London Stock Exchange allowed to give Hong Kong brokers direct access

The London Stock Exchange has been licensed by Hong Kong’s Securities and Futures Commission to operate as an alternative exchange operator. This means that brokers based in Hong Kong can join as direct members of the LSE and trade for Hong Kong clients in LSE-listed stocks and fixed-income products, provided they meet requirements. They will also get access to the LSE derivatives market, according to this Reuters story.
LSE chief executive Alexander Justham said on Monday (15 June), according to a report in South China Morning Post: “The SFC license is an important move for the London Stock Exchange to further develop our business related to Hong Kong and Chinese companies.”
He expects the new links would encourage more mainland firms to list for trading on the LSE as well as more dim sum bonds, which could create more competition for Hong Kong Exchanges and Clearing. He said: “The London Stock Exchange is not a competitor to Hong Kong but we could have a cooperation relationship.”
Two Hong Kong financial firms are members of the London Stock Exchange through branches in London and 57 mainland Chinese firms are listed. The LSE signed a memorandum of understanding with 4 companies – Agricultural Bank of China, Bank of China, China Construction Bank, and Haitong Securities – to help bring more Chinese firms to list in London.
London is developing as a trading hub for yuan.
The LSE has a list of its 883 members based in various countries around the world.

Africa Progress Panel urges triple energy win – for people, power and planet

APP_KA_quote

Africa is a potential low-carbon superpower and can show the world how to fight poverty, grow economies and fight climate change at the same time. It is a crucial message for 2015, when critical climate talks will set the future direction of the world’s weather and world leaders commit to achieving sustainable development goals.

Kofi Annan’s Africa Progress Panel today (5 Jun) issues its report Power, People, Planet: Seizing Africa’s Energy and Climate Opportunities. It calls on governments, private investors, and international financial institutions to unlock the Africa’s vast potential for renewable and a low-carbon energy and fight poverty by delivering universal access to electricity by 2030. The report is available for download here.

Source: Africa Progress Panel

Source: Africa Progress Panel

The report says Africa does not have to choose between economic growth and low-carbon energy development. Just as the continent leapfrogged decades of telecoms development with cheap rollout of mobile telephony, Africa has the sun, wind, water and geothermal resources to fire up energy without damaging the world climate.

Power against poverty
Many Africans cannot escape poverty because 621 million of them do not have access to electricity and they pay a heavy price in resources, time and environmental decline for energy such as firewood, which they use for lighting and cooking. A rural woman in northern Nigeria spends around 60 to 80 times more per unit of energy consumed than a resident of New York or London.

“Our report calls for a 10-fold increase in power generation by 2030,” said Mr Annan, adding: “Africa needs to utilize all of its energy assets in the short-term while seizing the opportunity to put in place the foundations for a competitive, low-carbon energy infrastructure.”

The Africa Progress Panel report highlights the scale of Africa’s energy deficits. Power shortages cut the region’s growth by 2-4 per cent a year, holding back job creation.

Electricity consumption in sub-Saharan Africa (excluding South Africa) is less than that of Spain. On current trends it will take until 2080 for every African to have access to electricity. The APP report identifies Ethiopia, Kenya, Rwanda and South Africa as emerging front-runner countries in the global transition to low-carbon energy.

There is a $10 billion-a-year opportunity in tackling deficits and the report authors estimate that households living on less than US$2.50 a day collectively spend this amount on energy-related products, such as charcoal, candles and torches.

Source: Africa Progress Panel

Source: Africa Progress Panel

“This is market failure on an epic scale. Low-cost renewable technologies could slash the cost of energy, benefiting millions of poor households, creating investment opportunities, and cutting carbon emissions,” said Mr Annan. “African governments should take responsibility for tackling corruption in energy utilities, strengthening energy governance to facilitate private investments, and increasing investment in energy infrastructure.”

The report urges African governments to redirect the US$21 billion spent on subsidies for loss-making utilities and electricity consumption for the rich, towards connection subsidies and renewable energy investments geared towards the poor.

It estimates the energy-sector financing gap will be US$55 billion each year until 2030. The panel members call for strengthened international cooperation and a global connectivity fund to reach an additional 600 million Africans by unlocking private investment and expanding public investment in on-grid and off-grid energy provision. Aid donors and financial institutions can do more to unlock private investment through risk guarantees and mitigation finance.

Time to end “climate negotiations poker”
Africa brings a message of hope for December’s climate talks, set for Paris. The world’s leaders must commit and act to implement agreements to cut emissions and limit global average temperature increase to 2OC above pre-industrial levels. Africa contributes the least to man-made climate change and already endures the worst effects such as droughts, floods, falling crop yields and rising temperatures. A bigger increase would mean these changes could spiral out of control within a few years.

The African Progress Panel report challenges African governments and the international community to scale-up the level of ambition ahead of the summit. It recognizes that the EU, the US and China have raised their levels of ambition but says current proposals fall far short of a credible deal for keeping global warming within the 2ºC limit. It condemns Canada, Australia, Russia and Japan for effectively withdrawing from constructive engagement of climate.

APP member Bob Geldof contrasted the “comfort blanket mood music” surrounding the Paris climate summit with current policies: “G7 and G20 governments tell us they want a climate deal. Yet the same governments – the UK, the United States, Germany, China, Brazil and India – are spending billions of dollars of taxpayer’s money subsidizing the discovery of new coal, oil and gas reserves. They should be pricing carbon out of the market through taxation, not subsiding a climate catastrophe that threatens the lives of millions of Africans and jeopardizes our children’s future.”

“This is a moment for bold global leadership and decisive action by governments around the world,” said Mr Annan. “Playing poker with our planetary and the lives of future generations is not a smart move.”

Announcing the winners – African Banker Awards

All the winners with Omar Ben Yedder (source - IC Publications)

All the winners with Omar Ben Yedder (source – IC Publications)

Congratulations to the winners of the 2015 African Banker Awards announced in Abidjan on 27 May. It is always a privilege to be a judge and I am very impressed with so many of the excellent business ventures and projects, including billion-dollar infrastructure plans and connectivity for tens of millions of Africans. Competition is very hot and all of the short-listed entries for this year’s ninth awards were excellent.

Morocco’s Groupe Banque Populaire triumphs as 2015 African Bank of the Year and Ghana’s Albert Essien, Group CEO of Ecobank, wins the award for African Banker of the Year. Tidjane Thiam, from Cote d’Ivoire and the first African CEO of a FTSE100 company, wins the African Banker Icon award and Nigeria’s Jim Ovia, Chairman of best-performing Zenith Bank wins the Lifetime Achievement category.

Groupe Banque Populaire has recently taken a major stake in West African group Banque Atlantique and helped to turn around its performance significantly. Essien inherited a bank in a precarious position last year, but has managed to steady the ship and bring in some important shareholders to strengthen Ecobank’s capital base. Thiam is the CEO of Prudential insurance and shortly to become CEO of bank Credit Suisse.

The awards were hosted by African Banker magazine at a gala dinner in Abidjan, Cote d’Ivoire, with over 500 people there including Ministers, Central Bank Governors and the CEOs of some of Africa’s leading Banks and financial institutions.

Here is the full list of winners:
African Bank of the Year
Groupe Banque Populaire – Morocco

African Banker of the Year
Albert Essien, Group CEO Ecobank (ETI)

Lifetime Achievement Award
Jim Ovia Chairman, Zenith Bank – Nigeria

Finance Minister of the Year
Hon. Claver Gatete – Rwanda

Central Bank Governor of the Year
Prof Njuguna Ndung’u – Kenya

African Banker Icon
Tidjane Thiam, former Finance Minister of Cote d’Ivoire and CEO of Prudential

Best Regional Banks in Africa

Best Bank in North Africa
Attijariwafa Bank – Morocco

Best Bank in West Africa
Orabank

Best Bank in Central Africa
Groupe BGFI Bank – Gabon

Best Bank in East Africa
Bank of Kigali – Rwanda

Best Bank in Southern Africa
Banco de Comercio e Investimentos – Mozambique

Best Retail Bank in Africa
Standard Bank – South Africa

Investment Bank of the Year
Rand Merchant Bank – South Africa

Award for Innovation in Banking
Millennium BIM – Mozambique

Socially Responsible Bank of the Year
BMCE Bank – Morocco

Award for Financial Inclusion
Fondation Attawfik – Morocco

Deal of the Year – Equity
Seplat IPO, Standard Bank

Deal of the Year – Debt
$850m Commercial and ECA Backed Financing Package for the Ethiopian Railways Corporation, Credit Suisse

Trade Finance Deal of the Year
$1.3bn Petroleum Export Limited Syndicated Pre-export Facility, Commercial International Bank (CIB) – Egypt

Infrastructure Deal of the Year
CENPOWER – KPONE IPP, Africa Finance Corporation – Nigeria

Best Islamic Finance Initiative
Senegal Sukuk, Citi and ICD

MasterCard International supported the event and MasterCard Division President for Sub-Saharan Africa, Daniel Monehin said: “We believe that the African Banker Awards understands precisely what excellence in banking means – one only has to consider the Award winners and nominees tonight. This is why we are proud to support these Awards, where we recognize and commemorate our banking colleagues who have, in the last year, provided us with outstanding examples of progress towards our shared goal of banking excellence.” Ecobank/Nedbank, Banque Internationale pour l’Afrique au Congo (BIAC), Banque Altantique, Groupe Banque Centrale Populaire, GT Bank and Coris Bank International also supported the Awards, along with ECAir, Sopra Banking Software and Travelex.

Omar Ben Yedder, Publisher of African Banker thanked the sponsors and the judging panel which this year included Ade Adebajo, Consultant, Debt Capital Markets – Africa; Koosum Kalyan, Chairman, EdgoMerap Pty Ltd; Tom Minney, Editor, African Capital Markets News & African Growth Partners Ltd; Alain le Noir, CEO – Finances Sans Frontières; Zemedeneh Negatu, Managing Partner – Ernst & Young Ethiopia; Michel Losembe, President – Congolese Association of Banks; Paul Derreumaux Honorary President – Bank of Africa Group and Christopher Hartland – Peel, Principal – Hartland-Peel Africa Equity Research.

Ben Yedder said “We have a fantastic crop of winners once again and they are widespread in terms of countries. East Africa won two coveted awards: the Minister of Finance and Central Bank Governor categories for Rwanda and Kenya, respectively. Morocco had a strong showing with four awards. Mozambique did well winning two awards in the most innovative bank and best bank in Southern Africa categories. It is great to see banks and financiers rise to the challenge to keep innovating and having a positive impact on Africa’s growth. The growth story will depend on a strong and resilient banking system, one that is both bold and responsible. We see plenty of these qualities amongst our winners tonight.”

Launch of Africa Progress Panel report 5 June

APP_2015_countdown_9APP_KA_quote

For more information, see Africa Progress Panel. The ground-breaking Africa Progress Report Power, People, Planet will launch 5 June – energy poverty, the effects and future of climate change, and Africa’s vast sustainable energy.

Putting aside billions – Africa’s sovereign wealth funds

Sovereign wealth funds are sprouting across Africa – 15 countries have created funds in the last 20 years, managing a total of $159bn at the end of September 2014.

Angola, Nigeria, Senegal and Ghana all started funds in the last 3 years and and funds are discussed, expected or being born in: Kenya, Liberia, Mauritius, Mozambique, Namibia, Niger, Uganda, Sierra Leone, South Sudan, Tanzania, Uganda, Zambia and Zimbabwe.

A key research event at Chatham House in September 2014 identified some principles of African SWF Demand, Development and Delivery.

Governance for sovereign wealth funds

Funds with strict rules should limit politicians’ discretion and they can ensure that money is earmarked for public investments. For instance Ghana has a rule that oil revenues must fund “development-related expenditures”. In many cases this funding can be done through the governments’ budget and oversight systems, which otherwise funds might undermine and bypass.

A key target is to ring-fence resource revenues to prevent mismanagement or corruption. Organizations such as the Extractive Industries Transparency Initiative had campaigned about billions of dollars being siphoned off oil and gas revenues in countries such as Nigeria and Angola, and some $10bn withdrawn from Russia’s National Welfare Fund without justification. Resource funds also offer governments greater autonomy, power and political leverage.

Sovereign wealth funds debate at Chatham House (source: Chatham House)

Sovereign wealth funds debate at Chatham House (source: Chatham House)

Africa’s new arrivals – learning from the past

Ghana has long exported gold and cocoa but in 2007 was delighted to discover large petroleum reserves. Mona Helen Quartey, Deputy Minister of Finance, said they wanted to avoid the pitfalls and asked for advice before opting for wide consultation and accountability: “We held a national forum and did a survey in all 10 regions to get the opinions of Ghanaians on how to manage petroleum revenues; it was a very, very broad consultation. The survey had thematic areas such as: revenue collection and allocation; how much to spend and how much to save; managing the fund and transparency and accountability.”

The resulting Petroleum Revenue Management Act 2011 established the Ghana Stabilization Fund which only allows withdrawals when oil revenues are low, and the Ghana Heritage Fund to provide an endowment for future generations when petroleum reserves are depleted and withdrawals only after 15-year intervals. The funds were worth almost $450m in June, according to the Deputy Minister.

Ghana is a great example of independent oversight, according to Andrew Bauer, Economic Analyst with the Natural Resource Governance Institute (NRGI): “There is public interest and an accountability committee which includes chiefs, journalists and accountants to report twice a year on whether fund rules are being followed.”

Victoria Barbary, Director of Institutional Investor’s Sovereign Wealth Center, adds plaudits: “The imperative is to think about strength of institutions, when there is a strong state, legislation and building by consensus. Ghana has done exceptionally well, making sure there is that trust element in managing money.”

Existing and Emerging SWFs in Africa. Source: Sovereign Wealth Center

Existing and Emerging SWFs in Africa. Source: Sovereign Wealth Center

New arrivals – Angola and Nigeria
Other new arrivals include Fundo Soberano de Angola, set up with an initial endowment of $5bn from oil. It has signed up to the Santiago Principles for SWF governance, and aims to diversify across various infrastructure and asset classes with one third for interest-bearing assets, a dedicated hotel fund and plans for infrastructure projects across sub-Saharan Africa. According to its chairman, José Filomeno de Sousa dos Santos, the Ministry of Finance has set up boards of directors and supervisors to look at detailed quarterly reports including bank statements, and an audit has recently been done by Deloitte.

Nigerian Sovereign Investment Authority (NSIA) set up by an Act to invest surplus income from excess hydrocarbon reserves, including the savings between budgeted and actual oil prices. It started with $1bn and has three funds: Stabilization fund, Future generations fund for long-term investments, and Nigerian infrastructure fund.

Barbary says public confidence and trust will be key for new funds: “In countries across Africa strong institutions are lacking and there is lack of public trust in politicians to manage the money well and to the benefit of the whole polity. Resource-rich countries in Africa that have just come out of civil war, for instance Liberia and Sierra Leone, are thinking of setting up natural resource funds.” However, Tanzania is working closely with the NRGI to create a resource charter and educate policy-makers and non-governmental organizations, building public accountability and trust.

Expert advice is available from many sources, including the World Bank and a team from the US Treasury which built its skills on managing US assets and then decided to share the learning. Africans are increasingly skilled at managing their financial sector, whether as diaspora members returning after star turns in the world’s financial institutions or as students of professional finance qualifications.

These skills will be particularly important when funds invest domestically, for instance trying to emulate successes of Singapore and Kuwait in bringing high-paying technology and other jobs into the country, according to Michael Maduell of the Sovereign Wealth Fund Institute. Infrastructure investment in Africa also presents challenges, although the field is developing fast. The NRGI’s Bauer warns: “It takes as much capacity to manage the manager as to manage the money.”

World Bank economist Håvard Halland says there is a risk of political meddling when fund managers are asked to trade off financial and social returns on parts of their domestic portfolios. This could compromise the independence of the fund management, the wealth objectives of the fund as well as the quality of investments. To reduce these risks, the fund should invest only in minority stakes in partnerships with qualified private investors or foreign SWFs, who can also bring additional expertise. “Only a narrow range of infrastructure investments are appropriate for SWFs under these constraints. Investments that do not have a commercial or quasi-commercial return, such as schools and hospitals, should go through the government budget. Rates of return on domestic investments need to be benchmarked against the return on foreign assets with no fixed allocation to domestic investments, and possibly allowing for a clearly defined markdown from the benchmark rate only if the investment has significant positive externalities”.

African SWFs are likely to grow fast in the short-term as countries that have oil and gas are keen to get it out and sold while world prices stay relatively high, as longer-term prospects are not good.

The funds are already a key force in building Africa’s economies, infrastructure and even capital markets. Getting their objectives, management, governance and investments right is vital for the welfare of future African generations.

Annex 1 – 6 steps to good governance and how Africa’s sovereign wealth funds measure up

Africans should be asking these questions about their sovereign wealth funds (SWF):

1. Set clear fund objectives: Examples include saving for future generation, stabilizing the budget, earmarking natural resource revenue for development priorities.

2. Establish fiscal rules for deposits and withdrawals that align with the objectives. Botswana avoids such rules. Where funds are allowed to invest domestically, including in social spending, they should work with national budget processes. Angola’s sovereign fund can bypass normal budgetary procedures.

3. Establish investment rules, There have been notorious problems worldwide, one of Africa’s worst examples has been the Libyan Investment Authority under “brother leader” Gadhafi, when his son Saif al-Islam Gadhafi had almost sole discretion to manage approximately $65bn and billions went to close acquaintances. In October 2014 LIA went to the High Court in UK to sue Goldman Sachs for $1bn for nine 2008 transactions that were worthless by 2011, alleging Goldman exploited the fund’s limited financial experience but made $350m profit, claims which Goldman denies. Chad’s fund was repurposed for military spending. Some funds such as Botswana block domestic investment, Angola is among others which see it as core.

4. Clarify a division of responsibilities between the ultimate authority over the fund, the fund manager, the operational manager (day-to-day), and set and enforce ethical and conflict- of-interest standards.

5. Require regular and extensive disclosures of key information and audits. Fund transparency is increasing, for example the rigorous transparency requirements of the Sao Tome and Principe National Oil Account and public scrutiny of its operations. By contrast, Botswana is still “opaque” despite signing the Santiago Principles and both Equatorial Guinea, another signatory, and Libya “keep nearly all information about their activities secret”.

6. Establish strong independent oversight bodies to monitor fund behaviour and enforce the rules

(Source, Natural Resource Governance Institute, New York)

Annex 2 – What are sovereign wealth funds?

The Sovereign Wealth Fund Institute of Las Vegas, USA defines SWF as “a state-owned investment fund or entity that is commonly established from balance of payments surpluses, official foreign currency operations, the proceeds of privatizations, governmental transfer payments, fiscal surpluses, and/or receipts resulting from resource exports”. That leaves out central banks’ reserves for balance-of-payments or monetary-policy, state-owned enterprises (SOEs), pension funds for government employees and assets to benefit individuals.

The term “sovereign wealth fund” has been around since 2005 when it was invented by Andrew Rozanov, then of State Street Global Advisors. However, there have been natural-resource funds since 1876 and the first SWF was the Kuwait Investment Fund in 1953.

Since then they have grown fast – total assets under management were $895bn in 2005, while an October 2014 count by the SWF Institute puts them at $6.8 trillion. Global giants are Norway’s Government Pension Fund with $893bn and Abu Dhabi Investment Authority with $773bn. Four of the top nine funds are Chinese, with $1.8 trillion between them. (Global stock market capitalization in 2013 was $62.6 trillion). The funds hit the global news agenda after the 2008 financial crisis as high oil prices helped increase some states’ spending power and funds snapped up high-profile investments including top financial firms.

SWFs have objectives such as helping to smooth expenditures when oil, gas and diamond revenues are volatile and helping governments set realistic budgets. They help governments avoid overspend when prices are high, for instance on legacy projects such as grandiose concert halls, or running out of cash when oil prices fall, leaving projects such as roads half-built. Funds can help governments save for the future in good years, especially useful if the governments are not good at spending well. Funds can also help countries ward off “Dutch disease” by keeping some revenues in foreign currencies.

Botswana supermarket raising $48m in JSE dual-listing

Botswana supermarket chain Choppies Enterprises Limited has launched a roadshow this week to raise $48 million and dual-list on the main board of the JSE Ltd on 27 May. It is offering to sell 117.4m new shares and 160m shares from existing investors.

Choppies was founded in 1986 and now operates 125 stores in Botswana, South Africa and Zimbabwe and employs over 11,000 people. It hopes to expand in Tanzania and Zambia, while Kenya and Namibia have also come up in reports.

The listing will be a secondary inward listing, so far only a few African companies have taken advantage of this opportunity offered by the JSE. The share price will be finalized after a roadshow which began on 11 May and a book-build run by Rand Merchant Bank. The offer should raise about R574m based on the current share price on the Botswana Stock Exchange.

Choppies store (credit Chronicle, Zimbabwe)

Choppies store (credit Chronicle, Zimbabwe)

Mr. Ramachandran Ottapathu, Group CEO said in a press release: “This is a really exciting moment in the life of the company. The listing on the JSE gives us further impetus for our ambitious growth plans. We are on track to have over 200 stores by the end of next year and we will be opening our first stores in Zambia and Tanzania by mid-2015. Choppies is a strong cash-generating business that has traditionally supported our organic growth of new store openings. The listing will allow us to fast-track the continued roll-out of new stores, unlock opportunities in new markets and fund acquisitions where opportunities arise.” Full details of the offer are available at their investor portal.

Media coverage on Reuters, Bloomberg and Business Day highlights the growth but adds that South African retailers Shoprite and Spar Group are also going after middle-income consumers in African markets. Bloomberg says it trades at 24x estimated earnings, compared to 21.4x for Shoprite and quotes Sasfin senior equity analyst Alec Abraham: “If Choppies can raise money at this price-to-earnings ratio, good for them. But it’s a very competitive space and companies are having to really invest to keep their market share.”

According to the company, Choppies has seen superior growth over recent years with a compound annual growth rate of 27% in total revenues from BWP2.4 billion for the year to 30 June 2011 to BWP5.0bn for the year to June 2014. Earnings before interest, tax, depreciation and amortisation (EBITDA) have grown at a CAGR of 19% to BWP352m in 2014, from BWP207m in 2011.

Mr. Ottapathu said: “We continue to establish ourselves in areas where we see great potential with the transition to branded convenience. We have the benefit of many years of experience identifying the right places to start up new stores for our target market. Our differentiated approach of partnering with local operators and sourcing from local suppliers provides us many advantages as we expand into new markets”.

Choppies locates its stores near taxi ranks and bus routes and is not in large shopping centres, Ottapathu told Bloomberg it has not experienced “significant pressure” on sales in South Africa. “We see growth opportunities in the current markets in which we operate and the retail penetration of the markets we are going into is low,” he said.

AfDB $400,000 seed equity to central depositories link Africlear Global

The central depositories of Kenya and Nigeria, two of the most dynamic in Africa, have formed a joint venture with Altree Financial Group. The African Development provided $400,000 in seed equity capital to the new Africlear Global venture, which aims to boost the efficiency of African capital markets by supporting modernizing the infrastructure of the central securities depositories.

The partners are Kenya’s Central Depository and Settlement Corporation (CDSC), Nigeria’s Central Securities Clearing System (CSCS) and Altree. However, several more African central depositories are interested in joining.

Africlear will help the depositories to pool their resources and boost buying power on equipment. They will work together to identify, acquire and maintain critical systems and technology, for instance for corporate actions, recording shareholder votes and other investor support services. The depositories will also share information and expertise.

The African Development Bank (AfDB) invested $400,000 in seed capital through the Fund for Africa Private Sector Assistance in an agreement signed 5 March in Abidjan. This may inspire more investors to join in building the company.

Africlear will use the money to improve the infrastructure used for post-trading processes such as settlements after a sale is done. According to AfDB press release: “The goal of the investment is to enhance the efficiency of capital markets by supporting the modernisation of central securities depository infrastructure in African securities markets.” Solomon Asamoah, AfDB Vice-President, Infrastructure, Private Sector and Regional Integration, and Anthony Fischli, Director, Africlear Global, signed the Shareholder and Subscription agreements on behalf of the Bank and Africlear Global, respectively.

Rose Mambo, CEO of CDSC, is the chairperson of Africlear. She was reported in Standard news in Kenya saying: “Africlear members will be able to realise significant cost savings via collective bargaining with industry participants and technology vendors. Africlear will also allow its members to offer more services ranging from corporate actions processing and collateral management to clearing and settlement.”

Kyari Bukar of CSCS said Africlear will accelerate process standardization and promote system integration across the borders. “By employing industry best practices, Africlear will facilitate improved levels of transparency and corporate governance within the African capital markets. This will enable local market practitioners to effectively compete for domestic and international capital.”

The board of Africlear held its first meeting in Nairobi on 24 April 2015. The members also include Altree Financial Group chairman Anthony Fischli and a representative from the AfDB to be named. Fischli said: “Africlear supports an open marketplace where scale and connectivity serve as the company’s competitive strengths” Benefits for investors should include improved access to securities services, collaboration between countries and cost-effective pricing of infrastructure.

Fischli told AfricanCapitalMarketsNews on 11 May that Africlear could also help the different countries’ and exchanges’ central depositories in future if they want to establish links. Fischli said in a press release “The AfDB investment in Africlear Global supports the improvement of securities market infrastructure through promotion of industry-leading technologies designed to enhance the underlying efficiency and overall functioning of the African capital markets.”

Kenya’s Business Daily reports that CDSC expects to gain revenue from its investment in Africlear by being able to charge for corporate actions such as reconciling investors on share splits, dividend declaration and payments. Revenues are particularly expected from international investors who mostly make the bulk of the traders on the Nairobi Securities Exchange.

Central Depository and Settlement Corporation (CDSC) Kenya is approved by the Capital Markets Authority of Kenya as provider of clearing and settlement services to the Kenyan capital markets. Central Securities Clearing System (CSCS) Nigeria is licensed by the Securities and Exchange Commission of Nigeria and serves as the clearing and settlement house for the Nigerian capital markets and The Nigerian Stock Exchange. Altree Financial Group is an integrated financial-services company licensed to conduct Investment Business by the Bermuda Monetary Authority.

The AfDB’s FAPA fund is a multi-donor thematic trust fund that provides grant funding for capacity building, seed capital and advisory services to support implementation of the Bank’s Private Sector Development Strategy. AfDB and the Governments of Japan and Austria have contributed to the fund, which to date has provided over $60m to 56 projects in 38 countries across Africa. The portfolio includes regional and national projects aimed at improving the business environment, strengthening financial systems, building private-sector infrastructure, promotion of trade and development of micro, small and medium enterprises

COMMENT – African nations seem keen on having national exchanges and central depositories under domestic regulation. However, they are working hard on harmonizing regulations, including to global standards, particularly within regional associations of regulators.

Africa is also looking for ways to increase links between the exchanges, eventually pushing to the point where a broker in one country can route orders to other exchanges, meaning that investors all over Africa have access to different exchanges, boosting liquidity and achieving more cross-border communications, trading, cross listings and remote memberships.

Africlear can be a key part of this. Getting post-trade “plumbing” for payments, clearing and settlement is key to ensuring African exchanges. Africlear is set to be an important step forward.

Payments messaging booms in Africa

Payments and securities transactions are growing faster in Africa than in any other part of the world, according to data from financial messaging institution SWIFT. Traffic volumes of payments information in Africa grew by 13.2% for the year to date compared to the same period in 2014, surpassing Asia Pacific (Apac) at 12.6%; the Americas at 12.1%; and for the “EMEA” region which includes Europe, the Middle East and Africa at 6.9%, or 8.8% growth for SWIFT worldwide.
Traffic between African countries has also been booming, good news for those who believe that Africa should focus on building competitive links and bringing the securities markets together.
SWIFT is a member-owned cooperative that connects more than 10,000 financial institutions and corporations in 212 countries and territories and provides a communications platform, products and services. Its SWIFT Index is seen to anticipate economic (GDP) growth in advanced countries, because the SWIFT infrastructure is so widespread that it picks up on increased levels of activity, particularly on commercial payments and transactions messages (MT103) on its systems.
Here are some examples of stand-out growth in SWIFT traffic in different countries (%age growth year-to-date compared to same period last year):
• Angola – payments traffic grew more than 78%
• Ghana – payments traffic rose by almost 30% and securities by almost 55%. Ghana has seen average growth of 27.2% since 2013
• Kenya – payment message traffic rose by 23.1%, while securities-related growth was 122.3%
• Nigeria – average yearly growth of 29.1% in traffic since 2013
• Tanzania – payments rose by 32.9% and securities by 45%
• Uganda – payments were up by 17.5% and securities by 31.6%.
The growth has been sustained for several years. Africa’s total SWIFT traffic rose by 44% over the last 3 years, of which payments rose 42% and securities information was up 37% across Africa.
For the first quarter of 2015, traffic from South Africa was 53% of traffic in Africa, compared to 72% in 2003.
Christian Sarafidis, Deputy Chief Executive EMEA, SWIFT, highlighted the value of SWIFT data in the story it tells about African economies: “The figures show strong organic growth across Africa and in East Africa particularly, and serve as validation of the positive growth trends we are witnessing in the region.”
Hugo Smit, Head of Sub-Sahara Africa, SWIFT, says: “Africa is an important market for SWIFT. Once again it has outperformed most of our other regions and has proven itself a critical component of our global business. Because the continent has such huge growth potential, we are continuing to invest more resources to support the local financial community. It is very heartening to see such impressive growth in West and East Africa, where we are currently opening new SWIFT offices.”
African corridors are becoming stronger. For the full year 2014, SWIFT data shows that 52% of the traffic sent from Africa stayed within the African zone, up by 16% on the year before and the highest growth rate for intra-African traffic. The trend was even more pronounced in the Southern African Development Community (SADC) region, where 55% of traffic sent from SADC stays in SADC, and the region is recording record growth, up 16.2% for the full year 2014 compared to 2013.

African financial innovators
SWIFT’s African Regional Conference (ARC) 2015 is happening this week (5-7 May) in Cape Town. One highlight is bringing Innotribe’s fintech Startup Challenge to Africa. The Startup Challenge introduces the world’s brightest start-up businesses to highly qualified financial service experts, angel investors, venture capitalists, and global leading fintech and financial decision makers. Innotribe is SWIFT’s financial technology innovation initiative and in the 2015 challenge, SWIFT Innotribe will have a round dedicated to fintech companies from across Africa, who will come to Cape Town in order to pitch to investors.

About SWIFT and the index
SWIFT is the Society for Worldwide Interbank Financial Telecommunication. It was founded in 1973 and still has its headquarters in Belgium. The SWIFT index is based on data on SWIFT MT 103 messages, a specific format that enables the bilateral transfer of information about payment transactions between customers of different banks or financial institutions. SWIFT says it is “the de facto global standard for cross-border single customer credit transfers and is used primarily for commercial rather than low-value retail payments”.
Wikipedia gives a run-down of the different SWIFT message types.

SWIFT operating centre (Source: SWIFT)

SWIFT operating centre (Source: SWIFT)