November 20th, 2014 by Tom Minney
Paternoster Square with London Stock Exchange at right (credit: Wikipedia)
The Nigerian Stock Exchange (NSE) this week (18 Nov) signed a capital markets agreement with the London Stock Exchange Group (LSEG) to support African companies seeking dual listings in London and Lagos. It follows implementation earlier in 2014 of a new settlement process between the UK and Nigeria which significantly boosts the efficiency of listing and trading of ordinary shares of Nigerian companies listed in London and those of UK companies on the Nigerian market.
A top LSEG executive said it shows the global investment community is rushing to be part of the Nigerian story.
The agreement was signed by Oscar Onyema, CEO of the NSE, and Nikhil Rathi, Head of International Development, LSEG. Also present was Sir Roger Gifford, Country Head for the European Bank SEB, former Lord Mayor of London, and Co-Chairman of the UK Government’s Nigeria Emerging Capital Markets Task Force and Nigerian co-chair Aigboje Aig-Imoukhede, President of NSE.
Gifford said, according to the press release: “This is exactly the sort of ambitious project the ECMT Nigeria was launched to support. Nigeria is without doubt one of the most promising opportunities for capital markets development worldwide.
“An effective, transparent and well-governed capital market – across all asset classes – has the capacity to catalyse a nation’s quest for growth and development. In particular, functioning markets for corporate equity and debt reduce the dependence on bank capital and make investment securities available to a broader range of investors: institutional, private and international. This agreement will build on existing strong commercial and economic ties between the UK and Nigeria to our mutual benefit. ”
Mot of the previous dual-listings have listed on London’s AIM market although the milestone April dual-listing of Seplat (see below) saw Seplat head for the main market.
Onyema said: “Today’s agreement is another major step towards our goal of ensuring that all companies that have substantial operations in Nigeria are accessible to both Nigerian and international investors. In addition, we will be ensuring that our leading companies achieve the global profile and international institutional investment they deserve.”
The 9 Nigerian or Nigeria-focussed companies quoted on LSE have a collective market capitalisation of $14.2bn and include 6 oil & gas explorers and 3 major Nigerian banks.
The press release also quoted Rathi: “The agreement signed today is a reflection of the global investment community’s strong desire to be a part of the Nigeria story. As the world’s most international exchange, LSEG looks forward to building on the success of existing dual listings in Nigeria and London and partnering with the NSE to showcase the rapid developments in Nigerian capital markets and the Nigerian economy.”
Seplat dual-listing helping Nigeria bourse towards N1 trillion
Indigenous oil company Seplat was the first to make use of the linkages in April, when it raised $500 million in an Initial Public Offer (IPO) on both exchanges. Euromoney reported it was the first dual-listing and largest IPO from southern Africa since Dangote Cement in 2010. The London end was advised by BNP Paribas, Standard Bank, Citi and RBC Capital Markets, the Nigerian listing by Renaissance Securities and Stanbic IBTC.
The IPO added N28 billion ($161m) to the NSE market capitalization. The bourse aims to reach N1 trillion ($5.7 billion) by 2016 with oil and gas firms a key target.
Euromoney quoted Dolapo Oni, energy research analyst at Ecobank: “To list on the main board in London, Seplat required international accounting standards and the highest levels of corporate governance and transparency, which it has aimed for from its inception in 2009. Many other Nigerian companies are still not comfortable with disclosing this much information to the public and thus are not good enough to list on the main board.”
Miguel Azevedo, head of investment banking Africa at Citi, added: “It also represents the return of the sector to the London market, which hasn’t had a significant oil and gas listing since the financial crisis. Seplat really creates a new benchmark for international companies coming to the market.”
UK pushes emerging capital markets
UK Chancellor George Osborne announced the Emerging Capital Markets Taskforce on 9 April. It aims to unlock new opportunities for the UK financial services sector by helping to open and deepen capital markets in emerging economies through innovative collaboration between Government and private sector. This is part of the strategic public-private sector Financial Services Trade and Investment Board (FSTIB) launched in 2013 and chaired by HM Treasury. More details can be found via the FTSIB website.
November 20th, 2014 by Tom Minney
According to the London Stock Exchange, the listings of companies focussed on sub-Saharan Africa total 115 companies:
• 26 companies on the Main Market
• 3 Global Depository Receipt (GDR) listings on the Main Market
• 2 GDR listings on the Professional Securities Market (PSM)
• 84 companies quoted on AIM, the growth market
The LSE headquarters are in London and it has significant operations in Italy, France, North America and Sri Lanka and employs approximately 2,800 people.
In its press release about a link-up with the Nigerian Stock Exchange, the London bourse says it offers partner securities exchanges and investors a broad range of international equity, bond and derivatives markets, including London Stock Exchange; Borsa Italiana; MTS, Europe’s leading fixed-income market; and the pan-European equities platform, Turquoise. Through its markets, the Group offers international business, and investors, unrivalled access to Europe’s capital markets.
Increasingly important are the post-trade and risk-management services including CC&G, the Rome headquartered central counterparty clearing house (CCP) and Monte Titoli, the significant European settlement business, selected as a first wave participant in the T2S (TARGET2-Securities) European settlement engine that aims to offer centralized delivery-versus-payment. The Group is also a majority owner of LCH.Clearnet, the leading multi-asset global CCP.
LSEG offers its customers an extensive range of real-time and reference data products, including SEDOL, UnaVista, Proquote and RNS. It owns FTSE which calculates thousands of unique indices that measure and benchmark markets and asset classes in more than 80 countries around the world. African exchanges have recently been taking strong interest in FTSE products that will help their visibility and data flows.
By purchasing Sri Lanka’s MillenniumIT trading, surveillance and post trade technology some years ago, the LSEG established itself as a leading developer of high performance trading platforms and capital markets software. According to the LSE press release over 40 other organizations and exchanges around the world use the Group’s technology, although smaller African such as the Dar es Salaam Stock Exchange are switching to other systems as reported on this blog, as Millennium IT’s focus changes.
October 31st, 2014 by Tom Minney
China rolling stock for Ethiopia (photo from: www.tigraionline.com)
The Ethiopian Government recently closed a $865 million financing package to fund part of the development of the country’s giant new railway infrastructure. One banker on the deal was reported by Reuters as saying: “This is a huge financing for Ethiopia, it is the first commercial deal of this size we have seen. Banks have a growing appetite for the Ethiopian market and we expect to see more deals like this.”
ERC is busy with 8 railway routes stretching 5,060 km, at a cost of $2m-$3m per kilometre. This includes rebuilding the Addis Ababa-Djibouti railway and lines heading north and south-west. A 36.5km mass transit railway is also being built in the capital, Addis Abeba.
The latest financing is split between a $450m commercial loan for 7 years, which includes a syndicate of lenders from Europe, Africa, the Middle East and the US, and pays 375 basis points over Libor. There is also a $415m 13-year loan backed by the Swedish Export Credit Guarantee Board (EKN) with Eksport Kredit Fonden (EKF) and Swiss Export Risk Insurance (SERV) export-credit agencies also included. The financing will be used to build the Awash-Weldia/Hara Gebeya Railway Project, one of the key railway corridors that will form part of the national railway network and connect northern and central parts of Ethiopia.
Turkey’s global rail company
Parastatal Ethiopian Railways Corporation (ERC) is undertaking the project construction, which will be built in the next 3 years. Turkey’s Yapi Merkezi Insaat ve Sanayi AS is the appointed contractor on the project and will design and construct the 389km railway line starting north east of Awash and going north through Kombolcha to Weldia under a 3-year $1.7bn project signed with ERC in Dec 2012. It will connect with the Addis Abeba-Djibouti line being built and with the Woldia/Hara Gebeya-Semera-Dicheto-Elidar project which will connect northern Ethiopia with Tajourah port in Djibouti, according to this report.
Credit Suisse acted as co-ordinating commercial facility arranger and export credit agency facility lead arranger. Some of the loans have already been disbursed. In addition, Deutsche Bank was the mandated lead arrangers for the EKF financing ($181m), ING Bank for the EKN financing ($83m) and KfW IPEX-Bank for SERV backed facilities ($151m).
In addition, Turk Eximbank provided a parallel financing of $300 million for the Turkish goods and services under the same project. Yapi Merkezi is a leading transportation infrastructure company and built the Dubai Metro Project, Casablanca tramline and Ankara-Konya high-speed rail line.
The financing has also been arranged under the OECD Common Approaches for Officially-Supported Export Credits and Environmental and Social Due Diligence which commit OECD countries to taking environmental and social impacts into account when granting officially supported export credits.
China’s $3bn finance to reach Djibouti
Export-Import Bank of China has pledged loans totalling $3bn to support Chinese railway construction companies on the 756km line from Addis to Djibouti, according to this in-depth overview of Ethiopian and Chinese relations. It runs parallel to the abandoned Imperial Railway Company of Ethiopia track built between 1894 and 1917. China will also provide most of the rolling stock, including locomotives worth millions, according to this story in Financial Times.
India to add $300m
In June 2013, India’s Exim Bank approved a $300m loan at 1.75% interest to finance a link from Asaita (670km from Addis) to Djibouti’s planned port at Tajourah. Debo Tunka, deputy CEO and head of infrastructure development at ERC reportedly said: “The new line will be very important for Ethiopia because it will give us an access to a second port and boost economic activities in the country,” The credit will be released once feasibility studies are done and contractors are still to be appointed. Tajourah will have a dedicated terminal for shipments from Allana Potash which is developing a $642m potash in northeast Ethiopia, according to Bloomberg.
October 30th, 2014 by Tom Minney
China is to build a huge new port and special economic zone in Tanzania worth at least $10 billion. Construction is due to start on 1 July 2015 as the country bids to rival Kenya’s Mombasa as transport hub for East Africa and is also investing in road, railways and major developments in commercial capital Dar es Salaam, 60 kilometres south.
Last Sunday, 26 Oct, the construction agreement for the port and associated 22,000 acres zone was signed in Shenzhen, southern China, with Tanzanian President as witness. According to a statement from the Office of the President, reported on Reuters: “The Tanzanian Government signed a memorandum of understanding with two major international institutions … to develop the Bagamoyo economic zone”.
It was signed with
• China Merchant Holding International (CMHI, based in Hong Kong) which claims to be “the largest public port operator in China and… leading… in the global port industry”. and
• State General Reserve Fund (SGRF) of Oman, the sultanate’s biggest sovereign wealth fund.
An earlier report on website Aid Data said the agreements also covered CMHI building railway infrastructure leading up to the port and the economic zone. Initial financing was $500m in 2013, supplied by Export-Import Bank of China.
Dar es Salaam harbour. Photo: Tom Minney
A framework agreement between Tanzania and the Chinese port operator had been signed when Chinese President Xi Jinping visited Tanzania in March 2013, the first country on his African tour soon after his inauguration.
An official said it had taken time to set a start date for building work because of other negotiations about infrastructure to link the port to national transport networks. Li Jianhong, executive chairman of CMHI, asked Tanzania’s Government at the signing of the contract to remove obstacles that have delayed implementation. President Kikwete said in the statement: “We will do everything possible to ensure that this project takes off because it will bring enormous economic benefits to the entire country,” according to Reuters.
Separately, Tanzania and China on 24 Oct signed deals with Chinese firms worth more than $1.7 bn, including one to build a satellite city to ease congestion in Dar es Salaam, deepening Beijing’s ties with east Africa. China is financing a $1.2 bn natural-gas pipeline that will run 532 km and in 2011 China’s Sichuan Hongda Co Ltd signed a $3bn deal with Tanzania to mine coal and iron ore. The new port is expected to handle 20 times more cargo than the existing port at Dar es Salaam, according to Aid Data website. It will act as a hub for raw materials coming in and out neighbouring landlocked countries, as well as bringing Chinese manufactured goods into the region, according to this earlier investigative report.
The report also said there were questions after the new port was pushed through Parliament by the ruling party with little debate. Apparently Dar es Salaam port is underused and with enough capacity until 2016-2020 depending on traffic. Other ports such as Tanga in the North and Mtwara in the South are dormant. Bagamoyo is a historic town.
The Bagamoyo agreements include large container and vehicle facilities, combined with smaller scale dry bulk and multi-purpose terminals at Mwambani Bay. It plans to handle more than 20m containers per year and also includes construction of a standard-gauge railway link to the central corridor railway at Ruvu Station and an extended link with the TAZARA railway. A highway to link the port to the Uhuru Highway that goes to Zambia will also be built.
China will have control of the port for 40 years. It provides access to 8 countries as Tanzania borders Mozambique, Malawi, Zambia, DR Congo, Burundi, Rwanda, Uganda and Kenya, with cargo uptake as far as South Sudan, The Comoro islands, Madagascar and the Seychelles. Journalist Shermax Ngahemera writes: “For China, the leading exporter in the world, it is an ideal site… China is widely involved in extraction industry in central Africa, especially in Zambia, the DR Congo and Angola. Cargo to and from those countries can therefore easily be diverted to Bagamoyo. In 2013 trade between Africa and China reached more than $200bn.”
He dismisses claims that it could have military significance, quoting a senior retired Navy General pointing out that at 14metres it could not berth a submarine. He also quoted the African Development Bank which says transporting supplies in East Africa is more expensive than in any other region, due to inefficient operations at ports in the region, road checkpoints and border controls. Shipping to Tanzania is 25% more than shipping to the larger and more efficient ports in Southern Africa.
China built the TAZARA railway linking Tanzania and Zambia in the 1960s and 1970s.
There are more details on this blog.
October 19th, 2014 by Tom Minney
Johannesburg Stock Exchange (credit: JSE)
The Johannesburg Stock Exchange (www.jse.co.za) equity market scored a record number of 395,969 securities trades on 16 October. The total value was just over R24.6 billion ($2.2 bn).
The previous record of one day’s trading on the JSE Equity Market was just under 300,000 trades on, but the average number of trades per day during 2014 is approximately 176,000 per day on the equity market.
Leanne Parsons: Director Trading and Market Services at the JSE, says in a press release that the JSE’s trading systems handled the large number of transactions without any difficulty: “Records like this show that the JSE continues to provide a stable, credible and world class trading platform as well as access to a very liquid market with deep pools of capital.”
The JSE offers a fully electronic, efficient and secure market and is the world’s best-regulated exchange. It has world-class trading and clearing systems, settlement assurance and risk management. It has been a marketplace for trading financial products for 125 years, connecting buyers and sellers in equity, derivative and debt markets and is in the world top 20 exchanges for market capitalisation and a member of the World Federation of Exchanges (WFE).
October 13th, 2014 by Tom Minney
BRVM in Abidjan (photo: AfricanCapitalMarketsNews.com)
Total Senegal is bringing the first initial public offer (IPO) of shares to the growing Abidjan-based Bourse Regionale des Valeurs Mobilieres (BRVM) since 2010, with shares on sale until November. Parent company Total Outre-Mer is selling 8.9% of the shares in the oil products company , in a share offer that began 8 Oct and closes 7 Nov.
Reuters quotes Odile Sene Kantoussan, chief executive of brokerage company CGF Bourse, based in Dakar, saying: “This operation … consists of the divestment of 290,000 shares held by Total Outre-Mer in Total Senegal’s capital..The shares will be listed on the (BRVM) alongside 22% of the capital representing the stake of minority shareholders, bringing the floating capital on the Bourse to 30.9%. ” The ordinary shares each cost XOF 12,000 (CFA franc) equivalent to USD 23.19, with a minimum subscription of 5 shares, according to this announcement by Compagnie de Gestion Financière (CGF Bourse), which is sponsoring broker and Société de Gestion Intermédiation (SGI) in a syndicate of 20 brokers placing the shares. Initial priority is giving to investors in Senegal before extending across the CFA zone. The shares have XOF 1,000 nominal value according to the information memorandum available here. The transaction value is XOF 3.48 billion ($6.7million).
Total has already listed its Ivory Coast subsidiary among the 37 companies listed on the BRVM which trades securities from 8 nations across the West African region.
According to another news report by Agence Ecofin, Gabriel Fal, Chairman of the BRVM and Edoh Kossi Amenounve, CEO, hosted a ceremony for the offering on 10 Oct. It reports that the BRVM’s market capitalization has soared past XOF6 trillion ($11bn) driven by demand for Sonatel – the previous Senegalese listing in 1998 – and capital increases by subsidiaries of Bank of Africa group.
Gabriel Fal, Chairman of the BRVM (photo: BRVM)
In April Fal was reported to forecast other potential BRVM listings could include Ivorian banks, Banque Internationale pour l’Afrique de l’Ouest en Cote d’Ivoire and Societe Ivoirienne de Banque, 51% owned by Morocco’s Attijariwafa Bank, as well as Matforce, a Senegalese company which provides energy equipment, an insurance company based in Dakar and a Canadian gold mining company operating in Cote d’Ivoire.
After the sale and listing, Total Outre-Mer will own 23.1% and Total Africa Limited will own 46%.
See the CGF Bourse website
for details on the share offer.
October 10th, 2014 by Tom Minney
The Board of Directors of the Nairobi Securities Exchange appointed Andrew Wachira as the Acting CEO of the exchange, effective from 1 Oct 2014. Peter Mwangi left on 30 Sept, as reported on this blog. The process to recruit a permanent Chief Executive is ongoing.
According to the NSE announcement, lawyer Mr. Wachira has over 10 years’ experience at the Nairobi exchange. He has been the Head of Compliance and Legal Department, NSE since 2009. He has a Bachelor of Law Degree from the University of Nairobi and is an Advocate of the High Court of Kenya. He is a member of the Law Society of Kenya.
Board Chairman Mr. Eddy Njoroge said: “Andrew has been instrumental in the implementation of a number of key initiatives at the exchange. His experience, leadership skills and wealth of knowledge will ensure a smooth transition for the exchange. As we formalise the substantive recruitment of a Chief Executive, we are confident that he will execute this interim position commendably.”
History pic – Nairobi SE in 2009 (credit www.businessdailyafrica.com)
October 10th, 2014 by Tom Minney
The Nairobi Securities Exchange (www.nse.co.ke) is trading corporate bonds and Government of Kenya treasury bonds on an automated trading system. It marks another step forward for South Africa’s financial software development company Securities Trading & Technology Pty (STT), which also supplies the STT bond trading system used by the Johannesburg Stock Exchange (JSE), Africa’s most liquid bond market.
The new system allows on-line trading of debt securities and is integrated with the settlement system at the Central Bank of Kenya (CBK) for treasury bonds. It offers true delivery-versus-payment (DVP) to mitigate risk. In August 2014 the NSE increased the number of settlements in treasury bonds to 3 per day, with settlements at 11:00, 13:00 and 15:00 each day so that a bond trader can buy a Kenyan treasury bond and sell it the same day.
The new STT automated trading system (ATS) also is efficient, scalable and flexible, and supports trading in bonds that have been issued in different currencies.
Peter Mwangi, CEO of the Nairobi bourse, said in a press release: “This is a significant step towards the exchange’s goal of ensuring that the secondary market becomes more transparent and the price-discovery mechanism is beyond reproach.
“The multicurrency trading functionality of the new system means that foreign-denominated bonds can now be listed and traded on the NSE. With this development, we look forward to the listing of the Government of Kenya Sovereign Bond at the exchange.” He was referring to Kenya’s debut $2bn Eurobond that was successfully floated on the Irish Stock Exchange in June after attracting bids for 4 times the initial target.
Nairobi’s stock market was reported to be working with the Central Depository and Settlement Corporation (CDSC) and the CBK for settlements of corporate bonds.
It also follows the South African practice and allows reporting of bond prices by yield (i.e. the current interest rate to investors). According to an earlier report in Standard Media, Mr Mwangi said: “the bond trading system.. will allow reporting of bond prices by yield… Decision-making will be faster and this should spur further liquidity in the bond market.”
The STT system supports market-making, a 2-way-quote trading model, ability to integrate with regulators’ surveillance systems and ability to report transactions that are concluded over-the-counter (OTC) for purposes of settlement.
In enhancing the bond trading system, the Nairobi Securities Exchange acknowledges the vital role that a vibrant secondary market for active African bond trading continues to play in raising long-term capital for the Government and corporate entities. County governments can also use the same system to raise capital through issuing and listing county bonds.
Ms. Michelle Janke, Managing Director of Securities Trading & Technology said: “I am delighted to have partnered with the NSE, all teams have put in an enormous effort to take the market live”. The market went live on 26 September.
The Dar es Salaam Stock Exchange went live using the STT system on 27 June, as reported on this blog, after switching from Millennium IT system.
October 9th, 2014 by Tom Minney
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October 9th, 2014 by Tom Minney
Ethiopia’s Finance Minister Sufian Ahmed has been meeting international banks about a planned Eurobond issue for the end of this year or early 2015. The advisors are likely to be Barclays, Citi and BNP Paribas. The are currently no details on the amount to be raised but the duration is likely to be “at least 10 years”.
Finance Ministry spokesperson Haji Ibsa told Reuters: “We are aiming for late December to early January at the latest as the time for our debut into the international capital markets.. Bonds are very much part of the plan to improve infrastructure.” He mentioned plans for railway, road and power links with neighbours such as Djibouti and Kenya.
Earlier this year Ethiopia achieved favourable international ratings. Fitch rating agency assigned a long-term foreign and local currency Issuer Default Debt Rating (IDR) of “B” with stable outlook, compared with Kenya’s ‘B+’ which issued a heavily oversubscribed $2 billion Eurobond in June 2014, according to Reuters. Standard & Poor’s (S&P) assigned “B/B” foreign and local currency ratings and also said the outlook was stable, see our May story here.
The Economist Intelligence Unit remains less optimistic, giving Ethiopia a rating of CCC, but it says the bond is likely to prove attractive to investors, as have other African issues.
According to the EIU: “The financing of similar schemes under the country’s Growth and Transformation Plan (GTP) has already seen external debt as a percentage of GDP treble over the past five years, to an estimated 33.9% in 2013, and the government hopes that issuing a Eurobond will both diversify sources of credit and help rebrand the country, thus attracting more international companies to operate there.
“If successful, the bond will reduce Ethiopia’s reliance on domestic borrowing, and suggests a slight moderation of the government’s previous determination to finance the 2010-15 GTP, and any successor programme, domestically, largely via direct central bank financing and by forcing private banks to purchase Treasury bills. However, it is unlikely that this will translate into a broader rethinking of the government’s commitment to a state-driven growth model or its insistence that certain key sectors, including banking and telecommunications, remain off limits to foreign firms. It would appear, therefore, that limits will remain on the government’s stated aim of rebranding the country and attracting a broader range of foreign operators.”
The EIU refers to Ethiopia’s strong economic growth rates, market size and substantial untapped resources. “However, we continue to flag the possibility that the government will struggle to fund its substantial infrastructure requirements and that, in the medium to long term, the authorities may have to cut spending significantly or return to the IMF for financing.”
In May Fitch was upbeat “Fitch expects real GDP growth of 9% in 2014 and 8% in 2015. Ethiopia’s growth over the medium-term can be sustained by large, untapped resources, including large hydro-electric potential”. However, it also warned about private sector weakness and inadequate access to domestic credit as limiting growth potential over the medium-term as public investment slows.”