Ethiopia’s draft capital markets bill

One of Africa’s biggest economies is taking a step closer to establishing a capital market to allocate capital more efficiently. The National Bank of Ethiopia (NBE), the central bank, has published a draft Capital Markets Establishment Proclamation for consultation.

According to a news report in Fortune newspaper, a technical committee consisting of people from the central bank, the Ministry of Finance, the Office of the Attorney General and external advisors, has been working on the for the past year. The bill is expected to be turned into law before the end of 2020.

Setting up a Capital Market Authority regulator is a key part of the draft bill. The proposed CMA will have a wide mandate, including promoting the development of capital markets by removing impediments and creating incentives.

It will also have the usual regulatory functions of ensuring a system for orderly, fair, efficient and transparent issuance and trading in securities, protecting investors and reducing systemic risk. The market will feature equities, bonds and financial derivatives.

Ethiopian Securities Exchange

The Authority will decide when to give a licence for establishing an Ethiopian Securities Exchange to provide the trading platform. It may even allow more than one exchange in future. The Exchange will provide a trading platform for equities, debt securities, derivative instruments, units in a collective investment scheme, real estate investment trusts (REITs), currency exchange contracts and other products to be declared by the Authority’s directive.

Government will be a minority shareholder in the Ethiopian Securities Exchange with a target of 5%-25% of the shareholding. Corporations, capital market intermediaries and international securities exchange operators are expected to hold 25%-55% and individuals 20%-40% of the shares. The aim is that foreign investors should not own over 25% of the shares. However, if no-one wants to invest in owning a stock exchange, then Government could own 100%.

Other work for the CMA includes creating regulations to govern the listing and delisting of financial products. It will grant licences to securities brokers, securities dealers, investment advisers, fund managers, investment banks and collective investment schemes.

One news report quoted a source: “The idea is to make the market predominantly owned by the private sector and the Government to be a strategic partner and market maker in the process. It’s likely that the market will kick off with stocks and bonds. The other financial market products are listed in order to give breathing space for a legal framework to be in place to be used at a later time.”

Information about the planning and timetabling has been scarce. We have previously reported the excitement at a finance summit in December 2018 when Zemedeneh Negatu, Global Chairman of Fairfax Africa Fund, said as many as 50 to 70 companies were ready for listing. Ethiopian banks and insurance companies are already well regulated with high standards of disclosure and many have large numbers of shareholders.

History of stock exchange in Ethiopia

Ethiopia saw its first initial public offering (IPO) of shares in 1959. To get the market more organized and efficient, the Share Exchange Department at the former State Bank of Ethiopia ran a successful stock market from 1960. This included capital raising through issuing shares and secondary trading in shares. However, the exchange was closed after the military overthrew the Government in 1974.

Democracy was restored after 1991 and a group of private-sector leaders worked together on preparations. By 2000 they were ready to launch the Addis Ababa Securities Exchange, but Government said other priorities needed to be tackled first.

Prime Minister Abiy Ahmed took office in 2018 and announced plans for economic reforms including a regulated capital market and stock exchange to support capital raising, growth and jobs.

Who will the new regulator be accountable to?

According to the draft law, the new regulator will be accountable to Parliament and the seven-strong Board will include the Minister of Finance, the Governor of the Central Bank and the Attorney General, or their representatives, and three other stakeholders appointed by Parliament on recommendation from the Prime Minister, with the Prime Minister appointing the Chairman from among members. Parliament will also appoint the CEO and deputy CEO on recommendation from the Prime Minister.

According to news agency Bloomberg: “Ethiopia is among the biggest 5economies in sub-Saharan Africa and the second-largest by population, but doesn’t have a stock market. Since Prime Minister Abiy Ahmed came to power in 2018, the country has pursued economic reforms, including opening up formerly closed-off sectors such as telecommunications.”

3 East African exchanges to link before year-end 2020

Market integration across 3 East African securities exchanges is moving fast with a target of being live and online by 31 December 2020. According to a news report, Uganda Securities Exchange, Dar es Salaam Stock Exchange and Rwanda Stock Exchange are set to start trading as a single market after connecting their trading systems to each other and hooking to the EAC Capital Markets Infrastructure (CMI) Information Technology platform.

The Pakistan-based InfoTech Group is been contracted to provide the software connecting the trading platforms of the U to enable them to run as a single market in real time. A news release from 2018 says ” InfoTech was selected to deploy its Capital Market suite, Capizar ATS, along with a Smart Order Routing system. This would achieve a single market for both central banks and capital markets and will stimulate intra-regional securities trade and investment.”

According to the report in East African “They can operate as a single market with a view of reducing the cost and time of trading in shares of companies listed on markets across the borders. Investors in the 3 countries will buy and sell shares of companies listed in any of the countries without going through different stockbrokers.”

 

World Bank project

The World Bank has committed $26.18 million for a 9-year Financial Sector Development and Regionalisation Project (EAC-FSRDP) 1. It supports financial sector integration among the East African Community (EAC) member States and was planned to as part of preparations for bringing in a single currency across the EAC, although the 2024 deadline for this is now being reviewed.

The World Bank project finishes on 31 December after the EAC Secretariat requested a 6-month extension for activities whose implementation was disrupted by Covid-19 pandemic. According to the World Bank website, $16m was the initial commitment, topped up with $10.5m in September 2016, and $24.7m has been disbursed as of September 2020.

The World Bank project has 6 components:

  1. Financial inclusion and strengthening of market participants ($4.3m)
  2. Harmonization of financial laws and regulations ($4.23m)
  3. Mutual recognition of supervisory agencies ($0.7m)
  4. Integration of market infrastructure ($3.75m)
  5. Development of regional bond market institution building ($12.1m)
  6. Project Management ($1.1m).

Missing Nairobi Securities Exchange

According to the report, the region’s biggest exchange, the Nairobi Securities Exchange, pulled out of the project in 2015 after expressing dissatisfaction on how the Pakistan firm was awarded the contracting citing procurement irregularities.

Geoffrey Odundo, chief executive of the NSE, was quoted: “We have not yet reconsidered our position in terms of our participation in this project but we have had a discussion with EASEA in terms of the progress of the project and how far they are. They mentioned to us that they have set the infrastructure and they are ready to go.

“They are supposed to share with us some information including the efficiency and the expected outcomes of the project for us to be able to make a proper assessment of the current status of the project before we can make any further decisions. But right now we have not made any decision to go back to the project.

According to the news report, the market capitalization of the NSE was $22.1 billion in June compared with $6.5bn on DSE, $5.1bn on USE and $3.5bn for RSE.

Ready in September

Celestin Rwabukumba, the chairman of The East Africa Securities Exchange Association (EASEA) and CEO of Rwanda Stock Exchange CEO is quoted by The EastAfrican reporter James Anyanzwa: “We are doing the final testing on our system for the CMI project. We are ready psychologically and technically we are working on those technicalities that are remaining. On the other hand Tanzania and Uganda are technically ready,”

“Everything should be ready by the end of this month and then we agree on the time of the launch because 95% of the work has been done. The launch cannot go beyond December because we cannot afford to go beyond that time.”

The report said the project has taken more than 5 years due to a payment dispute with the software provider and lack of integration between CMI software and the trading systems of the participating Uganda Securities Exchange, Dar Es Salaam Stock Exchange and Rwanda Stock Exchange.

AELP is different

The EAC market integration is separate from the African Exchanges Linkage Project, a joint initiative of the African Securities Exchanges Association (ASEA) and the African Development Bank (AfDB). The initial phase is promoting cross-border trading and liquidity in 7 stock markets with a combined market capitalisation of $1.0 trillion.

These exchanges are: Bourse Régionale des Valeurs Mobilières (BRVM – Benin, Burkina Faso, Côte d’Ivoire, Guinea Bissau, Mali, Niger, Senegal and Togo), Casablanca Stock Exchange (Morocco), The Egyptian Exchange (Egypt), Johannesburg Stock Exchange (South Africa), Nairobi Securities Exchange (Kenya), the Nigerian Stock Exchange (Nigeria) and Stock Exchange of Mauritius (Mauritius).

In March 2019, ASEA received a grant of $980,000 from the Korea-Africa Economic Cooperation (KOAFEC) trust fund via AfDB to facilitate implementation of the project.

CIMERWA cement is Rwanda’s 10th listing

CIMERWA, the only integrated cement producer in Rwanda, is also helping build the capital market by providing the tenth listing on the Rwanda Stock Exchange. It listed by introduction on 3 August, without a public share offer, however, the shareholders of 49% of its 703.2m shares will make them available for buying by the public to form a “free float”.

The shares are offered at RWF120 (12.67 US cents) each, according to an article on Rwanda’s KT Press website, giving a total value (market capitalization) of RWF84.4bn ($87.3m). The shares offered for buyers and traders are owned by:

  • AGDF Corporate Trust on behalf of the Government of Rwanda (16% of the total)
  • Rwanda Social Security Board (RSSB – 20%)
  • Rwanda Investment Group (RIG – 11%)
  • Sonarwa Holdings Ltd.

CIMERWA is also creating an employee stock ownership plan (ESOP).

CIMERWA is 51% owned by South Africa’s Pretoria Portland Cement. It has a production plant in Bugarama, in south-western Rwanda, with capacity to produce 600,000 tonnes per year but currently producing at up to 80% of capacity (480,000 tonnes). Prospects are good as Government of Rwanda steps up construction, including plans by the Ministry of Education to build 22,500 school classrooms by September, in a programme partly financed by the World Bank.

in the year to September 2019 it had revenues of $64.4m and net income of $3.5m, according to the prospectus. It has enjoyed revenue growth of 40% a year and has been profitable since 2016 with 31% EBITDA margin (a measure of cash generated by operations compared to turnover) and 64% gross profit growth.

Albert Sigei, CIMERWA CEO  since May, said: “We have been part and parcel of Rwanda’s growth story with contribution to the society on many fronts. This will be an opportunity for investors to gain exposure into the attractive cement industry with solid growth potential.”

CIMERWA was established in 1984 as Ciments dur Rwanda as a government parastatal in a cooperation project with China. It was privatized in 2007 with RSSB taking 37%, Government 30% and RIG 21% and other investors the rest. In April 2020 it became a private company and PPC International Holdings had 51%.

CIMERWA chairman Regis Rugemanshuro added: “This transaction will create opportunities for the private investors, and the government will become a neutral player in a sector whose potential is yet to be fully exploited. There could not be a better avenue of achieving this objective than listing at the RSE. With Rwanda having about 57kg per capita cement consumption annually, we have just but only scratched the surface on the huge long-term potential in the cement industry.”

Clare Akamanzi, chief executive of Rwanda Development Board, said: “If you look at Rwanda’s economic recovery plan, we expect CIMERWA to play a big role both in terms of building the economy through the indirect contribution but also directly contributing to the rebuilding and reconstruction of our economy post Covid-19.”

Demand for cement is estimated at 700,000 tonnes a year and there is considerable urbanisation as well as other big government projects such as Bugesera International Airport, model villages and transport projects. Although Rwanda’s economy is only expected to grow by 2% in 2020, due to the health pandemic, stronger growth of 6.3% is forecast for 2021 and 8% for 2022.

It is the fifth local company on the Rwanda bourse. South African health investor RH Bophelo was the ninth listing on 1 June.

However, trading in shares on the exchange for the first six months of 2020 was just under $400,000, down 85% compared to $2.6m in the six months to June 2019, according to an article in Rwanda’s New Times, particularly as trading slowed dramatically once the health crisis hit in March. Trading in bonds more than doubled, from $6.2m to $12.7m.

Top banks and bankers – African Banker Awards winners 2020

It is an honour to be a judge for this competition and tough to choose among so many excellent entries!

London, 26th August 2020: Winners of the 2020 edition of the African Banker Awards were announced today at a virtual Awards ceremony. The awards were pushed back to August to coincide with the African Development Annual Meetings which are taking place this week, with the election of the new President of the bank expected tomorrow 27 August.

The Awards are considered the Oscars of the African banking community and given the impartial selection and judging process are the most respected in the field.

The big winners this year were Nigerian-based group Access Bank and also women in the banking and finance sector. Following on from what was seen as a lack of inclusion last year, the organisers put an emphasis to reward institutions that ensured that women and financial inclusion at the forefront of their agenda.

Access Bank’s Group CEO, Herbert Wigwe, won this year’s African Banker of the Year. Access ranks as one of Africa’s top-tier banks and Wigwe has been at the helm of the bank’s growth and expansion, including the oversight of the takeover of Diamond Bank, a bank that was much bigger than Access Bank less than 15 years ago. Access Bank also won Agriculture deal of the year, in their role to help Olam develop their rice operations in Nigeria.

Women were also the big winners at this year’s awards. The Central Bank Governor of the Year went to Caroline Abel, from the Seychelles and the Finance Minister of the Year went to Nigeria’s Zainab Ahmed. The organisers had noted that despite difficult circumstances Ms Ahmed had managed to push through a set of difficult reforms as well as successfully engaging international partners to help the country navigate an extremely challenging economic environment.

African Banker Icon was given to Vivien Shobo, who was the CEO of ratings and advisory firm, Agusto & Co up until last December. She was recognised for playing an instrumental role in developing Nigeria’s credit markets and also for helping grow a truly world class organisation that is competing against much better resourced international players.

Tunisian pioneer Ahmed Abdelkefi won the Lifetime Achievement Award. This businessman and financier was the founder of numerous businesses operating in leasing, brokerage and investment banking. He also founded private equity group Tuninvest, and then launching Africinvest, without doubt one of Africa’s most successful Africa-owned PE firms.

The split of the other winners was quite even. TDB won Bank of the Year. Incidentally, its CEO, Admassu Tadesse, won Banker of the Year at last year’s ceremony. The organisers added a number of awards this year to reflect the AfDB’s High Fives Agenda. The energy deal of the year went to a renewable energy bond structured by Nedbank, and infrastructure deal of the year went to the Port of Maputo in a transaction led by Standard Bank. The SME bank of the year went to Nigeria’s Bank of Industry.

Commenting on this year’s awards, Omar Ben Yedder, Publisher of African Banker said: “It’s been a momentous year in every sense. Banks will have to play a lead role in kick-starting post-Covid growth and sustaining the real economy. Governments and regulators have done an excellent job with limited means and both our winners Caroline Abel and Zainab Ahmed have demonstrated strong leadership there. Banks will need to work with institutions and partners to ensure liquidity doesn’t dry up. To quote our Lifetime Achievement Winner: Keep moving forward: adapt, innovate, take risks. That’s your job. Today’s crisis is neither the first and it will not be the last.”

The Awards took virtually on the sidelines of the African Development Bank Annual Meetings which are now officially open.

The awards, which are held under the high patronage of the African Development Bank, are sponsored by the African Guarantee Fund as Platinum Sponsor, the Bank of Industry as Gold Sponsor and Moza Banco as Associate Sponsor.

THE 2020 AFRICAN BANKER AWARD WINNERS

African Banker of the Year
Herbert Wigwe, Access Bank

Lifetime Achievement Award
Ahmed Abdelkefi, Founder Tunisie Leasing; Tuninvest; Tunisie Valeurs

African Banker Icon
Vivien Shobo, Former CEO Agusto & Co.

African Bank of the Year
Trade and Development Bank (TDB)

Minister of Finance of the Year 
Ms Zainab Ahmed, Minister of Finance of Nigeria

Central Bank Governor of the Year 
Caroline Abel, Central Bank Governor of Seychelles 

Investment Bank of the Year
Citi

Award for Financial Inclusion 
Kenya Women Microfinance

SME Bank of the Year
Bank of Industry, Nigeria

Socially Responsible Bank of the Year
Equity Bank, Kenya

Innovation in Banking
Ecobank

Deal of the Year – Equity
MTN Nigeria IPO – Chapel Hill Denham

Deal of the Year – Debt
Bank of Industry €1bn syndicated senior loan facility – Bank of Industry / Afreximbank / Credit Suisse

Infrastructure Deal of the Year 
Port of Maputo – Standard Bank

Energy Project of the Year
Renewable Energy Bond – Nedbank

Agri Deal of the Year
Olam Rice Farm – Access Bank

Regional Bank of the Year
East Africa – Equity Bank
West Africa – Coris
North Africa – CIB, Egypt
Southern Africa – Moza Banco
Central Africa – BGFI, Gabon

For more on the African Banker Awards, please visit: www.africanbankerawards.com .

Africa’s top telco towers firm seeks $7bn US listing

A telecoms firm launched in Lagos is set to be Africa’s biggest listing in the United States with a suggested $7bn valuation. IHS Holding Ltd, which operates up to 28,000 wireless telcoms towers across nine countries, announced plans to go ahead with a potential initial public offering (IPO) of shares to investors in a press release on 14 August. It said the listing would start after a review by the US Securities and Exchange Commission (SEC), but gave no more details.

It is Africa’s largest mobile infrastructure provider and third largest independent multinational tower company in the world. It could be seeking to raise up to $1bn in New York.

In February, before the COVID-19 crisis hit markets, news agency Bloomberg gave the estimated valuation for IHS, which is based in Mauritius, and reported it had hired Citigroup Inc and JP Morgan Chase & Co as global coordinators for a listing. The preference was for New York as other world-leading telco tower firms are also listed in the US and have higher valuations compared to those in London. In 2018 the firm had delayed plans for a listing until after Nigeria’s Presidential election as Nigeria is still its main market.

Group CEO is US entrepreneur Sam Darwish, originally from Lebanon, was working in Nigeria with the first mobile (GSM) operator there. He founded IHS in 2001, with IHS Chief Operating Officer William Saad when the Government announced plans to privatize telecoms. The group builds or buys towers and leases space to mobile network operators (MNOs) who in turn provide wireless voice or data to customers, and it manages sites for MNOs. It is active in Nigeria, Cameroon, Côte d’Ivoire, Zambia and Rwanda with some 24,000 towers.

Earlier in 2020, IHS finalized the acquisition of some 1,600 telecom towers in Kuwait from Zain and of Brazil’s Cell Site Solutions (Cessão De Infraestruturas S.A., CSS) which has some 2,300 towers and telecom infrastructure sites in Brazil, Peru and Colombia.

Shareholders include the French private equity investor Wendel Group, which has a 21.3% stake, Goldman Sachs, MTN Group Ltd, previously reported with a 29% stake, and many other leading investors including International Finance Corporation and Emerging Capital Partners. Wendel is a listed long-term capital investor in a group launched by Jean-Martin de Wendel in 1704.

As it expanded, IHS has raised $5.5bn in equity from its shareholders and debt over the years, including $1.3bn in debt in 2019.

Fund managers seek good governance

Governance, good regulation and availability of market data and prices help African fund managers decide on investing into other African markets, according to a survey of 50 African asset-managers for the African Exchanges Linkage Project (AELP) project. Key factors when they choose new markets are: market regulation (91% of replies), followed by investor regulation and availability of market data and prices (90% each).

Other top criteria that help fund managers choose where to invest are: levels of dealing price, efficiency of execution and commission (86%), the quality of companies and investment opportunities (also 86%), corporate, social and governance criteria (84%) and availability of research (80%). Three quarters of investors said they were reluctant to invest in small and illiquid markets or where valuations are excessive. Only half decide to invest in a company based on its dividend policy, while valuation and governance are the top factors.

Comments from asset managers interviewed for AELP Buy-Side survey

Asset managers in Nigeria and the francophone West African countries are the most optimistic about prospects for Africa’s economies. In the AELP poll, some 97% of the surveyed Nigerian asset managers are optimistic about the continent, with average assets of $364 million under management, followed by 85% of surveyed francophone asset managers, who averaged $416 million of assets managed. Average across all the survey respondents, including a couple of South African managers, was $4.1 billion in assets under management.

Optimism is also strong among asset managers surveyed in Mauritius (80% optimistic), Morocco (73%), Nairobi and Egypt (each with 65% of responses optimistic). Nearly half (46%) of respondents manage assets with investment horizons over five years, another 23% for three to five years.

“The results of this survey confirm the high level of professionalism of African fund managers using world-class standards and criteria in their decision-making. This is really reassuring for the success of the AELP initiative,” says Dr. Edoh Kossi Amenounvé, President of ASEA.

The poll evaluates the appeal of different investment markets in the AELP, which brings together seven leading African securities exchanges to boost trading, investment and information links. AELP is procuring a technology platform to link stockbrokers, so that a broker on one exchange can send investors’ orders to an executing  broker on another exchange for execution.

The AELP is a joint initiative by the African Securities Exchanges Association (ASEA) and the African Development Bank to unlock pan-African investment flows, promote innovations that support diversification for investors, and address depth and liquidity in the markets. It is funded by the Korea-Africa Economic Cooperation (KOAFEC) Trust Fund through the African Development Bank.

The AELP exchanges are: Bourse Régionale des Valeurs Mobilières (BRVM, integrating eight West African countries), Casablanca Stock Exchange, The Egyptian Exchange, Johannesburg Stock Exchange, Nairobi Securities Exchange, The Nigerian Stock Exchange and Stock Exchange of Mauritius.

Cross-border trading between the seven markets totalled $1.1 billion in 2019, and was at over $500 million in the first quarter of 2020, according to the participating markets. The “African Listed Securities” assets across these exchanges offers equities investments in more than 1,050 companies, including Africa’s most promising, profitable companies and global leaders. Investors will also buy or sell bonds, exchange-traded funds (ETFs) and derivatives if they are listed on the participating Exchanges.

ASEA supports African economic integration and the African Continental Free Trade Area. The AELP will promote free movement of capital and investment.

About ASEA

The African Securities Exchanges Association is the premier association of the 25 securities exchanges in Africa who have come together with the aim of developing Member Exchanges and providing a platform for networking. ASEA was established in 1993 and works closely with its members to unlock the potential of the African capital markets.

Vision

To enable African Securities Exchanges to be key significant drivers of the economic and societal transformation of the year 2025.

Mission

To provide a forum for mutual communication, exchange of information, co-operation and technical assistance among its members, to facilitate the process of financial integration within the region for the effective mobilization of capital to accelerate economic development of Africa.

Zambia Forest lists on Lusaka Securities Exchange

Zambia Forestry and Forest Industries Corporation PLC today (12 February) brought welcome relief to the Lusaka Securities Exchange when it broke a 6-year listing drought. The listing was for the full 400 million shares, after an offer of 160m shares (40%) at ZMW2.06 each to raise ZMW330m ($22.5m). The forestry firm will use the proceeds from selling 70m of these shares for working capital, expenses and capital spending.

Zaffico is the biggest company in establishing, managing and selling exotic roundwood in Zambia and manages 51,659 hectares in pine and eucalyptus plantations plus some 50,000 hectares of unplanted land. It sells mature trees harvested as well as poles for transmission, fencing and construction.

According to the prospectus, dated 6 December, the total share offer included a sale of 90m shares from Zambia’s state-owned Industrial Development Corporation (IDC). The offer opened on 11 December. The sponsoring broker is Pangaea Securities. It was the LuSE’s first public offer and listing in 6 years since Madison Financial Services in mid-2014. The share offer was extended by 8 days but closed on 29 January.

In the financial year 2018, Zaffico’s revenue was ZMW244.7m (up from ZMW208.2m in 2017), earnings before interest, tax, depreciation and amortization (EBITDA) was ZMW163.5m (ZMW148.2m) and net profit was ZMW119.6m (ZMW114.5m). Zaffico has also been authorized to sell confiscated rosewood mukula logs and logs harvested before harvesting mukula was banned. In August 2019 it was reported that the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) had decided to include mukula trees in its Annex II listing. Rosewood has a high value in China for making furniture and is being widely harvested across Africa while Zambia has imposed bans and lifted them from time to time (Lusaka Times estimates that some $2bn of mukula revenue was stolen by a cartel).

Nigerian Stock Exchange launches SME Board

Photo credit: Nigerian Stock Exchange

Dynamic Nigerian entrepreneurs are in focus after the Nigerian Stock Exchange launched a growth board for fast-growing small and medium enterprises (SMEs) to help  businesses raise long-term risk capital and grow.

At the 29 January the bourse outlined the services on offer for businesses in the growth cycle. Services offered include: pre-listing diagnostics, institutional services (such as audit, financial advisory, legal advisory, corporate strategic advisory), investor relations, analyst coverage, corporate access and corporate governance.

According to the press release , Oscar Onyema, OON, CEO of the exchange told of collaboration at the launch: “We have partnered with relevant stakeholders to design a suite of cost-effective services to give listed companies a competitive edge within their respective industries while stimulating investors’ interest through enhanced information delivery.”

The new board has Entry Segment for companies with market capitalization from ₦50m ($136,000), compared to Standard Market for companies with market capitalization from ₦500m. Investors choose segments according to their investment preferences.

There other boards include the Main Board for well-established companies with a track record of commitment to high standards of disclosure and corporate governance. The Alternative Securities Market (ASeM) focuses on small to mid-sized companies. The Premium Board was added in August 2015 for companies that meet the most stringent listing criteria of capitalization, corporate governance and liquidity and aims to provide a platform for greater global visibility to attract global capital flows and reduce the cost of funding. 

Mr Onyema outlined the contribution of SMEs to jobs and growth in Nigeria: “SMEs have contributed about 48% of the national Gross Domestic Product (GDP) in the last 5 years, according to the Nigeria Bureau of Statistics. This segment of the economy also accounts for 96% of operational businesses and 84% of employment.

“Despite these significant contributions, SMEs face significant challenges, including lack of right-sized and right-priced financing. With the launch of the Growth Board, the Exchange is, therefore, offering issuers relaxed entry criteria as well as less stringent ongoing listing requirements to allow for greater accessibility to finance, global visibility and credibility through corporate disclosures.”

SEC Nigeria clears Nigerian Stock Exchange demutualization

Next step in the long demutulization of Nigerian Stock Exchange will be a court ordered meeting and an extraordinary general meeting. The demutualization is set to transform another of Africa’s most dynamic exchanges.

Last month (January 2020)  the bourse received a letter from the Securities and Exchange Commission Nigeria with “no objection” to its planned conversion from a not-for-profit entity limited by guarantee into a profit-making, public limited liability company owned by shareholders.

Oscar Onyema, CEO said (in a press release): “With this consent, the Exchange will proceed quickly to the next phase of holding a Court Ordered Meeting and an Extraordinary General Meeting to pass requisite resolutions including the approval of the draft Constitution; basis of allotment and split of shares between members; approval of new Board of Directors; and approval of new corporate governance and regulatory structures.”

In March 2017 the Members of the Exchange passed resolutions that authorized the Council and Management to proceed with the process. President Muhammadu Buhari signed the Demutualisation of The Nigerian Stock Exchange Bill into law on 29 August 2018, authorizing NSE to convert to a shareholder-owned public company limited by shares.

Seychelles MERJ Exchange IPO closes 28 Feb

The MERJ Exchange, the national securities exchange of Seychelles, has extended its $4 million initial public offer (IPO) to 28 February in the form of tokenized shares. The exchange already listed the tokens on itself by introduction on 7 August 2019 and opened the IPO on 10 September.

The exchange, previously known as Trop-X, says it is the world’s first fully regulated exchange that can handle both securities and digital assets, has a fully regulated post-trade processing infrastructure and works with a central clearing model. It operates a stock exchange for equities, debt and derivatives and says it will be first global market to offer the full cycle in primary and secondary markets in digital assets.

At the time of issuing the prospectus (27 August 2019) the bourse had 31 listed equities and 2 debt issues with market capitalization of $382.7 million. There were 3 members and 5 listing sponsors.

The MERJ Exchange shares are tokenized into digital assets. The offer is for tokens representing 1,652,893 securities at $2.42 per share, to be traded in USD. This will be 16% of the total shares if issued in full giving a valuation of $25m for the exchange. The minimum raise for the IPO to go ahead will be $500,000, the minimum subscription per investor is $2,000 (826 shares) and $10,000 (4,132 shares) from within the USA.

MERJ Exchanges plans to spend the offer proceeds on IT advisors and consultants, increasing its staff and marketing.

The total share capital is 15 million ordinary shares with a par value of $0.03 each. This has been tokenized to 8,684,207 tokenized shares which are currently listed.

It is starting to attract international partners including Jumpstart Securities in the US and Globacap in UK for the offer. The sponsor advisor for the offer is PKF Capital Markets (Seychelles) Ltd.

According to the investment deck (available here), it has big plans to increase the number of issuers from the current 33 to 111 by the end of year 2, boost the total market capitalization (already $1 billion according to a January 2020 newsletter) and increase the number of sponsors and brokers, as well as liquidity. It will cut trading fees from current 0.5% to 0.15% and have a capital raise fee of 0.3%.

MERJ aims to position itself as a key regulated system as blockchain technology transforms the way the world delivers value, including tokenization of illiquid assets including real estate, shares in small and medium enterprises (SMEs), copyrights and collectables such as art. It hopes to take on global incumbent exchanges which have legacy structures and stakeholders that are not yet ready to tackle the change.

From MERJ Exchange investment deck

The exchange was incorporated in 2011 as Trop-X (Seychelles) Ltd, received its licence to operate the Seychelles Securities Exchange in June 2012 and went live in August 2013 with the first equity listing. It became the national numbering agency and launching debt and derivatives exchanges in 2014. It listed its first Eurobond in 2016 and started working on the digital asset project with the Ethereum Alliance. It changed name in December 2018 and did its first tokenized listing, of its own shares, on 7 August 2019. Operational partners include Euroclear and Strate in its partners.

Ed Tuohy, CEO of MERJ Exchange, says in the investment deck: “MERJ has spent years establishing the infrastructure, the regulatory licences and the technology. We can now move decisively.”

According to the deck: “MERJ enjoys a number of key structural and organisational advantages which put us firmly ahead of the competition. These are: vertical integration, regulatory approval, agile organization, respected jurisdiction, live and operational, direct access platform.” The structure is MERJ Exchange Ltd and 2 wholly owned subsidiaries, MERJ Clearing and Settlement Ltd and MERJ Depositary and Registry Ltd.

The regulator Financial Services Authority Seychelles is an associate member of the International Organisation of Securities Commissions (IOSCO) and meets similar regulatory standards as all global regulators. MERJ is an affiliate member of the World Federation of Exchanges (WFE).

Seychelles is not listed on tax avoidance blacklists but is on the grey list of the European Union (with 31 countries including Namibia and Botswana) and Oxfam. By comparison Mauritius was removed from all EU lists in October 2019 but remains on the Oxfam grey list.

The Seychelles regulatory structure allows MERJ to integrate overseas organizations that are licensed and regulated in a recognized jurisdiction and there is no requirement that members have a presence in Seychelles.
It aims to provide seamless direct access for individual users using mobile and web apps.

For more information and to apply for the offer look at the MERJ Exchange website or the offer page on Globacap and US investors should speak to their broker.

NOTE: This article does not constitute investment advice, the purpose is news information. The writer is not affiliated to MERJ Exchange. Read the full prospectus, available here.