February 5th, 2010 by Tom Minney
The closure today (5 February at 5pm local time) of the share offer of Uganda’s National Insurance Corporation Limited (www.nic.co.ug) is likely to result in a rush for shares. It is the first listing on the Uganda Securities Exchange (www.use.or.ug) since 2006 and the amount on offer is small, totalling 161,552,000 ordinary shares – 40% of the issued share capital – at a price of Uganda Shilling (UGX) 45 or 2 US cents per share.
The total amount is UGX7.3 billion (US$3.7 mln).
The sale of shares is by the Government of Uganda, which says the price is subsidized. Ugandans get priority and the minimum purchase is 2,000 shares.
According to the NIC website: “This IPO marks yet another milestone in the deliberate use of the divestiture process in Uganda as a core catalyst for the development of the capital markets in the country.
“The Government of Uganda has to-date privatized 6 of Uganda’s successful public companies by way of IPOs. The companies namely are; – Uganda Clays Limited (UCL), British American Tobacco Uganda Limited (BATU), Bank of Baroda (U) Limited (BOBU), DFCU Limited, New Vision Printing and Publishing Company Limited (NVL), and Stanbic Bank Uganda Limited (SBU).”
4% of the issued shares has been reserved for the permanent employees of NIC at the IPO price.
In June 2005 the Government had sold 60% of the shareholding in NIC to Industrial and General Insurance Company Limited (lGI) of Nigeria (www.iginigeria.com), a leading West African insurance company, after a bidding process. NIC was set up in 1964 by Act of Parliament.
According to a report in The East African, Joseph Kibuuka, a research and market development officer at Crested Stocks and Securities, says: “This IPO is not the most exciting we have had. But the market was hungry for something to reignite it and NIC has provided that.”
One question mark in investors’ minds had been outstanding debts of UGX17.7 billion accrued in handling Makerere University’s Deposit Administration Plan – a staff retirement scheme – between 1996 and 2005.
February 4th, 2010 by Tom Minney
A new CEO started work at the Dar es Salaam Stock Exchange (www.dse.co.tz) and share prices surged in the following days, although market participants denied any connection with the appointment.
The governing council of the DSE appointed 46-year-old Mr Gabriel Kitua, replacing Jonathan Njau, whose tenure has expired after serving 2 terms of 3 years each. Previously Mr Kitau was director of research, policy, planning and information technology for seven years at the Capital Markets and Securities Authority (www.cmsa-tz.org), which regulates the DSE. Peter Machunde, chair of the DSE governing council, was reported in local media as saying that the new CEO had the requisite skills and experience “to take the stockmarket forward in the next phase of its development.”
Share prices climbed in the following three days, but Orbit Security senior broker, Florian Kahabi was quoted in the press as saying: “There is no relation between the CEO’s appointment and trading at the market as it is driven by supply. January is back-to-school month and parents are disposing their shares to offset fees obligations.”
It is a paradox of that selling shares into illiquid markets that increased supply can lead to more trading and prop up prices.
February 2nd, 2010 by Tom Minney
The Commonwealth Business Council has a top lineup for its Africa Investment Forum, due to be held from 8-10 February in Accra, Ghana in conjunction with Ghana Investment Promotion Center (GIPC). Investors and government leaders from over 30 countries will profile investment opportunities in sectors including energy, agriculture infrastructure and manufacturing to an international audience of 500 businesspeople. It will be opened by President of Ghana, John Atta Mills, and the theme is “Accelerating Intra-African Trade and Investment”.
Many African investment promotion agencies from West, East, Central and Southern Africa, will showcase projects to international investment banks and financial institutions. Discussion themes include:
• Addressing the Infrastructure Gap
• Oil and Gas Development: Planning for an Effective Energy Mix • Telecoms and Services: New Business Opportunities/ BPO
• Investing in Agriculture and Improving Food Security
• Micro Finance and New Financial Instruments
• Enabling Growth: Improving the Investment Climate
• Promoting Trade: New Strategies for Africa
Speakers include two presidents (John Atta Mills, Ghana and Hifikepunye Pohamba of Namibia), Dr Ngozi Okonjo-Iweala (World Bank Managing Director), Cyril Ramaphosa (Shanduka Group) and Dr Ibrahim Assane Mayaki (CEO of the AU’s NEPAD Programme). For more information see the CBC website http://www.cbcglobal.org.
February 2nd, 2010 by Tom Minney
The Rwandan capital markets are set for growth in 2010, including plans for a first local initial public offer (IPO) and developing the Rwandan stock exchange. In an interview with East Africa Business Week (www.busiweek.com), the Executive Director of the Rwanda Capital Market Advisory Council (www.cmac.org.rw) Mr. Robert Mathu outlined what to expect.
The first public offering of shares could come “very soon”, he said: “We are working on BRALIRWA and it will come very soon because it is a big company and it will meet all requirements. However, with small companies, I am looking at two years.” Brasseries et Limonaderies du Rwanda (www.bralirwa.com) is the only brewer and estimated to have 95% market share, as well as the Coca Cola franchise. It is owned 70% by international Heineken Group and 30% by the Rwandan Government. According to previous reports, the Government wants to sell 25% to the public and 5% to Heineken, but was examining applications to be the transaction adviser and sponsoring broker.
Other future transactions could include Government selling shares in cellphone company MTN Rwanda (www.mtn.co.rw) and insurance company Sonarwa (www.sonarwa.co.rw), which is estimated by Government to have 75% of all insurance premiums.
The Rwandan Government has also said that it wants to sell off its shares in other profitable firms but Mr Mathu says these companies are not in a hurry to go public: “Many of them may not have all the requirements because they have not bothered. They have had no reason in the past to try to meet the requirements. For example, one of the basic requirements is that a company must provide audited financial statements. In Rwanda, companies used to prepare accounts only to convince the taxman that they are fine. However, this is not enough for us; we have to see what accounting system they are using, the quality of accountancy and their corporate social responsibility.
Rwanda is framing the capital market through 3 pieces of legislation: 1) The law establishing the future Capital Market Authority; 2) A law regulating capital markets; and 3) A law regulating the Collective Investment Schemes (CIS). The market is waiting for a law to split the Rwanda Stock Exchange from CMAC, which established the Rwandan Over-The-Counter market 2 years ago and will continue to be involved, but would also seek to recruit energetic people to develop and run the future RSE.
Mr Mathu says that collective investment schemes (normally pension funds, insurance funds and collective savings plans such as mutual funds and unit trusts) as critical to market development: “CIS contribute a very significant proportion in the development and deepening of the capital market because without a collective investment scheme every investor would invest directly in the market. We needed the law to make sure that investment managers handling the money has the right qualification and that they have to disclose their investment strategies and policies to the public.”
He adds that Rwanda has benefited from membership of the East Africa Securities Regulatory Association (EASRA) and East Africa Stock Exchanges Association (EASEA). It is part of plans to develop an integrated East African capital market and also part of an agreement with the International Finance Corporation to develop this. Mr Mathu said the dual listing of Kenya Commercial Bank shares is a learning opportunity: “KCB cross listing has helped us to assess our system in terms of being able to serve investors by accessing and buying shares. Therefore, it has given us a lesson, we are working on it, and very soon, you will see us conducting our equities business more effectively.” Eventually Rwanda will introduce electronic trading in securities, which is the route for integration with the regional securities market.
February 2nd, 2010 by Tom Minney
The World Bank (www.worldbank.org) continues to step up its investments into Africa, and in February expects first close on a $500 million sub-Saharan Africa, Latin America, and Caribbean private equity fund and a $200 million Africa Capitalization Fund to invest in banks that are key to stability in the banking system. This was part of the speech of World Bank Group President Robert B. Zoellick at the African Union Summit, Addis Ababa, Ethiopia on 31 January.
Zoellick said that the International Finance Corporation (www.ifc.org) is stepping up its equity investment capabilities: “We are also pioneering new ways to connect private investments to Africa. IFC recently created a new Asset Management Company (AMC) that will raise and manage private equity funds to co-invest with the IFC.”
He said the Bank was working with China to help create the infrastructure for manufacturing and other investments that will create jobs and products: “For example, Oriental China-Ethiopia Industrial Zone aims to promote the manufacturing and processing industry while functioning as a hub for trade, warehouse, and distribution. These partnerships could be a growing part of Africa’s future.
“We also are working to make Climate Investment Funds more attractive to Africa. As developed countries consider low carbon investments and funds to support adaptation, the World Bank needs to use its global reach and experience to connect Africa to these opportunities.
Other areas Zoellick emphasized were help to Africa to develop energy access and to develop IT. He told the summit gathering of Africa’s presidents and heads of state: “Sub-Saharan Africa uses only 8% of its hydro potential. And we need to connect new electricity supplies to transmission and distribution systems, preferably with regional integration, so every African has access to electricity.
“ICT is a key enabler of productivity and creator of jobs. It can help farmers, small businesses, and those excluded from traditional banking services. It can extend and speed up government services. In Ghana, the introduction of IT systems and Business Re-engineering resulted in a drop in average customs clearance time from 2-3 weeks to 1-2 days and a 50% increase in revenue. In Kenya, ICT slashed the number of days it took to register a vehicle from 30 to 1, as well as cutting off avenues for greedy hands.
He followed earlier thought leaders in the last year, also covered on this blog, in pointing to the transformations of the African economy. “With supportive government policies encouraged by World Bank knowledge service, African entrepreneurs changed facts on the ground”.
January 29th, 2010 by Tom Minney
International stockbroker Exotix (www.exotix.co.uk) is bullish on African equities and on growth prospects. According to the latest report “Top 30 Companies: sub-Saharan Africa excluding South Africa”, many share prices still have to catch up with the improved fundamentals and Africa has lagged the recovery in the stock markets of Brazil, Russia, India and China.
Analyst Christopher Hartland-Peel writes: “We expect 2010 to be a strong year for sub-Saharan African markets and we think the improving fundamentals that we have seen in the region were not reflected in stock prices during 2009. Many investors believe that BRIC markets have outperformed the improving fundamentals; Sub-Saharan Africa has been the reverse and has underperformed the improving fundamentals. Now, we see a significant valuation gap between the BRIC’s, other emerging markets and frontier markets.
He adds: “Emerging markets continue to lead global growth and commodity prices will likely stay around current levels. This backdrop should be the equity sweet spot for frontier markets, especially since the 2009 global rally barely touched frontier markets.”
The research team, which also includes David Aserkoff and Stuart Culverhouse, highlights Nigerian banks which will be “interesting”. Regulators have spent considerable time and funds clearing up some banks last year, and share prices plunged. The report says: “The Nigerian banks clearly have value. The big four Nigerian banks – First Bank Nigeria, Guaranty Trust Bank, UBA and Zenith Bank are trading only marginally above book value at 1.4 times… The average big BRIC bank is trading at twice the book value of the average big four Nigerian banks.”
He also backs Nigerian non-financials, citing strong GDP growth including 8% for the non-oil sectors, and higher oil prices in the $70-$80 range.”Food companies and cement would be our favourites. The breweries are hurting from rising competition”.
He also highlights low-capital and early-stage resources and mining – “High commodity prices are back” – picking out stocks such as Mwana Africa and Bowleven. He adds that African assets listed in UK can give investors better liquidity and balance the portfolio.
Other highlighted economies are Kenya (4.0% growth forecast), Mauritius (2.0% growth forecast) and Botswana (4.1%). “We look closely at consumer stocks in Kenya such as East African Breweries, Safaricom and the banking sector…. Better harvests in Kenya would drive the agricultural sector, which still accounts for 22% of GDP.”
Investors who would like a copy should apply through the website.
January 28th, 2010 by Tom Minney
There is more trading on the Zimbabwe Stock Exchange after transaction costs were reduced, effective 10 January. Leading stockbroker Securities Africa (www.securitiesafrica.com) quotes Kingdom Financial Holdings (the website is given as www.kingdom.co.zw but wasn’t working when I tried) as saying: “Reflecting the reduction is transaction costs, daily trades shot up to USD 2.8m on 11 January 2010 and USD 2.4m on 12 January 2010 compared to only USD 338,000 recorded on the first trading of 2010 on 4 January 2010 and an average of USD 900,000 during the week ended 10 January 2010.
“The bullish sentiment on the ZSE saw share prices responding positively and this coupled with the increase in turnover explains the rise in the Industrial Index by 4.57% on 12 January 2010 followed by a 4.74% rise on 13 January 2010.”
Trading last week (to 22 January) was more than 435 million shares worth US$6.2 million, according to the Herald newspaper (www.herald.co.zw). The market ended marginally lower with the industrial index down 5% and the mining index 1%. The paper quoted one unnamed stockbroker as saying many investors may start to move into money markets as more stable, and this could see portfolio restructing and lower prices, as well as some potential equity bargains.
January 28th, 2010 by Tom Minney
The International Monetary Fund (www.imf.org) is upgrading its African growth prospects for this year, compared to forecasts made in its October 2009 World Economic Outlook. It foresees 4.3% growth for 2010, and 5.3% for 2011 in Africa and adds that the world will bounce back from negative growth in 2009 to 3.9% growth in 2010. The African growth is 0.3% (2010) and 0.1% (2011) better than previously forecast and the world economy is also growing faster than previously forecast, still driven by policy measures.
According to an update to its World Economic Outlook, released on 26 January: “The recovery is proceeding at different speeds around the world, with emerging markets, led by Asia relatively vigorous, but advanced economies remaining sluggish and still dependent on government stimulus measures.”
Economies could even head back into recession, if anti-crisis measures are withdrawn too soon, says IMF Managing Director Dominique Strauss-Kahn. IMF Chief Economist Olivier Blanchard says: “For the moment, the recovery is very much based on policy decisions and policy actions. The question is when does private demand come and take over. Right now it’s ok, but a year down the line, it will be a big question.”
The Fund called for a careful unwinding of positions, differentiated for different economies: “There remains a pressing need to continue repairing the financial sector in advanced and hardest-hit emerging economies. In these cases, policies are still needed to tackle banks’ impaired assets and restructuring.” Unwinding the financial sector support gradually can be facilitated by incentives that make measures less attractive as conditions improve.
“Policymakers will also need to move boldly to reform the financial sector with the objectives of reducing the risks of future instability… At the same time, some emerging market countries will have to design policies to manage a surge of capital inflows.”.
The growth and forecast growth for Africa is far behind that for China (8.7% in 2009, 10.0% in 2010 and 9.7% in 2011) and India (5.6%, 7.7% and 7.8%).
“Stronger economic frameworks and swift policy responses have helped many emerging economies to cushion the impact of the unprecedented external shock and quickly re-attract capital flows. The rebound of commodity prices is helping support growth in commodity producers in all regions. The IMF’s baseline petroleum price projection is unchanged for 2010 and revised up by a small amount in 2011 (to $82 a barrel, from $79 a barrel in the October 2009 WEO). Other non-fuel commodity prices have also been marked up modestly.
Significant risks remain if policymakers get it wrong.
Forecast
2008 2009 2010 2011
World 3.0 -0.8 3.9 4.3
Africa 5.2 1.9 4.3 5.3
sub-Saharan Africa 5.6 1.6 4.3 5.5
January 25th, 2010 by Tom Minney
A new fund is making good progress in raising up to US$55 million to be invested in business start-ups and small and medium enterprises in Kenya, Rwanda, Uganda, and Tanzania. The Fanisi Venture Capital Fund was set up with help from Norwegian Investment Fund for Developing Countries (Norfund) and incorporated in Luxembourg. Norfund is also an investor and a shareholder in the management company, Fanisi Capital Ltd.,,which is majority owned by Nairobi-based Amani Capital Ltd.
Fanisi has raised $40 mln in commitments and expects to reach its goal in the next 12 months. On 22 January, the Internatonal Finance Corporation (www.ifc.org), part of the World Bank group, announced it will invest $7.5 mln.
According to an IFC press release: “The fund plans to make investments between $500,000 and $3 million in a variety of sectors, ranging from manufacturing to technology, helping smaller enterprises and start-ups get the capital they need to create and expand businesses. It also will set up a business services support facility to help pipeline companies overcome technical and governance limitations, pre- and post-investment.”
It quotes Ayisi Makatiani, head of the fund’s investment team and CEO of the fund nabager: “IFC’s early and continued support to the Fanisi team has been extremely helpful, especially for a local and first-time fund management platform.”
IFC’s Gender Programme has agreed to support the business services facility, and IFC’s Rwanda Enterprise Development Programme will provide training support to the fund’s portfolio companies.
Haydee Celaya, IFC Director for Private Equity and Investment Funds, said, “IFC is investing in this local private equity fund that focuses in growing SMEs and startups at a critical time, when the region needs long-term financial and advisory support. The investment also will help build local fund management capacity.”
IFC is currently seeking a capital increase to strengthen its ability to create opportunity for the poor in developing countries—including by investing in private equity funds that target small enterprises in developing markets. Smaller enterprises are responsible for much of the job creation in the East African region.
January 23rd, 2010 by Tom Minney
The Zimbabwe Stock Exchange is seeking to reinforce International Financial Reporting Standards again on its listed companies. Many had stopped using the standards in runaway inflation (which reportedly peaked at over 231 million percent), but the introduction of US dollar-based figures and transactions allows them to reintroduce it.
South Africa’s W. Consulting (www.wconsulting.co.za), in partnership with the Institute of Chartered Accountants of Zimbabwe (www.icaz.org.zw) recently held a workshop with local firms on IFRS. W. Consulting is an independent technical accounting & professional skills training and advisory business based in South Africa, advising many SA listed companies and reportedly accredited to the JSE Ltd.
Currently, a ZSE panel of experts is responsible for checking IFRS compliance. It encourages accurate and correct presentation of companies’ financial accounts including historical data and internationally comparable balance sheets and disclosure. This makes it easier for investors, including external investors.
According to a report in the Herald newspaper, ZSE chief executive Emmanuel Munyukwi said that IFRS compliance is compulsory for all listed companies, but that some did not comply for the last financial period.
According to the newspaper, head of W. Consulting South African operations Tapiwa Njikizana said IFRS compliance was critical for JSE-listed firms to attract and retain foreign investors’ participation: “An investor sitting in China, Japan or somewhere else in Asia requires historical data about a company in order to make decisions. Without adherence to IFRS, he needs a lot of time to understand how and why certain things are done in Zimbabwe, but with IFRS he knows standards are uniform across the globe,” he said.
The Institute of Chartered Accountants of Zimbabwe has fought hard to ensure that the country’s accounting profession remains accredited or recognised by the International Accounting Standards Board.
