African Economic Outlook 2019: Growth acclerates

Africa’s economic growth (measured by gross domestic product, GDP) is set to accelerate to 4.0% in 2019 and 4.1% in 2020. The good news comes in the African Economic Outlook 2019, published recently by the African Development Bank.

Bank President Akinwumi Adesina says in the foreword: “The state of the continent is good. Africa’s general economic performance continues to improve.. (but) it remains insufficient to address the structural challenges of persistent current and fiscal deficits and debt vulnerability.”

Growth was 3.5% in each of 2018 and 2017, up from 2.1% in 2016.

The 2019 report focuses on three topics
• Africa’s macroeconomic performance and prospects
• Jobs, growth, and firm dynamism
• Integration for Africa’s economic prosperity.

Bank Director of Macroeconomic Policy Forecasting and Research Department, Hanan Morsy notes that, in spite of a rising national debt across Africa, “there is no systemic risk of debt crisis.”

12m jobs
Adesina says industry should lead this growth: “Macroeconomic stabilization and employment outcomes are better when industry leads growth, suggesting that industrialization is a robust path to rapid job creation. However, African economies have deindustrialized.

“Although structural change is occurring, it has been through the rise of the services sector, which has been largely dominated by informality, low productivity, and an inability to create quality jobs. To avoid the informality trap and chronic unemployment, Africa needs to industrialize and add value to its abundant agricultural, mineral, and other natural resources.

According to the report, Africa needs to create at least 12 million jobs a year to stop unemployment from rising further. Unemployment is already a key cause of instability in many African countries, particularly as the growing youth population gathers in cities, Morsy said at the launch last month: “Manufacturing-driven growth has the highest impact on job creation.”

Regional integration and the continental free trade area
The African Economic Outlook 2019 report focuses on regional integration for trade and economic cooperation and on delivery of regional public goods. It analyses gains of regional public goods, including synchronizing financial governance frameworks, opening regional aviation to competition, and facilitating the free movements of people, goods, and services through open borders.

“Borderless Africa” is a key foundation of a competitive continental market to become a global business centre. This includes developing cross-border supply chains, improving customs management and adopting simple and transparent rules of origin.

The report identifies 5 key trade policy actions that could potentially bring Africa’s total gains to 4.5 percent of its GDP, or $134 billion a year:

  1. Eliminate all applied bilateral tariffs in Africa
  2. Keep rules of origin simple, flexible, and transparent
  3. Remove all nontariff barriers on goods and services
  4. Implement the World Trade Organization’s Trade Facilitation Agreement to reduce cross border time and transaction costs tied to non-tariff measures
  5. Negotiate with other developing countries to reduce their tariffs and nontariff barriers, by 50%.

The research includes new data and analytics showing that the African Continental Free Trade Agreement (AfCFTA), signed in March 2018 by 44 African countries, offers substantial gains for all African countries. On 2 Feb Ethiopia was the 18th country to ratify the plan.

According to this article on nurmara.com “At around 15% regional trade remains the lowest globally, a major bottleneck to trade and investment. The estimate is that the AfCFTA could boost regional trade by 52% by 2022, and needs four more ratifications to come into force. The AU hopes to hit this target in February, but it might not mean much. The initiative needs to overcome a legacy of poor implementation.”

Download full report, research data
African Economic Outlook has been published annually since 2003 and is the African Development Bank’s flagship report. It provides analysis, data and also reference material on Africa’s economic development for researchers, investors, civil-society organizations and development partners.

A full set of updated growth projections will be released in May 2019, ahead of the Bank’s Annual Meetings in Malabo, Equatorial Guinea.
The full report is available online in English, French, and Portuguese at: http://www.afdb.org/aeo

IPO report 2 – African companies raised $2.2bn in 2018

Africa-focused companies raised $2.17 billion via 18 share offers (IPO) and listings in 2018, but the number is down 25% from $2.89bn raised in 2017 with 26 share offers and listings. According to asset manager Enko Capital, the slowdown was driven by “unfavourable market conditions”.

The Egyptian Exchange had 4 IPOs in 2018, and Ghana, Morocco and South Africa had 2 IPOs each and Botswana and Uganda one each. Six Africa-focused companies also offer shares through IPO on foreign exchanges in London and Australia. The offers included 2 IPOs linked to exits by private equity firms, continuing a trend to develop this as an exit route for private equity growth investors in African enterprises.

Enko Capital adds that the African exchanges enjoyed another 16 new listings in 2018, of which 7 were listing by introduction (down from 8 in 2017), 6 were cross listings (5 in 2017) and 3 were spin-offs as a company separated a part (4 in 2017).

The total number of listings for Africa-focused firms was 34 in 2018 (43 in 2017).

Botswana’s December bank listing

On 13 December 2018, African Banking Corporation of Botswana Limited (BankABC) successfully listed on the Botswana Stock Exchange following an IPO which raised BWP361.05 million ($33.90m). It is Botswana’s fifth largest bank in Botswana by assets and has over 60,000 customers and 330 employees. The IPO featured 180,525,000 shares or 24.9% of its share capital at BWP2.00 each.

Bank ABC is a subsidiary of Atlas Mara through ABC Holdings Limited, also incorporated in Botswana, which is the parent company of a number of sub-Saharan Africa banks operating under the BancABC brand in Botswana, Mozambique, Tanzania, Zambia and Zimbabwe and a group services office in South Africa. The group was formed through mergers and acquisitions and offers personal, business and corporate banking as well as asset management, stockbroking and treasury services.

Egyptian education provider listed Sept

The Egyptian listings included an IPO of some 14.5m shares of Egypt’s Cairo for Investment and Real Estate Development company (CIRA) which was 18.9 times oversubscribed in September 2018. There was also a private offer for 192.5m shares which was 10.6 times oversubscribed, according to this story from African Markets website. The total offer was 207m shares at EGP6.00 each for a total of EGP1.2bn ($70.7m). CIRA is a private education provider in Egypt, targeting both the K-12 and the higher-education segments in six governorates, the main selling shareholder was the Social Impact Capital Ltd, according to Egypt Today.

Africa’s eurobond outlook 2019

A good overview of Africa’s  $92bn eurobond market, with a summary of 2018 and 5 key themes for 2019, written by Gregory Smith, Director and Fixed Income Strategist for Emerging Markets at Renaissance Capital, is available on LinkedIn.

Overall there are 20 African eurobond issuers with the largest issuers South Africa, Egypt and Nigeria, also Africa’s 3 largest economies.

About 2018, he wrote: “Despite the tough markets 2018 was a record year for African sovereign issuance and saw a growing preference for euro-denominated eurobonds, and longer maturity eurobonds. The $25.8 billion issued by African countries in 2018 makes up 28% of the current stock of African eurobonds. Angola, Egypt, Ghana, Ivory Coast, Kenya, Nigeria, Senegal and South Africa each issued 30-year paper.”

Source: Renaissance Capital

As highlighted previously, there were 2 upgrades in credit ratings for Eurobond issuers during 2018. S&P upgraded Ghana and Republic of Congo. However, Moody’s downgraded 5 countries: Angola, Kenya, Gabon, Tunisia and S&P and Fitch joined in downgrading Zambia.

Key trends Smith focuses on for 2019:

  1. International market turbulence is the top trend. It will be good news for many African countries if the US dollar gets weaker internationally and the US Federal Reserve holds back from raising US interest rates as much as previously anticipated. But there are global downside risks to issuers, including lower global growth impacted by strained US-China relations.
  2. Will key issuers make enough progress with economic reforms? Reforms such as lower deficits and adequate foreign exchange reserves are needed to support economic growth and make the debt sustainable. If markets get tough in 2019 (see previous), reforming economies do best. Check Smith’s list of 10 African Eurobond issuers busy with reform programmes under guidance of the International Monetary Fund (IMF) and the 2 issuers, Zambia and Republic of Congo, still talking but not ready to start IMF programmes.
  3. Policymakers’ skills at managing their debt, particularly as a period of heavy bond repayments begins in 2022 and remains high until 2025. Strong debt management skills include “economic policy coordination, an understanding of debt risks, a debt strategy, good data management, regular public reporting, good investor communication, a skilled team that can negotiate good terms with potential global lenders” as well as redeeming some debt ahead of maturity by longer term issues
  4. Elections in eurobond issuers this year (in approximate date order): Nigeria, Senegal, South Africa, Mozambique, Tunisia and Namibia.
  5. This year is unlikely to see as many eurobonds issued as last year. “Those most likely to issue in 2019 include Egypt, Angola, Ghana, and Kenya”.

For deeper analysis and more details and charts, see the original posting on LinkedIn here.

 NB Gregory Smith points out his views are for information, they do not constitute investment advice.

IPO report – Airtel Africa looking for $1.25bn in 2019

++ STORY UPDATED AFTER ARTICLE IN SUNDAY TELEGRAPH IN UK ON 3 FEB 2019 ++

Airtel Africa, a UK-based company, is on track for an initial public share offer (IPO) on an international stock exchange in 2019 expected to raise $1.25 billion. Last November 2018 the board announced it had appointed 8 global banks JP Morgan, Citigroup, BofA Merrill Lynch, Absa Group Limited, Barclays Bank PLC, BNP Paribas, Goldman Sachs International and Standard Bank Group for the IPO. It aims to value the African business at some $8bn.

The company has denied a report on Bloomberg that the IPO could be delayed from March 2019 for 6 months due to emerging markets turmoil.
By that date parent Bharti Airtel had raised $1.25 bn in pre-IPO placements to 6 global investors, according to a regulatory filing on the Bombay Stock Exchange (reported in Economic Times of India).

On 3 Feb, an article in the Sunday Telegraph newspaper suggested the IPO would come to the London Stock Exchange later in the year, after delaying the float because of volatility. At $8bn it would be the LSE’s biggest listing since 2017. It adds that Airtel Africa in January secured a further $200m investment from Qatar’s sovereign wealth fund to reduce cash borrowings ahead of the listing.

According to journalist Christopher Williams: “Airtel Africa has turned around in ¬recent years, after making heavy losses in competition with financially stronger players in Africa, including Vodafone-controlled Vodacom. In its most recent quarter profits doubled as mobile data consumption increased across its territories, building on its first full year of profit.”

For various reports, the IPO is expected to raise another $1.25bn. After the IPO Bharti Airtel will only hold some 65%, down from around 92%-93% at present. The pre-IPO investors include Warburg Pincus, Temasek, Singtel and Softbank Group International, according to the report. The money will be used to cut back debt and free up cash to combat rival Reliance Jio Infocomm in India.

Airtel Africa is the holding company for Bharti Airtel’s operations in 14 countries, including Kenya, Tanzania, Nigeria and Ghana. It is Africa’s second largest telco with over 94 million customers, and ranked in the top 2 carriers in most of the countries where it operates, offering 2G, 3G and 4G services, plus mobile commerce through Airtel Money.

In December, the tax authority in Niger had ordered the closure of Airtel Niger which has 4.4m customers, over a tax dispute. French-owned Orange said it had also been threatened with closure in Niger over a tax demand, according to this report.

Airtel also announced a new board from the parent company and the investors: Sunil Bharti Mittal, Raghunath Mandava, Akhil Gupta, Vishal Mahadevia, Alok Sama, Arthur Lang, Shravin Bharti Mittal and Richard Gubbins. In a press release it said the board: “brings extensive experience across industry verticals including – telecom & ICT, financial markets as well as in technology, software development and consultancy”.

African revenues rose nearly 13% for the quarter to September, and net income compared to a loss a year earlier.

Africans inspiring London Stock Exchange

Opening bell ceremony at London Stock Exchange for Companies to Inspire Africa 2019, credit LSEG

The London Stock Exchange Group launched the 2nd edition of its Companies to Inspire Africa Report, on Wed 16 Jan, identifying dynamic growth businesses in Africa to build an information database and showcase them to a global audience. Many speakers expressed sympathies after a terror attack in Nairobi on 15 Jan.

International Development Secretary, Penny Mordaunt MP, said the positive African launch was uplifting after the previous night’s “depressing” vote in Parliament: “Five of the world’s fastest-growing economies are African and by 2050 a quarter of the world’s population will live there. This growth presents unique opportunities for us all (see speech here)

“The Companies to Inspire Africa report highlights the leading private companies operating in Africa, which have the most inspiring stories and the strongest growth potential. By combining African-led ambition with British expertise we can unlock investment and create more jobs for Africa and the UK. This is a win for Africa and a win for the UK.”

David Schwimmer, CEO of LSEG, said: “These high-growth companies have the potential to transform the African economy and become tomorrow’s job creators. At LSEG, we are committed to helping companies realise that potential and we are pleased to highlight and celebrate the company success stories behind one of the world’s fastest growing markets.”

He highlighted LSE’s role as a huge centre for African businesses and governments to raise capital. Successes include hosting bond issuances for Nigeria, Egypt, Angola and Ghana, and in November 2018 Quantum Terminals (liquid gas storage, cleaner fuel for households) from Ghana succeeded in the first local-currency bond to list in London.

He also mentioned the ELITE programme, an international network for growth and funding options,   which has enrolled over 90 companies with 20,000 employees in 8 African countries. The programme was launched in 2016 with the Casablanca Stock Exchange and has expanded across West Africa with support from CSE and the Bourse Régionale des Valeurs Mobilières (BRVM).

About the report

The report is a 144-page book with great infographics and photos, put together by LSEG and Wardour.

It includes inputs by President Uhuru Kenyatta of Kenya and Prime Minister Theresa May of UK, plus many other key leaders working in Africa. It highlights a good number of exciting companies across Africa including innovative farming and even drones for agriculture, top consumer goods services and the size of the growing consumer goods market, many dynamic companies with women leaders, fintech, better banking and other financial services, healthcare, education, industry, renewable energy and technology and telecoms.

Partners to the report who helped with the selection and research are Asoko Insight and PwC. It was sponsored by African Development Bank, CDC Group, Instinctif Partners and Stephenson Harwood.

The 360 companies were selected from 4,000 nominations by LSEG’s partners, development finance institutions, venture capitalists, private equity firms, impact investors. Research partner Asoko Insight nominated some and helped with data collection and company information, according to CEO Rob Withagen. To be included a company had to be active and privately owned, with headquarters and primary operations in Africa. It must have demonstrated growth over last 3 years measured in: revenues, number of employees, operational output or geographical expansion. It needed to be audited by a recognized auditor and individual company or consolidated group annual revenue must not exceed $1bn for the years 2015-2017. It includes 97 Nigerian companies, 66 from Kenya, 31 Ugandan and 23 South African

The report is also launching in Lagos.

A comprehensive searchable database of the report, along with a downloadable PDF of the publication is available at www.lseg.com/inspireafrica.

London Stock Exchange Group has a long history of supporting the development of African capital markets and investment in African companies. To learn more, click here.

Companies to Inspire Africa 2019 report in numbers:

The report identifies 360 companies from 32 countries representing 7 major sectors. It highlights the entrepreneurial and dynamic landscape of the African private sector. Companies featured include small entrepreneurial businesses through to well-established corporations. A searchable database of the report and a downloadable PDF of the publication are available at www.lseg.com/inspireafrica. The first edition of the report was published in 2017.

•             Average revenue Compound Annual Growth Rate (CAGR) is 46% (up from 16% in 2017 report) and average employee CAGR at 25%, over three years, in 2019 report

•             23% of the companies are led by women, almost double the proportion in the 2017 report: Standout sectors where senior female executives are having a big impact are: healthcare & education, and financial services. Ten out of the 20 Ghanaian companies featured are led by women.

•             The fastest growing sectors are financial services (revenue growth rate 70%) and renewable energy (revenue growth rate 66%)

•             Consumer services is the most represented sector with 79 companies from 20 countries this year, reflecting the growth of sub-sectors such as consumer goods, food & beverages, leisure & tourism, media and retail, and the growing middle class in Africa

•             Agriculture remains an important sector for the continent with 53 companies, almost 15% of companies in report

•             Most companies per country are: #1Nigeria (97 companies) and #2 Kenya (66). Nigeria was already most companies in 2017, but strong representation from the industry and technology & telecom sectors

•             The companies in this year’s report are creating significant employment opportunities across Africa with each company employing an average of 363 people.

UK and Africa in 2019 – Penny Mordaunt speech

International Development Secretary launches London Stock Exchange report – Hon Penny Mordaunt MP speech highlights

  • Nearly a quarter of the companies led by women, almost double that of the 2017 report. Globally companies with greater gender equality also do better in income, growth and competitiveness.
  • Africa is alive with opportunity – 5 of the world’s fastest-growing economies are African and by 2050, a quarter of the world’s consumers will live there.
  • UK to host UK-Africa Investment Summit in 2019, leverage UK’s reach and unique value of the City of London to make the UK Africa’s finance partner of choice.
  • Developing Africa’s capital markets is essential for unlocking finance for infrastructure and investment that will support job creation and economic growth in the long term… but need to be supported by a well-regulated financial sector.
  • UK aid is mobilising private investment to deliver the Global Goals. CDC has committed up to £3.5bn of new African investments and Private Infrastructure Development Group (PIDG), backed by DFID, up to £300m.
  • UK ambition to help African countries raise debt in local currencies. Nov 2018 first Ghanaian Cedi-denominated bond listed to London, supported by PIDG.
  • Investments by DFID-backed Financial Sector Deepening Africa (FSDA) supported 38 local currency bond issues by private companies and financial institutions in 16 African countries, in agriculture, energy, housing, microfinance and infrastructure.
  • Remittances – estimate $66bn in remittances into Africa annually, approximately 10% from UK. We are investing £2m for MFS Africa, mobile money company that makes it easier and cheaper to send remittances to and across Africa.
  • CDC-backed Blue Skies is a leading producer of fresh cut fruits and juices and largest private-sector company in Ghana. It sells across Africa and trades with UK supermarkets. Investing in African companies is good for Africa and it is good for Britain too.
  • Developing investment products for public to support Global Goals.

Speech in full

From HM Government website
“After the events of last night in the House of Commons, which were rather depressing, I felt it was very important that I did something this morning that was uplifting, constructive with inspirational people and of which we could be very proud, and represented absolutely Global Britain. So, thank you David and the London Stock Exchange Group for inviting me to launch the Companies to Inspire Africa 2019 report.
“I would like to start by congratulating all the companies featured. From 32 countries, with 7 major sectors represented, you have been nominated as Africa’s most inspiring small and medium-sized enterprises. It is you and your successes that will demonstrate globally the opportunities that are increasingly present in Africa.
“I am particularly pleased that nearly a quarter of the companies in this year’s report are led by women, almost double that of the report published in 2017.
“And we know that globally companies with greater levels of gender equality also do better in terms of income, growth and competitiveness. And today I have had the pleasure of meeting many of the inspirational female business leaders named in the report. Companies like Lioness of Africa, which aims to support 1 million African women entrepreneurs to achieve success. As female leaders you are role models that can make change happen. I applaud and admire you all.
“All of us in this room know Africa is a continent alive with opportunity. Five of the world’s fastest-growing economies are African and by 2050, a quarter of the world’s consumers will live there. This opportunity is why we saw Ghana hosting an Investment Summit last year, attended by over 50 British companies. It is why the London Stock Exchange has partnered with African Securities Exchanges like Casablanca and Nairobi. And it is why the Prime Minister recently visited the continent spending her time with business and political leaders, entrepreneurs and young people as well as throwing a few shapes – there’s still time David, there’s still time.
“They told her that they wanted a modern partnership with the UK that delivers mutual benefit. By combining African-led ambition with British expertise we can do just that – unlocking high-quality investment that delivers more opportunities, exports and jobs for both Africa and the UK.
“Global Britain is committed to this new partnership with Africa. The Prime Minister announced a radical expansion of the UK government’s presence, bringing in trade experts and investment specialists to deliver on our shared interests and find solutions to the world’s biggest challenges.
“And later this year the UK will host the UK-Africa Investment Summit, which will bring together key government and business people from the UK and Africa to strengthen our links and make the most of the fantastic opportunities that are there. We want companies like you to play your part in the Summit to make it a game-changer for investment in Africa.
“We want to leverage the UK’s reach and unique value of the City of London to make the UK Africa’s finance partner of choice.
“The London Stock Exchange Group has shown strong partnership and leadership in this area, helping to build Global Britain. Through its Africa Advisory Group, the London Stock Exchange has brought together key business leaders, policymakers and investors from across Africa to take the steps needed to develop Africa’s capital markets. We look forward to working closely with the Group this year.
“Developing Africa’s capital markets is essential for unlocking finance for infrastructure and investment that will support job creation and economic growth in the long term. But these capital markets need to be supported by a well-regulated financial sector.
“When I was at the London Stock Exchange during the Commonwealth Summit last April I announced a new DFID partnership with the Bank of England and the central banks of Ghana, South Africa and Sierra Leone to share regulatory expertise and enhance financial stability, helping promote economic growth through increased investor confidence. We will continue to scale up our work with the Bank of England throughout the course of this year.
“UK aid is mobilising the private investment needed to deliver the ]Global Goals](https://www.globalgoals.org/) and that is why CDC, the UK’s Development Finance Institution, has committed up to £3.5 billion of new African investments, and why up to £300 million has been committed from the Private Infrastructure Development Group. These partnerships will lay the foundations for new trading and business opportunities.
“And when I was last here I announced the UK’s ambition to help African countries raise debt in their local currencies. In November we celebrated the first ever Ghanaian Cedi-denominated bond to list to London, made possible through the DFID-backed Private Infrastructure Development Group.
“Investments by the DFID-backed Financial Sector Deepening Africa has supported 38 local currency bond issues by private companies and financial institutions in 16 African countries, in a range of sectors such as agriculture, energy, housing, microfinance and infrastructure. Local currency finance listings such as these are contributing to increased financial stability by ensuring that growth is fuelled by lower-risk finance over the long-term.
“And we are committed to supporting innovative African companies to make it easier for finance to flow into and across the continent. It is estimated that US$66 billion in remittances flow into Africa annually, with approximately 10% originating in the UK. The transfer of money by foreign workers to their families in their home countries is a lifeline to many in Africa. But many are losing their hard-earned money to too high remittance fees.
“That is why we are announcing £2 million investment for MFS Africa, an innovative mobile money company that makes it easier and cheaper to send remittances to and across Africa. This is a clear example of the UK honouring its commitments to the G20 and Global Goals targets of reducing those costs.
“Our investments and partnerships are already bringing benefits for both Africa and the UK. The CDC-backed company, Blue Skies, features in the report and is a leading producer of fresh cut fruits and juices and is the largest private sector company in Ghana. It sells its produce across Africa, and also trades with UK supermarkets. You can find Blue Skies products in Sainsburys, Waitrose and on Amazon Fresh – a clear demonstration that investing in African companies is good for Africa and it is good for Britain too.
“The UK values such partnerships. We bring the technical knowledge of our professionals, and we bring the values of a compassionate global nation. Our values sit at the heart of our aid spending.
“In October I announced a new campaign to find out the appetite of British people who might want their savings or their pension to be used to support the Global Goals and to potentially deliver better returns for them. Over the coming months we will be speaking to financial institutions, savers, pension holders and the wider British public to help shape new investment products to deliver the Global Goals.
“This report demonstrates that great partnerships can lead to great things. Working together, the UK and Africa can generate private sector investment, which in turn is creating business and investment opportunities for both Africa and the UK.
“2019 is the year of significant opportunities to take those partnerships further – and I very much look forward to seeing the results. Thank you all very much.
Published 16 January 2019

Performance on African stock exchanges in 2018

We don’t need to tell you 2018 was rough for equity investors, particularly the last four months. Only 2 African exchanges managed to buck the global trend, as judged by this table of performance of main indices for investors looking for USD returns, although four had a positive return for local currency investors.

Source: www.investinginafrica.net, www.african-markets.com, own adjustments and stock ex websites. FIGURES ARE INDICATIVE ONLY, not exact.


In some of the exchanges, overall market performance was better for local investors, since the strong US dollar over the year as the Federal Reserve hiked rates helped depress returns of the stock exchange indices when rebased into US dollars in addition to pushing down prices as global investors turned away from frontier markets.


The soaraway success indices were the Zimbabwe Stock Exchange, where the index soared by 50.4% in US$ over the year, and nearby Malawi Stock Exchange, where it climbed 22.2%. The ZSE local index shows a US$ return but currency is not liquid and its value questionable, price rises on the ZSE have been inflated as many domestic investors feel the bourse provides part protection against inflation or currency decline.


Stock Exchange of Mauritius was close to breakeven, with a US based decline of 0.30%.


This was better than a drop of 6.20% in the S&P 500 index over the year, including more than 19% from its high in September 2018 and the worst December since 1931 when it fell 14.5% during the Great Depression.
Markets have trended more positive since the start of 2019, with world eyes on the Fed and how fast it raises a key interest rate, with a meeting of the Federal Open Market Committee due 29-30 January, global trade as the US-China trade war discussions continue, and economic data from Europe and China.


Close to the bottom of the chart is the JSE FTSE All Share Index, with a fall of 27.9% to US dollar investors, compared to a fall of 11.4% to investors focused on ZAR returns.

Regulated blockchain and commodity exchanges coming to Mauritius

GMEX Group is leading in plans to launch a revolutionary blockchain exchange platform in Mauritius with MINDEX Holdings Limited (MINDEX) linked to Mauritius International Derivatives and Commodities Exchange and Hybrid Stock Exchange Corporation Limited (HYBSE).

The new bourse will be called HYBSE International Marketplace. The partners are:
• MINDEX: a complete exchange, post trade and physical infrastructure, facilitating a variety of asset classes to be traded in Mauritius, supported by GMEX
• GMEX: a world leader in digital business and technology solutions for exchange and post-trade operators. GMEX serves as core of a network of stock exchanges and other trading and post-trade centres around the world.
• HYBSE: a global online marketplace based on blockchain technology that is part of the DIM-Ecosystem.

Daniel Liu of HYBSE and Hirander Misra of GMEX Group

According to the press release:
“The HYBSE International Marketplace will integrate blockchain solutions and technology with traditional financial industries providing a complete and governed ecosystem that digitalizes assets onto the Blockchain. This partnership will for the first time, enable institutional investors access to cryptocurrency ETF’s and other crypto-instruments.
“The following asset classes will be facilitated for trade in a digital tokenized format:
• Cryptonized shares
• Cryptonized currencies
• Commodities
• Indices
• Forex
• ETCs (Exchange-traded commodities)
• ETFs (Exchange-traded funds)
• CETFs (Crypto exchange-traded funds)

“SMEs (small and medium enterprises) will be able to use the HYBSE International Marketplace to seek capital by launching an Initial Blockshare Offering (IBO); a time-limited offer to purchase cryptonized-equities and other cryptonized-instruments, such as blockshares, from businesses registered on the HYBSE International Marketplace at special discounted rates.”

The decision to set up in Mauritius follows news that the regulator FSC will create new licensable activities for the Custodian of Digital Assets and Digital Asset Marketplace – see consultation paper issued in November 2018 – and provide a regulated environment for the exchange and safe custody of digital assets. The regulator in Mauritius has also issued guidelines on investment in cryptocurrency as a digital asset.

Hirander Misra, CEO of GMEX Group, commented: “He added, “We welcome the new regulatory framework for digital assets in Mauritius and we are thrilled to be at the forefront of market development as one of the first ventures to set up under the new regime. We are firmly convinced that there is a massive opportunity for Mauritius to position itself as a major global hub in this dynamic space underpinned by strong governance and regulation to ensure trust”.

In a blog post he noted that Mauritius has also set up a National Regulatory Sandbox Licence Committee to consider sandbox licensing of fintech activities. “Sham ICOs have to be stopped and robust KYC / AML processes and rules must be put in place. In addition technology if developed and deployed well can ensure that some of the crypto exchange hacks we have heard of in other parts of the world can be avoided. Ultimately the current regulatory confusion will correct itself as there will be a flight to quality to those jurisdictions with robust laws and regulations in place. The unregulated bucket shop exchanges with poor controls will cease to exist, as properly run and secure technology enabled digital exchanges and digital asset custodians come into the market to facilitate increased institutional business and wholesale retail business.”

Commodity platform – gold from mine to vault
In June, GMEX had announced it was part of the initial consortium to launch Mauritius International Derivatives and Commodities Exchange (MINDEX), which will become a multi-commodity and derivatives exchange platform. The Mauritius Financial Services Commission will exercise full regulatory oversight.
GMEX has been working closely with the British High Commission Mauritius and Department for International Trade (DIT) Mauritius since it opened a regional headquarters in Mauritius International Financial Centre (IFC) during 2017.

MINDEX Clearing will act as central counterparty clearing house (CCP) to clear all trades.

The GMEX consortium led investment in the MINDEX project amounts to $35 million to build a gold refinery, a secure vault, launch of an advanced technologically enabled spot exchange, derivatives exchange and clearing house. This is expected to create 104 direct jobs over 2 years and an additional 408 new secondary jobs over the next 2 years in Mauritius.

The Department for International Trade’s Minister for Investment Graham Stuart MP said: “As an international economic department, we are pleased to be working with GMEX in Mauritius on an investment which will sustain and create jobs in Mauritius and the UK. The MINDEX project will support an ecosystem which creates opportunities in gold mining, refining, storage, recycling, and in commodities trading and financial technology.

“We will continue support companies’ overseas investments where there is benefit to the UK by offering practical support to investors, facilitating introductions to ease market entry and using our expertise to explain political sensitivities and cultural differences to British businesses.”

Blockchain, crypto and the changes to stock exchanges in coming 2 years

Hirander Misra of GMEX, speaking at panel organized by lawyers Mackrell Turner Garrett on cryptocurrencies in London on 14 Nov, says: “We get 10 inquiries a week to set up a platform. The bar for setting up a blockchain or crypto exchange is moving much higher. In Mauritius and Abu Dhabi the bar is almost as high as for setting up a normal exchange.

“Digital currency is here to stay, in time some sovereign states will adopt it. In Venezuela, where currency collapsed, people have used bitcoin to get currency out, in Harare people have adopted it. Fidelity and others have started to dip their toes in the water.

“Independent crypto exchanges are opaque, it can be very expensive to get assets in and out. In the last 6-12 months, some of the big custodians have been getting involved, the large banks are going into custody, adopting own products, vaults, etc.

“We talk about ‘decentralized’ but everyone is protecting their own turf, we will end up in worse mess. It can be spaghetti.

“Securities exchanges are very much like they were 25 years ago, standalone, at the time when electronic trading came in. Unless you change you won’t be relevant. There will be change in the next 2 years.

“We still need for regulation and intermediaries, people still want institutions to be accountable. A lot of what we have done in last 30 years is still relevant, our challenge is to make it more efficient.”

GMEX
GMEX Group (GMEX) comprises a set of companies that offer leading-edge innovative solutions for a new era of global financial markets, providing business expertise, the latest technology, connectivity, and operational excellence delivered through an aligned partnership driven approach. GMEX uses extensive market infrastructure experience and expertise to create an appropriate strategic master plan with exchanges, clearing houses, depositories, registries, and warehouse receipt platforms. GMEX also offers the added benefit of interconnection to multiple partner exchanges, to create global networks of liquidity. GMEX Technologies is a wholly owned subsidiary of GMEX Group.