Consensys ramps up blockchain rollout in African financial markets with new appointment

Leading #Blockchain innovator #Consensys continues to ramp up its role in shaping the future of financial services and capital markets in Africa with the recruitment of #fintech veteran Ian Bessarabia. He joins the team as Head of South African Operations to support the implementation of enterprise Blockchain solution.
Bessarabia has been working in fintech for 20 years, and has managed operations teams, project implementations and market-driven initiatives in an array of countries and across industry. He is best known in African and global capital markets for his work as Market Development Lead – Fixed Income, Foreign Exchange and Blockchain – Africa at Thomson Reuters and previously as Business Development Manager at SWIFT.

Ian Bessarabia


ConsenSys is a worldwide venture production studio that specialises in building decentralised applications (DApps), enterprise solutions and various developer tools for Blockchain ecosystems, focused primarily on Ethereum. Powered by smart contracts, and secured through encryption, the applications provide the benefits of transparency, auditability, and immutability that are unique to solutions based on blockchain.
In a recent post on LinkedIn Bessarabia wrote: “Blockchain has the power to transform the way businesses share information and deliver services. However, this relatively new technology needs to demonstrate clear value to businesses before it builds enough trust to go mainstream.
In a recent press release Bessarabia adds: “Much time has been spent analysing and challenging the underlying technology, and there is a pressing need to shift the thinking into a tangible business narrative, and pragmatic adoption. Expansion within the local financial sector will see our marketplace becoming Blockchain enabled. The idea is that every asset bought or sold would be on the ledger”.

Monica Singer

Monica Singer, South Africa Lead at ConsenSys, recruited him: “It provides me tremendous pleasure to take someone with the abilities and experience as Ian on board. We are on such an incredibly exciting journey and having Ian provide his input is a real boon for us.”
According to the press release: “(Ian) thrives on mentoring start-ups and early-stage initiatives looking at deploying technology for social good. As an ethical protagonist, he is also a participant of the Ethics and Governance Think Tank, run by The University of Pretoria’s Gordon Institute of Business Science” He is on the South African Financial Blockchain Consortium (SAFBC), a group aimed at educating and bringing the benefits of Blockchain to the industry for the benefit of the entire country.

What is Ethereum?
According to the Ethereum website it’s a way to build “unstoppable applications”:
“Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third-party interference.
“These apps run on a custom built blockchain, an enormously powerful shared global infrastructure that can move value around and represent the ownership of property.
“This enables developers to create markets, store registries of debts or promises, move funds in accordance with instructions given long in the past (like a will or a futures contract) and many other things that have not been invented yet, all without a middleman or counterparty risk.”

New $60bn US development finance institution arriving soon

The USA is creating a new International Development Finance Corporation with streamlined capacity for investment. It will replace the Overseas Private Investment Corporation and draw together several other US investment initiatives.

The IDFC is supposed to offer one stop for other investment support including technical assistance grants, finance for feasibility studies, development credits, first loss guarantees, debt financing including in local currency which will save currency risks for investors, and political risk insurance.

The bipartisan act was introduced by Senators Bob Corker and Chris Coons, and Congressmen Ted Yoho and Adam Smith. The Better Utilization of Investments Leading to Development (Build) Act passed the House in early August and the non-partisan policy think-tank Brookings Institution says both the House Foreign Affairs Committee and the Senate Foreign Relations Committee strengthened the development aspects xx. “A review of the legislation casts no doubt that the proposed… IDFC.. is first and foremost a development agency.” See the article for more on the structural elements and how it achieves coordination.

The new agency will pull together Overseas Private Investment Corporation (OPIC, the US Government development finance institution), some credit facilities under development agency USAID, US Trade and Development Agency and financing for feasibility studies in emerging markets
According to Aubrey Hruby, writing in the Financial Times: “The proposed IDFC will be OPIC on steroids. It will advance American interests in three critical ways: 1) it will enhance global competitiveness relative to US trading partners; 2) it will support US firms seeking opportunities in frontier markets and 3) it will eliminate institutional inefficiencies.”

Hruby says the new agency double the overall budget from $30 billion to a $60bn cap and will also be able to deploy equity as well as the debt which Opic was allowed to deploy, limiting the range of projects into which it could invest. By comparison, European development finance institutions can deploy contributions of some $10bn a year. In 2015, Chinese President Xi Jinping announced that funds available for Chinese entities in African markets would double to $60bn. It is estimated that total capital flows from China to Africa were between $70bn and $175bn over the decade 2001-2011.

The new IDFC will enable the US to align commercial and development interests and will provide more opportunities in the emerging economies which account for 80% of global growth since 2008. It will be used to mitigate risk and act as a catalyst.

Connect Africa is OPIC’s $1bn programme (photo credit www.opic.gov)

According to Hruby, projects that OPIC invested into supported more than $80bn in exports and created 280,000 jobs. It supports initiatives such as Connect Africa, an initiative to invest $1bn into telecommunications infrastructure in the next 3 years. Opic was also key to helping Bechtel coordinate and develop the Nairobi-Mombasa Expressway Project in 2016. Analysis by the conservative think tank Heritage Foundation says OPIC invested 27% or $6.28bn of its portfolio in Africa, of which half focused on Ghana, Kenya and South Africa.

Audrey Hruby is co-author of the award winning book The Next Africa, adviser to investors and companies doing business in Africa and a Senior Fellow at the Africa Center at the Atlantic Council.

Recent Africa share listings news

London and South Africa
Old Mutual Limited, an insurance company founded 173 years ago, moved its main listing back to Johannesburg on 26 June and has dual-listings in Namibia, Malawi, Zimbabwe and London, as reported by Bloomberg and Moneyweb. Old Mutual plc terminated its listing on the London Stock Exchange on 25 June, and spun off UK wealth manager Quilter plc which was listed separately on the LSE (and dual listed on the JSE) the same day with a market capitalization of £2.75bn based on a £1.45 share price. It also sold its US asset manager and Latin American units as it believed each unit would be worth more separately. The “home-coming” was marked with a parade in Sandton and events in Malawi, Namibia and Zimbabwe. Old Mutual had moved its head office and primary listing to London in 1999, according to Reuters, but now its prominent riverside London head office is being wound down, with staff down from 120 to 40 in 2018.
The stock was listed in Johannesburg at ZAR28.50, valuing the company at some ZAR140bn ($10.7bn). According to Sanlam analyst Renier de Bruyn, quoted by Bloomberg, the share price did not reflect the hoped-for “value unlock” and Old Mutual was at an “attractive” price-earnings ratio of 7.5x, compared to 13x for its biggest South African rival, Sanlam. Bloomberg quotes Brad Preston, chief investment officer at Mergence Investment Managers Ltd: “Old Mutual’s strategy of trying to build a completely global business I think clearly has failed. We’ve seen them reverse that completely.” It bought United Asset Management Corp in USA for $1.4 billion in 2000 and Skandia AB in Sweden for $8bn in 2006. Between mid-1999 and June 2018 Old Mutual’s shares in Johannesburg returned 480% while Sanlam’s returned almost 2,000%. Sanlam had focused on African markets and reached 34 countries, including buying out remaining shares in Morocco’s Saham Finances SA earlier in 2018 for $1.1bn. Old Mutual is only in 13 countries.
Next step will be the unbundling of shares in Nedbank Group by about December 2018. Old Mutual owns 53% since it bought in under apartheid capital controls in 1986 and it is expected to reduce that to 19.9%.

London
Microfinance firm ASA International listed on the London Stock Exchange on 13 July. Its 85% shareholder Catalyst Microfinance Investment had partially sold half its stake by offering 40m shares at GBP2.24 each. ASA International was set up in 2007 and is one of the larges and most profitable international microfinance institutions, with 1.8m clients, particularly low-income and underserved women entrepreneurs. It operates in Asia (7)%) and in Africa (30% of clients, including in Tanzania, Uganda, Kenya, Rwanda, Nigeria, Ghana and Sierra Leone. It has 1,387 branches and employs 9,000 staff.

Mauritius and London
Grit Real Estate Income Group, a pan-African real estate company based in Mauritius and investing in 7 countries Botswana, Kenya, Mauritius, Morocco, Mozambique, Ghana and Zambia with plans for Senegal and the Seychelles, raised $132.1m through selling 92.4m shares at $1.43 each, before listing on the London Stock Exchange main board on 31 July. The new funds are for more investments in Mozambique and Ghana. Previously there were 214m shares listed in Johannesburg Stock Exchange and Stock Exchange of Mauritius. Bronwyn Corbett and Sandile Nomvete built the Delta International Property Fund from R2.2bn to R11.8bn. It became Mara Delta Property Holdings and was then rebranded Grit and the company headquarters moved to Mauritius, according to this 2017 interview in Finweek magazine.
Corbett commented in a press release: “”We are delighted to have successfully completed our Listing on London Stock Exchange and we are proud to be the first London listed pan-African real estate group”. Earlier she was quoted saying the African real estate sector “offers some of the best returns in the global property market. We have a proven track record of generating income from our selective and diversified range of assets, built through our close and detailed understanding of the region’s property investment environment. The listing will support our aim to grow our portfolio further and become the leading real estate owner on the African continent outside South Africa.” The share price was set at net asset value and the aim is to yield 12% a year in US dollars.

Nigeria
The Federal Government of Nigeria listed a NGN10.7 billion ($29.5m) FGN Green Bond 2022 on the Nigerian Stock Exchange on 21 July. It offered a coupon of 13.48% and aims to finance initiatives including solar plants and hydropower.

South Africa
Anchor Capital became the 9th listing on the A2X Markets on 19 July through a secondary listing. It was listed on the Johannesburg Stock Exchange’s AltX platform in September 2016 after raising ZAR60m ($5.4m) through an IPO.

Some African IPOs – August 2018

Uganda – CIPLA-Quality Chemicals IPO closes 24 August
CIPLA-Quality Chemicals Ltd opened its initial public offer (IPO) on 13 August and will close on 24 August, aiming to list on the Uganda Securities Exchange on 24 September. The pharmaceutical company aims to raise $45 million through offering a 18% stake via 657,179,319 shares at UGX256.50 per share, according to Reuters. The company manufactures drugs that include anti-retroviral, anti-malarial and Hepatitis B medicines and its products are sold in Cameroon, Comoros, Kenya, Namibia, Tanzania, Uganda and Zambia.
India’s Cipla Limited, Uganda’s Quality Chemicals and the Government of Uganda set up the company as a joint venture in 2005, and TLG Capital and Capitalworks Investment Partners invested in the company in 2009, holding stakes worth 12.50% and 14.40% respectively. Lead transaction advisor was reported to be Renaissance Capital in Kenya and Crested Capital in Uganda is the lead sponsoring broker.
it ends a 6-year listing drought as the previous IPO in Uganda was Umeme in 2012.

CIPLA-Quality Chemicals in Kampala (file photo)

Egypt – Giza Spinning & Weaving probably Q4
The IPO of garment maker Giza Spinning & Weaving is set for the fourth quarter, probably November. According to reports, the aim is to sell a 40% stake to finance investment of EGP250m ($14m) into expanded production of garments and yarn. The company employs around 4,800 and was set up in 1979. It is the biggest garment exporter in Egypt by volume and the sixth largest by dollar value, with 87% of production exported to the USA and Europe in 2017. Beltone Financial will be the global coordinator and book runner and a roadshow will run in October, according to Bloomberg.

Uganda – MTN under pressure to list
MTN Group Ltd, which has 55% of the mobile market in Uganda with about 10.9m subscribers, is seeking to renew its 10-year licence in October. Godfrey Mutabazi, executive director of Uganda’s telecom regulator, says that selling shares on the local bourse isn’t a pre-condition for the granting of a new 10-year contract, but Uganda wants “Ugandans to be part of the company,” according to this Bloomberg report.

MTN Ghana – IPO closed 31 July
The IPO of Scancom PLC, the name of telco MTN in Ghana, closed on 31 July as par of bids for a local licence. It was selling 35% of the company, in line with discussions with the regulator. Details are to be announced soon and trading could begin from 5 September. It is set to be the largest listing on the Ghana Stock Exchange and shares could also be bought using the MoMo Wallet mobile-money platform. MTN has more than 221m customers across 22 markets in Africa and the Middle East. It had agreed with telecom regulators in Ghana and Nigeria to list its local units, and the offer was set to raise GHS3.5bn ($725m).

MTN Nigeria “not yet applied”
MTN had not yet applied for a listing by 9 July, according to a news report which quoted the Securities and Exchange Commission. Previously it had been reported that the listing could go live in August, when Reuters reported on pre-IPO documents in February 2018. It said that MTN planned to list by July and raise at least $400m to cut debt in its Nigeria unit, which was valued at $5.23bn. The Nigerian pledge to list cwas part of a settlemetn whcih also included a $1bn fine in 2016.

Airtel – London or Johannesburg in 2019
Airtel is reported to be aiming to raise up to $1.5bn by listing 25% of the equity in its Africa unit in early 2019, according to this report on Bloomberg, as part of plans to reduce its debt by $4.6bn over three years. Airtel is India’s top wireless operator. It also was reported to be planning to sell part of its stake in a $14.6bn company owning tower infrastructure, formed when Bharti Infratel Ltd merges with Indus Towers Ltd. It is owned by billionaire Sunil Mittal and is hoping to keep its Moody’s credit rating at Baa3. It sold about 8,300 towers in 7 African countries for some $1.7bn in 2015 and in 2016 sold its towers in Tanzania for $179m and sold its Burkina Faso and Sierra Leone units for some $1bn the same year. In 2010 it paid an enterprise valuation of $10.7bn for the African assets of Kuwait Mobile Telecommunications Co, also known as Zain.

Kenya – National Oil Corporation aims at Nairobi and London in 2019
The Government of Kenya plans to raise up to KES103bn ($1bn from a dual listing of shares in state-owned National Oil Corporation in Nairobi and London, according to this news report in Business Daily. NOC needs the money to exercise its rights to buy back shares before production at the Turkana oil field, discovered in 2012.
Petroleum principal secretary Andrew Kamau told the Business Daily that the contract for the concession of oil blocks in the Turkana oil fields to existing operators has a clause allowing the government to exercise a back-in right, which essentially means buying back a percentage of the ownership before production kicks in. “When you sign a contract you have a right to buy back some share, before production. The percentage we can buy back is 15 in one block and 20 in the other. The listing should raise enough money for the purchase,” said Mr Kamau, without indicating whether the State would exercise its rights for the entire stake under the clause. The two blocks are owned by British firm Tullow (50%), Africa Oil (25% and Total (25%). The Government and Tullow was to start small scale crude production of about 2,000 barrels a day in 2018, with full production due from 2021 after building a $2.1bn pipeline to Lamu on the coast, according to Reuters.

London – Intercement delays to 2019
Intercement is to delay its $1.8 billion IPO on the London Stock Exchange from the second half of 2018 to early 2019, according to reports. It makes cement and related products in Brazil, Portugal, Argentina, Mozambique, Cape Verde, Paraguay, South Africa and Egypt and was founded in 2008.

For fuller analysis of recent and upcoming IPOs across Africa, see the website of the Enko Africa Private Equity Fund, a $63.4m fund focused on pre-IPO opportunities across Africa.

Mobile phone app for trading on Zimbabwe securities exchanges

Investors can check their portfolios and send orders to their stockbrokers on their smartphones in Zimbabwe with an app called C-Trade from today (4 July). C-Trade is an online and mobile trading platform for shares on the Zimbabwe Stock Exchange (ZSE) and the second licensed exchange, the Financial Securities Exchange (FINSEC).

According to an article in the Herald newspaper, C-Trade is for financial inclusion in Africa: “The platform will enable investors, both local and foreign to purchase securities from anywhere in the world anytime, using mobile devices. The initiative is being led by capital markets regulator, Securities Exchange Commission of Zimbabwe (SECZ), and seeks to promote financial inclusion by encouraging participation by the smallest retail investor.”

The Herald newspaper reported SECZ chief executive Tafadzwa Chinamo saying that President Emmerson Mnangagwa had agreed to launch the programme. “After that what you will be seeing more of is our campaign as SECZ to educate the public on what investing on the capital markets is about.”

“We have taken the issue of deepening and broadening the capital markets very seriously, to the extent that we added a new committee to our board of investor education.” In July 2017 Chinamo said SECZ had committed $300,000 to a campaign to get more people engaged in the capital market.

Escrow Systems headquartered in Zimbabwe has created the C-Trade programme to trade bonds and shares, using the same technology as Kenya’s world-first M-Akiba mobile Government bond sold on mobile phones to small investors in Kenya, from minimum denomination of $30. Here is our post on M-Akiba from October 2015 and a Reuters story on the eventual M-Akiba launch in March 2017.

According to a report in Newsday, Escrow Group chief executive officer Collen Tapfumaneyi said: “C-Trade is a mobile trading platform and is combination of a number of systems that enable investors to access the securities market or capital markets popularly known as the stock to enable people buy shares and all that. It comes in three forms, USSD application which can be utilised by mobile network subscribers. We have Econet and Telecel, but we are about to finalise with NetOne as well so within a few days all three will be on board,” It is not restricted to local mobile operators to enable foreign investors, including those in Diaspora.

Trading is still through a stockbroker, as before, says Chinamo of SECZ: ”This application is essentially sold to a stock broker to give the brokers clients access to the market. Rules of the exchange are still valid. For your trade to go through, it needs the authenticity of your broker so the broker is still liable for your trade, settlement, clearing and feed.”

The platform allows easier access for smart-phone users to manage their portfolios when they are away from a desktop/laptop.

Escrow is offering it on revenue-sharing basis to users with “minimal or no costs to market participants” according to an older news story in Financial Gazette.

According to an article today in Newsday, there are 13 licensed stock-broking firms in Zimbabwe, of which 3 signed up to use C-Trade. Escrow’s Tapfumaneyi said they were still talking about sharing fees: “C-Trade acts as an agent for the broker. The broker will still earn his full revenue according to the fee charged. However, the brokers pay a fee to use the platform which is negotiable.

“What we are basically doing is get business for them and they keep their traditional business. But, if we get people registering online and placing orders online, all that traffic is being channelled through to the brokers which then gets channelled to the exchange. So we are basically an extension of the brokers,” he said.

“These orders, when they come to the brokers, is also the issue of evaluation and trading is not just picking an order from a client and sending it through. You have got to analyse the market and advise the client what the pricing should be and all that. So we still have that interface.”

The target for C_Trade is about 20,000 individual participants by year-end and an ultimate goal of 2 million people.

Meet FINSEC, Zimbabwe’s second securities exchange

Zimbabweans have a second option for trading securities, with an emphasis on financial inclusion and economic empowerment through capital markets. Financial Securities Exchange (Private) Limited (FINSEC) is licensed by the Securities and Exchange Commission of Zimbabwe as a securities exchange (alternative trading platform).

It was launched in December 2016 and is part of Escrow Group, which has interests in financial services and technology. According to Escrow website, it has offices in Kenya and Zambia. The group includes Corpserve Registrars, which is a share registrars company set up in 1997, with operations in Zimbabwe, Zambia, Malawi, Kenya and Tanzania.

According to the website: “FINSEC is a pioneer in the provision of alternative trading solutions aimed at automating activities of previously sidelined OTC (over-the-counter) markets. It offers a complete suite comprising Order Management, Matching Engine, Clearing, Settlement and Delivery. FINSEC is transforming markets with activities so far in Kenya, Uganda and Zimbabwe.”

FINSEC Zimbabwe reported record turnover of $1.2 million in November 2017, with total equity turnover of $3.1m from launch to early December 2017. Listings include bonds issued by Infrastructure Development Bank of Zimbabwe (IDBZ), and class B shares of Old Mutual Group. CEO Collen Tapfumaneyi forecast that bringing in mobile technology would boost volumes.

Microfinance company Untu Capital Ltd has raised $5m in medium-term notes on the platform, which it will use to finance micro, small and medium enterprises (MSMEs) in Zimbabwe. According to a story in Herald newspaper. It started with a $1m issue, followed with $2m and again with $2m in May-June 2018, which listed on FINSEC on 11 June 2018, paying a fixed coupon of 10% a year. The bonds are a financial inclusion tool, called “U-Gain” and partnered with Telecash and EcoCash to offer a minimum $50 issue, maturity date 10 June 2021, paying interest every 6 months. Untu was set up in 2009 and provides finance to MSMEs, including working capital, capital and investment and value added services.

According to a story on the Daily News website, the class B shares were created in 2011 when Old Mutual surrendered 25% of its issues shares to indigenous investors as part of the indigenization laws, including 11% to employees, 8% to pensioners and 3.5% to strategic investors and 2.5% to a special youth fund. On 25 June FINSEC announced that the shares were liberalized and could be bought and sold by investors who were not indigenous Zimbabweans, including foreign investors and all capital market participants.

FINSEC does electronic trading of different types of securities, and the FINSEC website reads: “..(it) integrates all market participants in real time via a robust and state-of-the-art web based technology. The market participants include but are not limited to securities dealers, custodians, asset managers, issuers, settlement banks, market makers, transfer secretaries and regulators.

“FINSEC offers an integrated market-place solution covering; order management; order routing; order matching; clearing and settlement; securities delivery; trade risk management; data analysis; surveillance; mobile trading; online trading and full reporting.” FINSEC manages the full cycle from investor creation to trade settlement with the involvement of custodians and settlement banks.

According to the FINSEC website, it hopes to focus primarily on retail investors. It says its alternative trading platform “emphasises that all investors make informed investment decisions based on thorough research, which includes evaluating a company’s disclosures and financial reports as well as the prices and market for the company’s securities”.

Trading is through stockbrokers and investor accounts have to be opened through stockbrokers and custodians. The only mentioned custodian is Three Anchor Investments, trading as Old Mutual Custodial Services and the only mentioned bank is CABS, a financial institution and subsidiary of Old Mutual.

FINSEC says it also has an investor relations portal where individuals can monitor their portfolios, update know your client (KYC) information and check inquiries. It provides online and mobile access.

Victoria Falls

Why Ethiopia needs a stock exchange as it liberalizes

One of Africa’s biggest economies. Ethiopia, is launching a giant privatization campaign that could be lead to transformation, growth and liberalization. But there is no Ethiopian securities exchange, meaning citizens and domestic savings institutions may not be able to participate and the economy will continue to suffer inefficiencies and lack of transparency.

On 5 June Prime Minister Abiy Ahmed and the ruling party EPRDF set headlines alight by announcing a decision to sell stakes in the telecoms monopoly, long a cash cow for the Government. Investors will also be invited to buy stakes in Ethiopian Airlines, one of Africa’s fastest-growing and best-run airlines.

Zemenedeh Negatu, chairman of Fairfax Africa Fund LLC, a U.S.-based investment firm, and a former Managing Partner of EY in Ethiopia, commented in the Wall Street Journal newspaper: “The new leadership in Addis is smartly modifying and adopting policies and strategies that will sustain Ethiopia’s growth. I also strongly believe that these enterprises should be privatized by listing their shares in a local stock market, which should be established as soon as possible.”

Ethiopia was the world’s 2nd fastest growing economy in 2017 with 10.9% growth, according to the International Monetary Fund, which forecasts 8.5% growth in 2018, after a decade of growing at nearly 10% a year.

According to a Reuters report by Aaron Maasho: “It is unclear whether the Government would consider licensing foreign mobile operators. Interest might be limited if the only option is a minority stake in the monopoly.

“Analysts have said the government’s move falls far short of enabling full competition by multinationals. They note that by selling minority stakes the EPRDF is underscoring its view that the state should be a key player in the economy.” However, he notes “the step is still radical for the EPRDF.. and could indicate how 41-year-old Abiy plans to steer the country.”

Abiy Ahmed took office in April. The announcement also included a peace deal with neighbouring Eritrea in line with a decision in year 2000 that would cede disputed territory.

Both Africa’s telecom giants MTN and Vodacom told Reuters they are interested. MTN says Ethiopia “would be a natural fit for MTN’s existing pan-African footprint.” And Vodacom said “Ethiopia is an attractive market so it follows that there would be interest”.

A statement after a day-long meeting of the EPRDF’s executive committee said economic reforms are needed to sustain economic growth. It referred to foreign exchange shortages that mean there are too few goods in shops. Economists estimate that foreign reserves cover less than 2 months of imports.

Much of Ethiopia’s growth and successes at rolling back poverty are linked to the ambitious road, rail and electricity infrastructure investment and building projects run by the Government, which pours revenues from its telecoms, airlines and other monopolies to this. There is an ambitious strategy to transform a nation, which on farming, into an industrialized nation where manufacturing provides expert earnings.

On 6 June, Abiy warned of the risks: “”It is progressive. This new economic decision will afford us the opportunity to resolve widespread unemployment, ease foreign currency shortages, and reduce weaknesses in market connectivity. However, unless implemented with skill, knowledge and focus, it can lead to a repeat of the pervasive theft seen in many African countries and a destruction of Ethiopia’s wealth.”

Charlie Robertson, global chief economist at Renaissance Capital, told Reuters: “”The Government is still deeply sceptical about capitalism and speculative investors.”

OPINION – A well run stock exchange is vital in Ethiopia’s successful privatization and transformation

The capital market will bring many benefits to Ethiopians and the economy. A stock exchange enables enterprises to raise capital to create growth, jobs and fight poverty through issuing shares (equity) to long-term investors who are ready to share the business risks. It provides a transparent and efficient market for raising hundreds of millions of long-term debt, including bonds for housing and infrastructure, as in neighbouring Kenya. It would amplify efforts by Ethiopia’s Government and banks to finance the ongoing giant growth potential.

A regulated stock exchange encourages savings and help investors channel these into the most productive enterprises, boosting market size and efficiency. It boosts transparency by requiring companies to publish audited trading information promptly and widely, sharing similar information benefits with smaller investors as the Ethiopian Commodity Exchange (ECX) brings to farmers – any by encouraging professional analysts.

Individual Ethiopians are very keen for additional places to grow their savings, some of which are held in cash or low yielding bank deposits. Like other African countries, Ethiopia has fast growing domestic investment funds at pension and insurance institutions, and these need a much wider choice of productive assets to invest into, offering diversification and growth while seeking to maintain the overall safety of the members’ funds.

There are many Ethiopians both at home and abroad with the skills and character to ensure that any Ethiopian exchange will be one of the best and biggest in Africa. Although speculative trading is expected, it is also a key contributor to market liquidity and efficiency, and ensuring a large and active enough domestic base will counter much of the overall market volatility. Regulation is also needed to protect investors by ensuring that only well run businesses with a good track record and management can offer shares to the public, contrary to many unregulated initial public offers that have happened.

A well run stock exchange is what Ethiopia needs to transform its economy, boost participation, investment and the private sector, and to encourage efficiency and jobs.

DISCLOSURE – The author has worked on proposals on a stock exchange in Ethiopia, including when he worked at EY, and has studied the background and potential of the capital market there.

Addis Ababa (photo credit Horn Affairs)

Africa-focused Vivo Energy soars after £548m IPO on London SE

Africa’s £1.98 billion ($2.68bn) megalisting Vivo Energy (VVO) soared in its first 2 days of trading on the London Stock Exchange (dual-listed on the Johannesburg Stock Exchange) at the close of last week. After a successful initial public offer (IPO) of shares at 165.00 pence per share for 323.3 million shares, 27.7% of the company, it listed on the LSE on 10 May and traded up 11% on Thursday to 183.20p, before soaring as high as 198.10p on Friday 11 May and then closing at 185.0p.

Vivo raised £548m ($742m) in the share offer, which was the largest UK-listed African IPO since 2005, when Telecom Egypt raised about £650m, and the biggest IPO in London so far this year.

It listed on the Premium Segment of the LSE Main Market. Global coordinators of the deal were Citigroup, Credit Suisse and JP Morgan.

According to the LSE press release, Christian Chammas, CEO of Vivo Energy: “We have been extremely pleased with the investor response to our offer, in what has been a challenging period for the wider markets. Vivo Energy’s differentiated business model, strong track record, exposure to Africa and the growth opportunity it represents has been well understood by investors. We are excited about the momentum in the business and are looking forward to delivering further growth and success as a London listed company.”

In an article in Financial Times Chammas described Vivo as offering international investors exposure to a diverse group of mostly fast-growing African economies with rapidly expanding urban populations: “We are at the heart of the growth story, the growth of Africa’s population and consumer demand.”

Vivo is a retailer and marketer of Shell-branded fuels and lubricants in Africa, operating about 1,800 service stations across 15 African countries, with Morocco its biggest market. It is expanding fast, and is second in Africa after Total. It is owned 55% by oil trader Vitol Group SA of Switzerland, and 44% by private equity group Helios Investment Partners and 1% by management. Last year earnings before interest, depreication and amortization (EBITDA) was $326m. In December it announced a ZAR3.5bn ($256m) share swap transaction with Engen, South African unit of Malaysia’s Petroliam Nasional Bhd, which would add 9 more countries and 300 more service stations, which was awaiting regulatory approval.

According to another article in the Financial Times: “People close to the deal said that investor appetite was strong and the listing was more than two times subscribed. The transaction could unlock other African-focused IPOs that had been waiting until a company successfully tested the market.”

Nigeria’s Dangote Cement, which operates across more than 10 African countries, could be planning to raise between $1.2bn and $2bn by floating 10%-15% of the business, according to chairman Aliko Dangote. In May it announced the appointment of non-executive directors Mick Davis (former Xstrata chief executive) and Cherie Blair (lawyer and wife of former UK prime minister Tony Blair).

Another potential large African listing on the London Stock Exchange in 2018 is Liquid Telecom, which describes itself as: “the leading independent data, voice and IP provider in eastern, central and southern Africa. It supplies fibre optic, satellite and international carrier services to Africa’s largest mobile network operators, ISPs and businesses of all sizes. It also provides payment solutions to financial institutions and retailers, as well as award winning data storage and communication solutions to businesses.”

In March Africa-focused mobile phone tower firm Helios Towers, dropped plans for an IPO because of weak investor appetite. Regional rival Eaton Towers had also been considering a listing.

Vivo Energy (photo credit Vitol)

London Stock Exchange financing African growth

African companies listed or trading on the London Stock Exchange have a total market capitalization of over $200 billion ($271bn), and in the last 10 years have raised more than $16 bn on London’s markets. The 108 African companies is more than any other international market, according to a press release from the LSE.

There are 9 African sovereign bonds listed in London, from: Gabon, Ghana, Namibia, Nigeria and Zambia

According to Tom Attenborough, Head of International Business Development, London Stock Exchange, in an LSE press release: “The success of Vivo Energy’s IPO is a strong statement of international investor interest in building exposure to Africa. As a London-listed company, Vivo Energy, will gain access to the world’s most international market, as well as an unrivalled source of deep liquidity and new investors.

“London is a strong partner to African companies seeking to attract international investment.”

Paternoster Square with London Stock Exchange at right (credit: Wikipedia)

  • Also this month, May 2018, Angola launched a $3bn Eurobond on LSE, the country’s biggest international bond and the first international issuance since 2015.
  • In April the LSE Group, the Nairobi Securities Exchange and non-governmental organization FSD Africa signed a memorandum of understanding to explore the launch of LSEG’s business support and capital-raising programme, ELITE. In May, the first Kenyan company, Olsuswa Energy, joined the programme. So far 850 companies have joined the ELITE programme.
  • In November 2017, the LSE, Casablanca Stock Exchange and the Bourse Régionale des Valeurs Mobilières (BRVM) signed an agreement to roll out ELITE across West African markets, in a signing ceremony presided by Amadou Gon Coulibaly, Prime Minister of Côte d’Ivoire.
  • In June 2017, Nigeria raised $300m through its first Diaspora Bond on LSE, a retail bond aimed at Nigeria’s global expatriate community seeking to invest in their home country’s development. It was the first bond of its kind from sub-Saharan Africa.
  • In March 2017, LSE published its first “Companies to Inspire Africa” report, identifying hundreds of the fastest-growing and most dynamic private businesses across Africa. Vivo Energy is the first company in that report to follow up by listing on LSE.
  • In March 2016, LSEG established an Africa Advisory Group, bringing together 12 distinguished business leaders, policymakers and investors from across Africa, to discuss the challenges and opportunities presented by the development of the continent’s capital markets.
  • In November 2014, London Stock Exchange Group and The Nigerian Stock Exchange signed a capital markets agreement to support African companies seeking dual listings in London and Lagos. The agreement followed the implementation earlier in 2014 of a unique new cross-border settlement process between the UK and Nigeria.
  • In June 2014, LSEG signed a strategic agreement with Casablanca Stock Exchange to share its expertise on the full exchange business chain, from listing to trading, and from clearing to settlement and custody with a commitment to position Casablanca’s capital markets and financial infrastructure as a regional hub.
  • In April 2014, Nigerian oil and gas group Seplat was the first Nigerian company to simultaneously dual list equity shares in London and Nigeria and raised $500m in an IPO.

LSEG market infrastructure technology, supplied by Millennium IT of Sri Lanka, is deployed in more 12 African markets, including Botswana, Casablanca, Namibia and Johannesburg stock exchanges.

African Banker award 2018 – here is the shortlist

The organizers of the African Banker Awards have announced the shortlisted nominees in the different categories. The African bank excellence awards are hotly contested and will be made on 22 May, during the annual meetings of the African Development Bank (AfDB) in Busan, South Korea. The awards are organized by African Banker magazine, published by IC Publications Group.

Chair of the Awards Committee, Omar Ben Yedder, the Group Publisher and Managing Director of IC Publications Group, says he is again impressed by the quality and breadth of entries: “We saw McKinsey earlier in the year releasing a very positive report analysing the banking landscape in Africa. The entries reaffirm their findings when they say Africa’s banking market are amongst the most exciting in the world.

“The categories that caught my eye were innovation in banking – and this year’s entries reflect the transformative role of fintech and also blockchain technology – as well as deal of the year, which is every year a very competitive category. Equity markets were a little slower in 2017, but we saw some interesting deals on the debt side and also transformative infrastructure financing structures. The quality of the entries, and sophistication of the solutions being presented, reflect a buoyant sector in continuous evolution.”
reflects another strong year in African banking, driven by innovation and resilient markets

The shortlist reflects another strong year for banks from Morocco, Nigeria and Kenya. Banks which have a large footprint across Africa, such as Ecobank, Standard Bank and Standard Chartered, also feature across several categories.

The African Development Bank is the patron and the awards are sponsored by The African Guarantee Fund, Banco Nacional de Investimento (BNI), Groupe Crédit Agricole du Maroc and The Bank of Industry. Ecobank will be the hosts of the African Banker Awards cocktail reception prior the awards. The Gala Dinner and Awards presentation will take place at the Paradise Hotel, Busan.

Shortlisted entries are:

African Banker of the Year:

  • Mohamed El Kettani – Attijariwafa Bank, Morocco
  • James Mwangi – Equity Group Holdings Plc, Kenya
  • Joshua Oigara – KCB, Kenya
  • Segun Agbaje – Guaranty Trust Bank, Nigeria

African Bank of the Year:

  • Attijariwafa Bank, Morocco
  • Equity Group Holdings, Kenya
  • Guaranty Trust Bank, Nigeria
  • The Mauritius Commercial Bank, Mauritius
  • Standard Chartered

Best Retail Bank in Africa:

  • Barclays, Zambia
  • Ecobank
  • KCB, Kenya
  • Millennium BIM, Mozambique
  • SBM Holdings, Mauritius

Investment Bank of the Year:

  • Barclays Africa Group
  • Exotix
  • FNBQuest Merchant Bank, Nigeria
  • Standard Bank
  • Standard Chartered

Award for Financial Inclusion:

  • Fourth Generation Capital Limited, Kenya
  • Groupe Crédit Agricole du Maroc, Morocco
  • Baobab Group, France
  • Equity Group, Kenya
  • JUMO World, South Africa

Award for Innovation in Banking:

  • Agricultural Finance Corporation, Kenya
  • Ubuntu Coin
  • Banque Nationale pour le Développement Economique, Senegal
  • Ecobank
  • SBM Holdings, Mauritius

Socially Responsible Bank of the Year:

  • Barclays Bank, Zambia
  • BMCE Bank of Africa, Morocco
  • Equity Group, Kenya
  • First Bank of Nigeria, Nigeria
  • KCB Group, Kenya
  • Standard Chartered Bank Kenya, Kenya

Deal of the Year – Equity:

  • ADES IPO – EFG Hermes, Egypt
  • First Rand Acquisition of Aldermore PLC – Rand Merchant Bank, South Africa
  • GAPCO sale to Total – Standard Chartered, South Africa
  • Long4Life IPO – Standard Bank, South Africa
  • Steinhoff Africa Retail Listing – Rand Merchant Bank, South Africa
  • Vodacom Tanzania IPO – National Bank of Commerce and Absa CIB, Tanzania

Deal of the Year – Debt:

  • $300m Diaspora Bond – Standard Bank/FBNQuest Merchant Bank, Nigeria
  • $540 First Rand Asia Focused syndication – Standard Chartered, UK
  • Cape Town Green Bond – RMB, South Africa
  • Dufil Prima Foods – Standard Bank, South Africa
  • Nokeng Fluorspar – Fieldstone, South Africa
  • Viathan – Renaissance Capital, Nigeria

Infrastructure Deal of the Year:

  • Nigeria Infrastructure Debt Fund – Chapel Hill Denham, Nigeria
  • Nacala Railway and Port Corridor – Standard Bank SA / RMB, South Africa
  • FIRST – Rand Merchant Bank, South Africa
  • AEE Power Project – RMB, Namibia

Individual recognition will also be given in the categories for the Regional Bank winners, Central Bank Governor of the Year, Finance Minister of the Year, and Lifetime Achievement.