Archive for the 'Innovation' Category
June 25th, 2010 by Tom Minney
The Uganda Securities Exchange (www.use.or.ug) is aiming for a 28 June deadline to finish immobilizing the shares listed for trading, according to a statement issued by the bourse and reported in local media. Companies whose shares are being moved into electronic form include Bank of Baroda, East African Breweries, Equity Bank, Jubilee Holdings, Kenya Airways, National Insurance Corporation and British American Tobacco, reports East African Business Week (www.busiweek.com).
Investors have been gradually moving from holding paper certificates as proof of owning shares in a company to keeping them through electronic records at the Securities Central Depository (see the USE website ). Once a share is held on an electronic register, shareholders cannot use their old share certificates.
The aim is to support automated trading on the USE, which could start as soon as next January. The paper quotes a market analyst as saying: “Liquidity once again will be the issue but this is not likely to impact the market performance in the long run.” However the paper says that the immobilization, which started on 29 April with the immobilization of Stanbic shares, has led to lower trading volumes on the exchange.
The paper quotes the Manager of the Securities Central Depository, Joel Lutamaguzi, as being happy with progress: “The ultimatums have worked. I am thrilled with the response from the public and if we can get this through this process then we will be getting closer to automated trading.”
Investors are opening accounts with the Securities Central Depository Agents (SCDAs), who are mostly broker/dealers and include all the brokerage firms licensed by the Capital Markets Authority and commercial banks.
The Nairobi Stock Exchange (www.nse.co.ke/newsite/) also uses automated trading and a securities depository. Nairobi also reportedly saw lower trade volumes during immobilisation.
The USE has been trading since 2000, and its first listed company was Uganda Clays.
The New Vision newspaper interviews Harriet Kiwanuka, the USE’s research and market development manager. It quotes her as saying: “Immobilisation means shares are pooled into the system and for anybody to trade, you need to get your certificate to the SCDA who will deliver it to the USE for depositing to certify trade. Once a counter is immobilised, you cannot use a paper certificate to trade on the floor. Everything has to be entered into the system for trade to occur.
“We cannot run a parallel system of trading electronically held securities parallel to paper securities because of the risks, and reconciliation challenges involved.
“We are only trading electrically deposited securities. Anybody holding Stanbic, New Vision, DFCU, Uganda Clays and Kenya Commercial Bank certificates has to go to SCDA because these counters have been immobilised.”
She says that there has been a lot of education, but many people will only immobilize their share certificates when they decide to sell and, although there is demand, prices are lower and many sellers are not keen. However, response on immobilization has been satisfactory and she says 300 million shares have been immobilized in 1,400 new accounts. The response is across the board, with account openings by the locals, institutions and foreigners which means education efforts are paying off.
The Nairobi Stock Exchange has already immobilized shares, and faced a similar task of convincing shareholders to act, until the listing of Safaricom. Immobilization and electronic trading are part of moves towards an integrated East African securities market.
June 18th, 2010 by Tom Minney
South Africa’s first, specialised, private equity clean technology fund, Evolution One Fund, has reached its final closing after raising R700 million (US$92 million) from local and foreign investors, including development finance institutions, a family office and sovereign wealth funds. This capital is to be invested into equity in clean technology projects and enterprises including new energy and environment focused technologies in South Africa and across the Southern African Development Community. Evolution One will concentrate on long-term equity and equity-related investment based on active management and adding value after investing.
The fund will prioritise investments in expansion capital but will consider earlier-stage environmental infrastructure projects when there is clear evidence of early revenue streams and profitability. The fund will also invest into proven technology or projects that clearly demonstrate market adoption. The minimum investment size is R10 million ($1.3 million) and its maximum investment is R100 million into any one project or technology.
Consensus Business Group (www.consensusbusiness.com), the London-based advisor to The Tchenguiz Family Trust, has played a leading role in establishing and advising the fund. Consensus owns or manages 300,000 UK residential units and £4 billion of commercial properties, as well as extensive “clean tech” investments. As founding cornerstone investor, Consensus has secured the participation of 7 other leading international organisations.
Vincent Tchenguiz, Chairman of Consensus said: “We have extensive experience and a long track record in global clean technology investing and this has given our partners the confidence to join with us in setting up Evolution One in South Africa. We are delighted to have successfully achieved final closing of this ground-breaking fund.
“Evolution One Fund is the first dedicated clean technology private equity fund to be established for Africa and its value proposition is to bring Consensus’s active financial modelling and specialist insights together with expertise to projects and technology enterprises in South Africa and the SADC region. In addition, the investment capital of this network of leading investment institutions inherently leverages access to specialised knowledge and skills in the broader global clean technology sector.
“The Fund is advised by a fund management team comprising 9 principals and analysts who collectively bring their unique breadth and depth of commercial, financial and sustainability credentials. This is combined with strong black empowerment credentials and the ability to structure broad-based black economic empowerment transactions.”
Consensus is joined in the Evolution One partnership by IFC, a member of the World Bank Group; the Finnish Fund for Industrial Cooperation (Finnfund); the Swiss Investment Fund for Emerging Markets (SIFEM); fund of funds the Global Energy Efficiency and Renewable Energy Fund (GEEREF- www.eif.org), a compartment of the European Investment Fund; the African Development Bank (AfDB); the Norwegian Investment Fund for Developing Countries (Norfund); and the Industrial Development Corporation of South Africa (IDC).
The local South African fund advisor is Inspired Evolution Investment Management (IEIM – www.inspiredevolution.co.za), which aims to support and guide target invested companies and provide long-term capital growth. The Evolution One fund is a 10-year fund is committed to investing into clean technologies in the new energy and environmental sectors, including cleaner energy generation such as wind and solar energy, and energy efficiency, cleaner production and more efficient manufacturing processes, air quality and emissions control, water quality and resource management, waste management, agribusiness, natural products and materials and related services for sustainable buildings.
Michael Brooks, CEO of IEIM, says the fund management team has already appraised numerous deal opportunities and within weeks would announce details of the first 3 investments to be undertaken by the fund: “In the past 2 years we have seen significant positive shifts in the commercial thinking underpinning the roll out of clean technology projects and enterprises, both within the public and private sectors.
“The South African government’s recent adoption and implementation of the Renewable Energy Feed-in Tariffs and Co-Generation Feed-in Tariffs are evidence of the state’s support for regulatory drivers to underpin the development at scale of commercially viable renewable energy projects here and in our neighbouring countries. We are currently actively engaging with a range of promoters of clean technology enterprises and with developers of renewable energy projects.”
The first close of the fund was announced in July 2008 when $54 million had been raised from the initial 4 investors: IFC, Castleway Properties (owned by Tchenguiz Family Trust), SIFEM and FinnFund.
March 16th, 2010 by Tom Minney
Sunil Benimadhu, Chief Executive Officer of the Stock Exchange of Mauritius:
The Mauritius market lost 50% in, as investors worried about the fallout of the global financial crisis, but then they realized our companies were not so badly affected, from March to December we had one of the best rebounds in 20 years, with an 80% gain. We have come back with a vengeance. Our economy was helped by swift reactions from our authorities including easing policies. We have had a volatile time, but it has also meant a shift to much more trading on the SEM.
Our exchange is trying to develop the “3 Ps” of exchanges – products, players and participants. We anticipate the players into African markets will only increase, as they realize that expected returns in the US and Europe are only 1% or 2% and need to get positive alpha. Beyond equity, we are trying to develop an active second market in debt instruments, and we are trying to move up the value chain and introduce derivatives, including an index derivative of the 7 most liquid stocks.
In the past Mauritius has been a base for funds investing into India and China, and we have traditionally been a business gateway between Africa and the East, whether for foreign direct investment or others. We are now changing our listing rules to allow more funds to list, including the global business sector,
We have already changed our rules to allow shorting on the Stock Exchange, including rules for stock borrowing. Institutions are realizing they can make money from their stocks and we are seeing more liquidity as people are able to trade more.
March 16th, 2010 by Tom Minney
FROM SECURITIES AFRICA/CITIBANK 5TH ANNUAL AFRICAN INVESTMENT CONFERENCE, LONDON
Kenya’s biggest mobile telecommunications company says it will continue to lead the market through its revolutionary mobile payment system M-PESA – already the world’s most successful with 9 million users – and through moving fast into data. Safaricom (www.safaricom.co.ke) has 78% market share (83% by revenue) and 15.2 million customers, according to Les Baillie, Chief Investor Relations Officer, and it will be hard for its competitors to catch up.
M-PESA, which allows people to do cash transfers using their mobiles, was originally started as a customer loyalty tool, but has soared ahead in proving the value of the mobile phone in bringing financial services to Africans. Now 22% of Kenyans are signed up as users and use it for a range of functions including paying their water and electricity bills, receive their share dividends (Safaricom paid 150,000 shareholders their dividends this way) and even buy airtickets and make international transfers, all using the mobile handset. M-PESA has 17,500 agents.
Non-governmental organizations are using it for payments in remote areas and it is increasingly being used as a way for microfinance institutions to make and collect loans. Future developments could be to use M-PESA as a tool to link people with small savings to banks and savings institutions, providing new opportunities for the unbanked to gather assets and interest, and to offer micro-insurance, etc. International transfers are reaching remote parts of Kenya through tie-ups to Vodafone and Western Union. M-PESA employs 12,000 including agents, but the knock on effect in terms of small enterprises in remote areas could be many times more.
Mr Baillie told institutional investors at the conference, organized by stockbrokers Securities Africa and Citigroup, that the core of Safaricom’s competitive strategy is to keep the voice customers happy “by offering the best network, the best coverage, the best services and other offers to subscribers to make them stay with us, including the bongapoints and competitions.”
He says as they drive into rural areas, the revenues per customer are dropping. Kenyans like to buy in small denominations, partly due to cash shortages and Safaricom now offers top up cards in KSh 5 denomination (approximately US cents 6.5).
Safaricom’s second strategic drive is data, boosted by the undersea cables which reached Kenya and offer massive opportunities, According to Mr Baillie, Safaricom have invested KSh1 billion ($130 million) into upgrading networks, including the only licence for the fast 3g data network technology and extensive investments into Wi-max networks. Some 500 sites have been upgraded to 3g and 100 are active Wi-max sites.
He says they offer companies a full range of solutions, and one of the top areas of growth will be small and medium enterprises as well as major companies such as banks which are starting to move back into rural areas as they find ways to do sustainable business there. He says they have 2 million data users and are one of Kenya’s biggest sellers of laptop and notebook computers as they can sell at cost, since their revenues will come from data usage. However, currently 90% of internet users are still using their mobiles and rapidly moving into internet technologies such as social networking.
Safaricom still believes customer service is its core, with 1,000 agents working at its call centre, one of the biggest and best in East Africa. It is also seeing how its Internet portal can stimulate growth. Safaricom hopes to remain number one and it seems hard to see how its competitors (nearest is Zain with 3 million customers) can catch up.
February 21st, 2010 by Tom Minney
A Marketplace on Innovative Financial Solutions for Development (www.fininnov.org) is to be held in Paris on 4-5 March. It is dedicated to innovative financial mechanisms for better mobilizing, channelling, and using funds and aims to collect and highlight fresh ideas on financial solutions for development at global, regional and local levels.
It is expected to bring together more than 1,000 development practitioners, donors, philanthropists, social entrepreneurs, academics, representatives from a range of financial institutions, civil society, and policy-makers from around the world.
It is supported by Agence Française de Développement (AFD), Bill & Melinda Gates Foundation and the World Bank and will be held in the Cité des Sciences et de l’Industrie in la Villette, Paris.
It is a 2-day event including policy and technical workshops, a marketplace, and presentations showcasing innovative initiatives designed to meet current development challenges.
Five winners of a competition on innovative financial solutions for development will be selected and will each grants of US$100,000 to implement their proposals. The 20 finalists, chosen from 800 submissions, include proposals from:
• Center for Innovative Financial Design, India for a new “savings card” that has the characteristics of a consumption good, giving savers a “shopping experience” while saving.
• International Food Policy Research Institute and Nyala Insurance S.C. for a system of simple weather securities with fixed payments to improve the welfare of millions of rain-dependent farmers in Ethiopia.
• Crimson Capital Corp., which proposes to bring Purchase Order Finance (POF) to the Northern Amazon region in Bolivia, providing early-stage working capital for bio-trade value chains.
(The list of the 20 finalists is available on www.fininnov.org.)
The objectives of the Marketplace are to:
• Advance the agenda on innovative financial solutions for development;
• Facilitate knowledge-sharing and learning, including the exchange of lessons between developing countries (South/South learning) and to review the most effective approaches in terms of impact and efficiency; and
• Spur the introduction of innovative financial mechanisms in order to meet development challenges of varying dimensions.
The meeting is to be opened by Christine Lagarde, French Minister of Economy, Industry, and Employment, and speakers are to include: Ngozi Okonjo-Iweala (Managing Director, The World Bank Group), Jean-Michel Severino (Director General, Agence Française de Développement), Geoffrey Lamb (Managing Director, Public Policy Operations, Bill & Melinda Gates Foundation), Philippe Douste Blazy (Under-Secretary-General of the United Nations, Special Adviser to the Secretary General on Innovative Financing for Development, Chair of the Board of UNITAID), Rachel Kyte (Vice President, International Finance Corporation), Eckhard Deutscher (Development Assistance Committee Chair, OECD), and His Highness the Aga Khan.
M Severino is quoted on the website: “We are witnessing a complete transformation of Official Development Assistance in terms of its objective, actors, and instruments. Over the past ten years, international assistance has been extended to such new areas as climate change and is mobilizing new private actors who are operating alongside States.”
According to World Bank Group Managing Director, Ngozi Okonjo-Iweala, “Innovative finance not only helps bring additional resources to developing countries, it also makes the delivery of development finance more efficient and results-oriented. The World Bank Group has pioneered a range of innovative finance instruments which has helped developing countries immunize women and children, combat the effects of climate change, develop clean technology and access capital markets for catastrophe insurace. The Marketplace provides an opportunity to further explore new ideas and solutions to help developing countries help their people. “