, which said there were 4 bids. The ECX manages the bid if a member sells his or her seat and they are only allowed to do this after trading for 3 years and meeting requirements. Yohannes Hamereselassie, member development specialist at the ECX, said the original price for a seat was ETB301,000.

The new e-trade facility (credit ICF Africa)

The new e-TRADE facility (credit ICF Africa)

The ECX developers of the eTRADE platform (credit ICF Africa)

The ECX developers of the eTRADE platform (credit ICF Africa)

Namibia’s stockbrokers switch to IRESS to access NSX

All 4 Namibian stockbrokers have switched their front-end links into the local bourse trading system to the trading solutions supplied by IRESS. The company is a leading supplier of innovative technology for financial markets, wealth management and the mortgage industry in South Africa, Asia, United Kingdom, Canada, New Zealand and Australia.

IRESS says that the fully integrated solution incorporates order and execution management means that brokers no longer have to use multiple and legacy trading systems when managing orders on the local Namibian Stock Exchange (NSX) and their institutional order flow to South African brokers for execution on the Johannesburg Stock Exchange (JSE). Order routing is fully managed by IRESS and delivered within a unified multi-market order-management system. Brokers can leverage IRESS’ international trading connectivity and seamlessly access counterparties on the IRESS network, which includes many “buy-side” or institutional investors. Efficiency benefits include unified systems and no need to enter data twice or more, removing the potential for human data entry error.

Ridwaan Kharva, Head of Trading Solutions at IRESS, explains in a press release: “Having an integrated order-management system and execution platform creates a huge amount of efficiency in terms of both cost and workflow. We are delighted to include all Namibian brokers as IRESS exchange trading clients in addition to our presence in South Africa. IRESS has been connecting market participants for over 10 years and brokers in Namibia will now be able to benefit from enhanced trading capability, delivering improved speed and reliability with reduced cost.”

IRESS has also supplied the NSX with IRESS Professional Market Data, enabling comprehensive market monitoring and analysis.

The NSX made history in 1998 when it became the first African exchange to run its trading systems on the system offered by the JSE under an agreement to exchange technology, skills and . That has ensured, over the years, that it has remained with one of the world’s best and most up-to-date trading systems, currently running out of Johannesburg and previously run by the London Stock Exchange. The arrangement was renewed in 2014, and details of its benefits are given in this JSE press release.

The NSX has 34 listed companies and 4 listed exchange-traded funds (ETFs), 4 stockbroking members and 7 sponsoring brokers.

IRESS, headquartered in Australia, employs over 1,340 staff globally, with local knowledge and industry experience. All its product streams support a diverse range of roles and offer front, middle and back-office functionality for clients that range from financial service institutions through to independent operators

Kenya’s revolutionary mobile phone M-Akiba bond on 21 Oct

Nairobi centre (credit

Nairobi centre (credit

Kenya’s National Treasury will float a KES5 billion ($48.6 million) M-Akiba bond which will only be purchased through mobile-phone platforms. The minimum investment will be KES3,000 ($29.13) and the maximum KES140,000, which is the maximum allowed in a single mobile-money transaction (it can be increased by making more applications).
The 5-year infrastructure bond will float on 21 October. The National Treasury and Central Bank of Kenya will set the rate, which will be free of income tax. Finance Cabinet Secretary Henry Rotich said the rate will be higher than rates offered by commercial banks (currently 1.37% on cash in savings accounts) but did not give more details.
It is unlikely to be as high as the soaring rates in local money markets – a 91-day treasury bill was at 20.637% at the auction for value dated 5 Oct, up from 18.607% on 28 Sept according to the CBK and 182-day paper on 28 Sept was 14.5%. The Government’s 1-year KES30bn bond sold at a record rate of 19.062%, offering the biggest returns for investors in 3 years. Kenya’s inflation in Sept 2015 was 5.97%, up from 5.84% the previous month and above expectations, according to
The new bond will only be available to Kenyans, who currently make up 2% of investors into bonds listed on the Nairobi Securities Exchange (NSE).

Innovative mobile money tech
The innovative Treasury Mobile Direct (TMD) platform means individuals will buy the bonds instantly instead of the previous 2-day process. Potential customers will only need to have a mobile phone line and subscription to a mobile-money transfer service, which will enable telcos to open an electronic account with the CDSC on their behalf, as well as a valid ID. They will dial *889# and follow the prompts. Treasury will pay the coupons every six months through Safaricom mobile transfer service M-Pesa.
M-Akiba aims to help more people save and invest and make it easier for the Government to raise funds and diversifying their investor base. Stephen Chege, corporate affairs director of mobile phone company Safaricom, was quoted in this news story in Nation as saying it would help build a savings culture: “Currently, only 11% of Kenyans save on a regular basis as compared to 22% in Rwanda and Uganda, while in Qatar this figure stands at 60%.” Up to 23m Kenyans could participate. The National Bureau of Statistics says the rate of savings has stagnated and remains far below the medium-term targets.
The bond was launched on 28 September, and NSE chairman Eddy Njoroge said: “Our bond market is currently dominated by foreign and local institutional investors, M-Akiba is in line with NSE’s strategy of enhancing financial inclusion by driving retail investor participation.”
The prospectus will be released on or after 16 October.
Rose Mambo, CEO of the Central Depository Settlement Corporation (CDSC) was reported as saying: “This will be a vanilla bond attracting a fixed rate of interest and redeemable in full on maturity which will not be affected by changes in the market interest rates and the principal is secure.”
Previously the minimum investment possible in a Treasury bond was KES50,000.

Mobile money reach
Mobile money bond investments will be a technology revolution for world capital markets.
According to CNBC, mobile penetration across Kenya was last recorded at 83.9% for the period between April and June 2015, according to the Communications Authority of Kenya. The mobile money service M-Pesa has become a formidable competitor for local banks since it was launched by Safaricom in 2007 and last recorded a total of 23.3m customers, more than half of the country’s near 44m population. Statistics from digital finance researcher Financial Inclusion Insights show over 62% of Kenyans actively managed money on their mobile phones in 2013, compared to 21% who held bank accounts.

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.