Archive for the 'Integration' Category
November 3rd, 2011 by Tom Minney
Reuters newsagency has put together stories on issuers’ and investors’ difficulties with African stock markets. These include lack of liquidity and sinking currencies. It notes that African companies are increasingly dual listing on international stock exchanges.
“Liquidity: the scourge of African stock pickers” quotes a range of institutional investors complaining that liquidity is a major constraint on markets such as Malawi Stock Exchange. According to the article: “Poor but fast-growing, Malawi and other sub-Saharan African countries would offer huge opportunities to international equity investors – if it weren’t for the liquidity scourge. Markets across the continent are hampered by a lack of liquidity, making it nearly impossible to take stakes in all but the biggest firms. “With the exception of South Africa, we feel all sub-Saharan African (markets) are illiquid,” said Ronak Gadhia, Africa equities research analyst at London-based frontier markets specialist Exotix. “Most of our investors are unable to invest outside the big 2 markets, and even then their investable universe is usually the largest 5-10 stocks,” he said, referring to the Nigerian Stock Exchange and Kenya’s Nairobi Securities Exchange, the two biggest markets outside Johannesburg.
It notes that Sonatel, the giant of the BRVM West African regional securities exchange, is concerned about liquidity on that market and thinking about a secondary listing. An earlier story said the pressure comes from investors.
“Africa’s growing firms shun Jo’burg for London” suggests that even when companies are thinking about dual-listing, they head to the London Stock Exchange or AIM market and don’t consider Johannesburg. The article quotes Zambeef executive director Yusuf Koya: “It was a tough decision. A key factor in the decision process was London’s reputation as the world’s financial centre, which allows us to access a potentially wider range of investors and liquidity.”
According to the article: “A total of 104 African companies are listed on the London exchange, with the majority on AIM. The combined market value of African companies listed in London is now bigger than every African exchange except Johannesburg. Just under $2.1 billion was raised by African companies on the London bourse in 19 transactions in 2010, representing about 90 percent of all equity capital raised by Africa-focused companies in 2010, said Ibukun Adebayo, the LSE’s head of equity primary markets. Dual listings are critical for companies that outgrow their home exchanges, where thin liquidity keeps large investors out. Big bourses such as London and Johannesburg also boast tougher disclosure requirements, reassuring investors concerned about Africa’s corporate governance.”
It also cites bankers that London-based investors tend to have a bigger appetite for emerging market assets than their South African counterparts and quotes a private equity manager: “South African investors don’t understand Africa risk in the same way UK investors do.” It also suggests London may be an easier sell to international investors unfamiliar with Johannesburg. Nicky Newton-King, incoming CEO of South Africa’s JSE Ltd, says Johannesburg offers a world-class standard of disclosure for a lower price and less hassle than London: “You can come to the JSE, you can raise the money here, and your shares will be traded in a very liquid environment, a very respected environment. Without going through the costs and the hoops of listing in London, but with exactly the same standards.”
African investment institutions are just starting to rise, it could be a great time to heed the call from ASEA Chairman Sunil Benimadhu for African securities exchanges to find ways to get more liquid. SADC Stock Exchanges already have a workable model, but what will cause anyone to initiate the change to move onto the next level before many more firms move activity to London , New York or elsewhere?
October 28th, 2011 by Tom Minney
The next step for Africa’s securities exchanges is critical for the continent’s development. There is a huge demand for capital to be put to productive use in what could be the world’s fastest-growing continent, with a dire need for fast growth to drive out poverty. There is also a tide of international risk capital, looking to fund that growth and share in the profits. Between the two are the capital markets, challenged to move fast to become liquid, transparent and effective.
Lots of these topics are on the agenda for The 15th Annual African Securities Exchange Association conference (www.aseaconference2011.ma) (in Marrakesh, Morocco), which looks to have an excellent agenda. Casablanca Stock Exchange is the host, the theme is “Africa, alive with opportunities!”
Top speakers include key opinion leaders such as Thomas Friedman, Mark Mobius and maybe Christine Lagarde of the IMF. Expect speeches from Sunil Benimadhu (Stock Exchange of Mauritius and chair of ASEA), Karim Hajji of the Casablanca bourse, leaders of African securities markets and top speakers from several world bourses including BM&F Bovespa, Istanbul, NASDAQ OMX and the London Stock Exchange, with India’s National Stock Exchange and NYSE Euronext to confirm. They will be joined by finance ministers, bankers, analysts, traders, investors and many more.
Topics on day 1 include
• “The financial crisis: Is there a pilot in the plane?” Top analysts, bankers and traders, possibly joined by a European Commissioner from the heart of the crisis
• The economic implications of the “Arab Spring” for the continent, featuring key Ministers who are rebuilding post-crisis countries, a strategist and others
• Capital markets and BRICS (see previous story on stock exchange link-ups) – hear from CEOs and Executive Directors of key BRICS stock exchanges and Emergent Asset Management
• Nursing Africa’s future IPOs: heads of top African stock exchanges from Mauritius to Morocco, via Ghana and maybe Nigeria, plus PAI Partners, a leading French private equity firm
• A new FTSE-ASEA African index.
Day 2 tackles
• Regulation for cross-border development: Regulators from Morocco and the central African stock exchange, plus long-term Africa bull stockbroker Jonathan Auerbach
• Cost-effective and scalable technology options for emerging markets exchanges – featuring Tony Weeresinghe of the LSE, Anne Ewing of NASDAQ and maybe Joseph Mecane of NYSE Euronext, 3 top suppliers of securities markets systems to the continent who hold many of the keys to the next stage of evolution.
• “What’s hot in Africa today?” with a host of top speakers from politics, consulting, banking, mining, economics and development finance covering energy, infrastructure, mining, industry, agribusiness and others.
OPINION: Please note the Day 2 morning topics address critical and urgent issues of how African stock exchanges can work across (colonial) borders to build liquid and effective markets, part of the grand process of African integration and building viable economies.
Expect participants from over 100 countries. The ASEA AGM and committee are on 11 Dec and the conference starts on 12 Dec. The official language is English with Arabic and French translations.
Unmissable! Book the conference here via the ASEA website (www.africansea.org).
Warning!! You may not want to come home. The conference is in Hotel Palmeraie Golf Palace & Spa. The conference website says: “As a backdrop, the majestic, silvery, sentry-like summits of the High Atlas stand out. At the foot of the mountain lies a beautiful city, built in red and surrounded by age-old palm trees. Monuments defying time form a string of pearls for her. An enticing labaryinth, created centuries ago, of old ramparts meanders along its slender “body”. In this fairy-tale decor, lies Marrakesh the legendary; Marrakesh the imperial, the pearl of the south, bathed by an invigorating sun all year round.”
October 15th, 2011 by Tom Minney
The securities exchanges of the “BRICS” emerging market bloc have announced a joint initiative to expose investors to the dynamic economies of the bloc members, Brazil, Russia, India, China and South Africa. China and India are among the fastest-growing major economies over the next five years, according to forecasts, and all are increasingly attractive to investors worried about stagnation on US, European and other major exchanges. The initiative was announced on 12 October, during the 51st AGM of the World Federation of Exchanges (WFE), held in Johannesburg.
The stock exchanges will start by cross-listing benchmark equity index derivatives on the boards of each of the other alliance members. Following that, the alliance will develop innovative products to track the BRICS exchanges.
This brings together Brazil’s BM&F BOVESPA stock exchange, MICEX from Russia (currently merging with RTS Exchange), Hong Kong Exchanges and Clearing Limited (HKEx) as the initial representative of China, and South Africa’s JSE Ltd (the Johannesburg Stock Exchange). The National Stock Exchange of India (NSE) and the BSE Ltd (formerly known as Bombay Stock Exchange) have signed letters of support and will join the alliance after finalizing outstanding requirements.
The seven stock exchanges represent a combined listed market capitalization of US$ 9.02 trillion (source WFE and RTS website) with listed 9,481 companies2, equity-market trading value of US$ 422 billion per month and over 18% of all exchange-listed derivative contracts traded by volume worldwide (source Futures Industry Association) as of June 2011.
Ronald Arculli, chairman of HKEx and of the WFE, says in a press statement: “Global investors are increasingly seeking exposure to leading developing markets. The close relationship of the BRICS stock exchanges is behind this initiative, through which investors worldwide will gain easier access to benchmark equity index derivatives, which will now be offered in local currency on these exchanges. These cross-listings are planned to take place by June 2012.”
He adds that this is an important moment in the history of developing countries: “The alliance enables more investors to gain exposure to the BRICS bloc of emerging economies, with its increasing economic power. From a global perspective this alliance points to the growing relevance of the BRICS economies and financial markets in the coming decade and further underlines the reason for the BRICS relationship.”
Russell Loubser, CEO of the JSE, says: “As well as being barometers of market performance, indices also form the basis of other tradeable products, including exchange-traded funds. As a logical second phase in the alliance, the exchanges have agreed to work together to develop new products for cross-listing on the respective exchanges.” These products would combine exposures to equity indices of all alliance partner exchanges. Edemir Pinto, CEO of BM&F BOVESPA, explains: “These products would then be cross-listed and traded in local currencies. They will also allow investors to gain exposure to other emerging markets through a locally listed product.”
A third phase may include product development and cooperation in additional asset classes and services.
Madhu Kannan, CEO of BSE Ltd, says: “The BRICS exchanges alliance holds great promise, as it will create avenues for Indian investors to diversify and expand into other emerging markets. It will also provide unique opportunities to investors in other BRICS nations to participate and contribute in India’s growth. BSE will actively work towards bringing world-class products to India as well as developing new products for other BRICS markets.”
Investors worldwide and those whose homes are in the BRICS economies are increasingly interested in investing in high growth emerging economies. Most of the BRICS countries are predicted to have above-average economic growth. They are going through shifts in that there is rising consumer power generated by a growing middle classes in each, which will accelerate demand.
September 30th, 2011 by Tom Minney
Ethiopia has raised Birr 7 billion ($408 million) of debt to finance the $4.8 bn Grand Ethiopian Renaissance Dam on the Blue Nile River and plans to issue more bonds. Communications Minister Bereket Simon said the country is not raising funds from foreigners in a bid to demonstrate its economic resurgence, according to an interview on Bloomberg yesterday (29 Sept).
The 5,250-megawatt dam, also called the “Millennium Dam”, is scheduled for completion in 2017 with the first 700 MW to be generated in 2015. It is on the Blue Nile, the main tributary of the Nile River, about 30 kilometres from the border with Sudan. According to the report, the dam wall is to be 145 meters high and 1.8 kilometres long and the lake will be 1,680 square kilometres (Lake Tana is 3,000-3,500 square kilometres according to Wikipedia), reportedly mostly uninhabited forest in the western Benishangul-Gumuz region.
Prime Minister Meles Zenawi launched the project and construction in April. Ethiopia is busy with many giant hydropower, wind and other generation projects to use its potential to generate 45,000 MW of hydropower, 10,000 MW of wind and at least 1,000 MW from geothermal sources. It is becoming a regional electricity exporter to counteract shortages in the nine East African Power Pool (www.eappool.org) countries, including Kenya, Djibouti, Sudan and Uganda, which are to be connected by a regional grid by 2016. The country started exports to Djibouti in May, a transmission line to Sudan may be completed by January and a feasibility study for a link to Kenya has been finished. Ethiopia is seeking to diversify the fast-growing economy, which used to rely on commodities such as coffee for most of its foreign currency.
Bloomberg quotes Bereket: “Building a dam on the Nile has been the dream of every Ethiopian. For millennia, we have been looking at the Nile as if it has been a curse that took our fertile soil and benefited others while Ethiopia was impoverished.” Bereket is heading a “public mobilization council” to raise funds for the project.
Egypt depends on the flow of the Nile for all of its water. Previous President Hosni Mubarak opposed infrastructure projects by upstream nations, citing old treaties established by the British which favoured Egypt. However, Ethiopia announced the dam soon after Mubarak was deposed in February and the new government has reportedly sought details of the technical and environmental studies on the effect of the dam on Egypt’s Nile water flow. Bereket told Bloomberg that Egyptian and Ethiopian officials have met twice and relations are improving.
Zemedeneh Negatu, managing partner for Ernst & Young LLP in Ethiopia, told Bloomberg: “The financial capacity to build the dam I don’t think should be in doubt at all. Over the next six years, Ethiopia can collect from taxes somewhere between Birr 450 and 500 billion.” He said the dam is “very critical” for Ethiopia to achieve its industrialization goals and for neighbouring states.
Donations of a month’s salary by civil servants have been converted into bonds to help boost the nation’s savings rate, currently 5.5% of gross domestic product, Bereket said. The opposition have criticized funding pressure on civil servants.
Public funding is unlikely to be maintained as it would be “too taxing,” so private companies have been encouraged to buy the debt, which offers a coupon of 5%. There are also plans for bonds to be offered to the Ethiopian diaspora with returns above the London Interbank Offered Rate, while sales to farmers are planned “early next year,” he said. A “significant” portion of funding will also come from the government’s development budget, Bereket said. A National Bank of Ethiopia directive was issued in April compelling banks to buy government bonds equivalent to 27% of their loans each month may raise Birr 11 bn for development programs in its first year, according to Access Capital (www.accesscapitalsc.com), the Addis Ababa-based research group. That amount is likely to increase in subsequent years, it said in an April research note.
The Ethiopian Government plans to borrow Birr 398.4 bn by mid- 2015 to invest in industry and infrastructure. The World Bank said in June this may lead to the economy over-heating and debt problems, the. Annual inflation in Ethiopia was 40.6% in August, partly because the central bank boosted money supply.
August 2nd, 2011 by Tom Minney
The International Finance Corporation (www.ifc.org) and 6 leading international finance institutions provided $164 million in financing to Rift Valley Railways International (www.riftvalleyrailways.com) to rehabilitate the Kenya-Uganda railway today (2 August). The aim is to boost cross-border trade and investment in East Africa. Other key shareholders are Kenya’s TransCentury, which listed on the Nairobi Stock Exchange on 14 July, and Uganda’s Bomi Holdings Ltd, reportedly owned by Charles Mbire. The financing is part of a $287m capital expenditure programme to improve the operating company’s infrastructure and rolling stock.
Other institutions participating in the package include: African Development Bank ($40m), Germany’s KfW Bankengruppe ($32m), Dutch Development Bank FMO ($20m), Kenya’s Equity Bank ($20m), Cordiant’s Infrastructure Crisis Fund ($20m) and the Belgian Investment Company for Developing Countries ($10m). The balance of the funding for the $287 million capital expenditure programme is being contributed by shareholders and generated through operations.
IFC is the largest financier to Rift Valley Railways and provides a $32m loan, of which $10m is already disbursed, and an additional $10m in equity to be committed. RVRI is a portfolio company of Citadel Capital, an Egypt-based private equity firm with $8.7 billion in investments across 14 countries in Africa.
The Kenya-Uganda railway line (apparently formerly nicknamed the “Lunatic Express”) has a track length of 2,350 kilometres with several branches extending from Mombasa, through Nairobi and right across key parts of Uganda. The rolling stock is 219 locomotives and 7,500 railroad cars. Brown Ondego, Group Chief Executive Officer of RVRI, said in a press release: “Our rehabilitation programme has already delivered impressive early results. Net “ton kilometres” were up 9% in the first half of 2011, compared with the same period last year, while turnaround times — a key measure of asset utilization — on the strategic Mombasa-Kampala route dropped 27% in the same period. Year-on-year, we have also seen a 30% drop in accidents per train kilometre.”
Karim Sadek, Managing Director at Citadel Capital, said: “This financing package is the backbone for an ambitious 5-year rehabilitation programme that will see Rift Valley Railways International make a quantum leap in operating standards as it addresses safety issues, completes due maintenance to improve reliability and hauling capacity, improves service to passengers, and captures long-term gains through investments in information technology.”
IFC has been key in encouraging private investment in the Kenya-Uganda railway since the consortium won the private management contract in 2005. After the project’s initial sponsor left, IFC led the restructuring of the shareholder group that resulted in the entry of new project sponsors and investors.
Jean Philippe Prosper, IFC Director for East Africa, said: “IFC has provided leadership and dedicated significant resources to encourage the turnaround of the Kenya-Uganda rail project. We are committed to the success of this railway as part of a broader effort to encourage private investment in infrastructure that promotes regional integration and social and economic development in Kenya, Uganda, and the surrounding region.”
Transport prices in East Africa are among the highest in the world, largely due to heavy reliance on trucking. A lack of operating capacity has resulted in rail capturing less than 10% of East Africa’s transport market. An efficient rail network has the capacity to reduce East African transport costs by as much as a third, since rail transport is more efficient to operate and in fuel.
IFC is a member of the World Bank Group and the largest global development institution focused exclusively on the private sector. In the fiscal year 2011, amid economic uncertainty across the globe, IFC said it boosted investments to an all-time high of nearly $19bn.
June 3rd, 2011 by Tom Minney
I have the honour to be published on the opinions section of the Royal African Society website and the article can be seen along with their excellent blogs here. I also reprint the article, which is meant to spark debate, and I welcome your comments – is it time for change and what is the way forward?
“The wind of change” was Harold Macmillan’s famous 1960 phrase about Africans moving to political self-determination. Half a century later the world’s biggest securities exchanges are worrying who will survive a hurricane of globalization, technology and competition, but some of Africa’s capital markets still seem sheltered from the economic winds of change.
The giants of securities trading are slugging it out in a wave of mergers and acquisitions and London Stock Exchange (LSE) chief executive Xavier Rolet said: “In five years there will be three, four international exchange groups with global distribution capabilities”.
In the world of mega-bourses the LSE launched a £4.3 billion merger with Canada’s TMX Group of exchanges but a “Maple consortium” of Canadian financial institutions has launched a hostile bid, seeking to block the marriage. New York’s NYSE Euronext and Germany’s Deutsche Börse want a $9.5 bn union, but US stock exchange NASDAQ and its partner IntercontinentalExchange are offering $11.3 bn to snatch the New York bride. NASDAQ is reportedly worth $5.7 bn and worried it may become a takeover target if it stays single. Many other leading exchanges are busy with strategic transactions.
Africa however has not seen much change at least in the last decade. Some of Africa’s stock exchanges are making a few operational changes, but structural transformation is not on the agenda. The continent has a couple of world-class stock exchanges – in 2010 South Africa was rated the world’s best-regulated capital market – and three or four better exchanges with enough liquidity for international and big local institutional investors. The rest of the continent features a small regional exchange and more than 15 national stock exchanges where activity could drop to a few deals a day and liquidity is too small for the market to work efficiently or provide scope for minimum transactions for international investors. Some don’t even open their doors every working day.
Stock exchanges and securities markets evolved worldwide as the most efficient way to channel capital from savers to entrepreneurs, governments and others who can use it most productively, i.e. profitably. Savers with capital are more than eager to invest billions of dollars into Africa, dubbed the “final growth frontier” for its vast opportunities and favourable pricing. Meanwhile in Africa, entrepreneurs and governments are calling for billions in capital to build roads, rail, power, water and telecommunications/IT infrastructure up and down the continent and to transform farmlands, build industries and hopefully improve livelihoods sustainably through business.
Nationalist politics and comfort zones are among the factors holding back African securities exchanges, which have traditionally been seen as national institutions. Sovereignty has been more highly prized than liquidity and efficiency. In 2009 South Africa’s JSE Ltd sought to acquire a stake in the Stock Exchange of Mauritius (SEM) after two years of talks, but regulators blocked it. Nationalism about stock exchanges is not just an African concern, it is currently in the news in Canada and Australia.However, now technology is available to transform exchanges without losing national regulation or denting pride.
Some African exchanges are improving their own operations fast. The two NSEs – the Nigerian and Nairobi stock exchanges – have taken stern measures to improve governance, regulation and transparency. In Nigeria this included a morning in August 2010 with armed police on the Lagos trading floor after regulators fired the Director-General. Other exchanges such as Mauritius Stock Exchange (SEM) are noted for continuous improvements and innovation. However, only the Egyptian Exchange, the JSE (Johannesburg Stock Exchange) and SEM have attained the exalted membership of the World Federation of Exchanges.
In some countries trading in debt is improving faster than equity markets. Kenya’s NSE launched effective automated bond trading, backed by much improved settlement, and trading volumes and liquidity are soaring. The Government is responding with a deft series of issues that balance the domestic market and stretch it with long-dated 25- and 30-year bonds. Better maturity in the national fixed-income market enables lenders to offer locals long-term housing and other finance with paybacks over decades rather than a few years. Electricity company Kengen, telecoms operator Safaricom and others have raised hundreds of millions of dollars through bond issues, many aimed only at local savers. The overall effect on the economy is likely to be huge.
But change is coming slow to some African exchanges where liquidity is too small and action too slow. International investors complain that many don’t have enough trading to accommodate the minimum buy or sell amounts required and they lament the quality of market and business information and transparency. Coupled with the operational problems and uncertainties that dog local and international businessmen in many African countries, some are still “off the map” for investment.
London, New York and other international stock exchanges benefit if companies and bond issuers seek listings and cross-listings internationally in order to get closer to investors and sources of capital and because efficient marketplaces make their capital raisings more attractive to investors. London has a tradition as the world’s capital marketplace and the LSE’s Main Market lists 18 equities for trading that focus on Sub-Saharan Africa. In 1995 the exchange created the Alternative Investment Market (AIM) as an international marketplace for smaller, growing companies seeking growth capital, including early-stage and venture-capital, as well as more established companies. Sub-Saharan Africa scores 55 out of 3,000 listings, mostly mining firms, but also farming, finance and machinery.
NYSE Euronext Inc says trading in 16 African equities listed on its New York and European stock exchanges has boomed. Stefan Jekel, managing director for Europe, Middle East and Africa, says main activity stems from South Africa but interest in Africa is growing: “The volume (number of shares) traded has increased by factor of 12 over the last ten years to 7.9m shares, and the value is up by a factor of 21 times to $204m per day”.
London is to the fore when it comes to international Eurobond issues as African countries rush to issue sovereign debt and benefit while world interest rates are rock-bottom. Interest is also growing in African derivatives such as Exchange-Traded Funds (ETFs) available on London, New York and other international markets and one or two African markets. NYSE says the number doubled in 2009 to ten ETFs, six in Europe and four in New York, and they have over $1bn in assets.
It is an historic opportunity for Africa’s capital market structures. However much national exchanges improve, they need radical restructuring to create liquid and more efficient markets or they will be blown off the map by the winds of change.
Kwame Nkrumah (1909-1972) and many others transformed the continent driven by their vision of a mighty Africa that grew strong by unshackling the borders that colonial powers had drawn on maps. The African Union is founded to achieve regional and economic integration for Africa to take its rightful place in the world. Capital markets have an opportunity in that technology and proven models exist for African stock exchanges to pool trading while still maintaining national exchanges and regulation and being adaptable to meet local requirements.
Sunil Benimadhu, President of the African Securities Exchanges Association and CEO of SEM said in November 2010 that world investors see the continent as “a very promising investment destination with tremendous present and future growth potential”. African countries have achieved growth rates exceeding 5% in recent years after embracing fundamental structural reform programmes. The growth is set to continue but it must be fuelled with capital, skills and improvements in the investment and business climate.
African capital markets have an opportunity and a challenge.
Tom Minney is a consultant, speaker, financial journalist and editor of the blog www.africancapitalmarketsnews.com
May 13th, 2011 by Tom Minney
West Africa’s Bourse Regionale des Valeurs Mobilieres (www.brvm.org) regional stock exchange is still trading in Bamako this week, but next Monday (16 May) the market will reopen trading operations ino Abidjan, Cote d’Ivoire’s commercial capital. The market had moved operations and started trading in Mali on 1 March because of the violent crisis in Cote d’Ivoire (see our earlier report).
Senior management were already back in Abidjan and banks and stockbrokers were reopening on Monday (9 May) when AfricanCapitalMarketsNews phoned.
According to a report on Bloomberg, Abdelkader N’Diaye information systems director of the BRVM said trading was picking up as situation improved in Abidjan and banks in the city reopened. Former president Laurent Gbagbo was arrested on 11 April and Alessane Ouattara, recognized internationally as winner of last November’s election, was sworn in on 6 May. Forces supporting him had swept through the country in a swift campaign in early April after waiting months for successful international intervention, including from the African Union.
The BRVM smuggled senior management out of Cote’Ivoire in February after security forces loyal to ex-President Laurent Gbagbo occupied the BRVM on 11 February. In an amazing piece of Business Continuity Planning, the BRVM management had all systems including support systems running within 18 days. In March Bloomberg quoted BRVM head Jean-Paul Gillet saying: “We managed to restart the operations of the bourse after we reconstructed the system and the environment. The volume of transactions has been a bit affected, but the prices haven’t dropped as there has been no haste in selling.”
Most banks in Cote d’Ivoire closed about the same time and their branches were taken over. Without the usual custodians and stockbrokers, trading in Mali saw much lower volumes than in Abidjan.
The BRVM lists 39 securities and acts as the regional exchange for 8 countries as an African innovation when it opened in 1998. Sonatel, based in Senegal and including France Telecom as a shareholder, is the biggest listed company with CFA 1.65 trn in market capitalization. Other listings include 8 banks, including SGBCI (Societe Generale SA) and Ecobank Transnational Inc. Ivorian companies make up 33 of the 39 listings, according to BRVM website, and the BRVM Composite Index peaked at 174.89 on 11 Jan, but was 151.46 at close of trading today (13 May) after edging down all week. Michael Barnes, Head of Sales and Trading for Securities Africa said on Monday that much of the pent-up buying and selling had already gone through.
April 26th, 2011 by Tom Minney
The East African Monetary Union is supposed to be effective from 2012. The New Vision newspaper reported that senior officials including central bank governors, capital markets authorities, insurance and pensions regulatory agencies and national statistics officials from the East African Community (www.eac.int) partner states are set to meet in the last week of April 2011 for a third negotiation round in Tanzania.
The second meeting of the EAC High Level Task Force to negotiate the East African Monetary Union (EAMU) Protocol was in Burundi for 5 days in Feb-Mar and the first in Tanzania in January.
Four working groups – macroeconomic, statistics, financial sector and payment and settlement systems- will discuss the draft protocol.
According to reports, the second meeting considered the structure of the proposed East African Community Monetary Union Protocol and also finalised and adopted a matrix of issues to be negotiated in the different areas through the 4 working groups. It considered draft terms of reference for EAC macroeconomic convergence criteria that will be part of the monetary union protocol. It also advised that the study to review the EAC macroeconomic convergence criteria needed to be undertaken urgently.
The East African monetary union is supposed to be effective by 2012 after the EAC common market protocol that was effected on July 1, 2010 and the customs union in 2005.
EAC Deputy Secretary General (Planning and Infrastructure) Alloys Mutabingwa said in February that the EAC Secretariat was building capacity for the negotiation process and had signed a US$16 million grant agreement with the World Bank to support the EAC Financial Sector Development and Regionalization, initially for 3 years but with an extension for 6 more years. The project covers 5 areas with a base component of capacity building including: i) financial inclusion and strengthening market participants; ii) harmonize financial laws and regulations against common standards; iii) mutual recognition of supervisors; iv) integration of financial market infrastructures; and v) development of a regional bond market.
April 24th, 2011 by Tom Minney
Dr James Ndahiro, Chairperson of the Rwanda Stock Exchange, said East African countries should form a single stock market by 2015. He is quoted in the local Standard newspaper as telling a conference in Nairobi: “Financial markets contribute to 28% of the region’s gross domestic product, which stands at $80 billion. This is a very big percentage from one sector, which should be nurtured to promote further growth.”
He said that the growth of stock and capital market would help East African countries liberate themselves from dependence on foreign aid.
Companies cross-listing their stocks and offering shares to citizens of the 5 countries without discrimination was one step, he said: “We saw it in Safaricom initial public offering where all citizens of countries in East Africa bought shares as local investors. This was good because it encouraged flow of investment in the region,” he said.
He also said governments should spread knowledge and encourage people, particularly the middle-class, to invest in stock markets and infrastructure bonds: “This is where Governments can find money to develop infrastructure, create employment opportunities and improve the quality of life of its citizens.”
The Summit of the East African Community Heads of State met in Dar es Salaam on 19 April and appointed Dr. Richard Sezibera, who was until April Rwanda’s Minister of Health, as Secretary-General for a 5-year term.
April 11th, 2011 by Tom Minney
So far, South Africa’s JSE Ltd (www.jse.co.za) securities exchange has achieved limited success with its Africa Board, aimed to encourage dual-listing of leading African equities on the JSE as part of a strategy to help capital markets development. On 8 April the JSE Executive appointed an advisory committee (Africa Board Advisory Committee) to boost the JSE Africa Board, part of the main equities market, to achieve its mission and strategic objective to provide a world-class stock exchange platform and help attract capital to the African continent.
The committee was launched in Accra, Ghana, and comprises 9 members from several African countries. Membership of the Advisory Committee will also grow and change over time. The chair is Nathan Mintah, previously a partner at private equity firm Kingdom Zephyr Africa Management Company and having over 18 years’ of investment banking and operating experience. Bolaji Balogun, CEO of Chapel Hill Denham Group, Nigeria is another member.
The task of the committee is to promote the business, goals and objectives of the JSE Africa Board to the main stakeholders of the investment community, including issuers, investors, service providers (i.e. banks, auditing firms, legal firms etc), governments and regulators. The committee is also mandated to advise on operational matters relating to the Africa Board, including reviewing the strategy and development of relevant new products that facilitate capital flows into Africa; advise from time to time on any proposed amendments and/or improvements to the JSE Africa Board model; assist business development efforts by facilitating key meetings in jurisdictions where Advisory Committee members have influence; offer advice on protocol, regulatory interpretation in different jurisdictions and assist in sourcing funding for the operations of the Africa Board.
Speaking at a media briefing in Accra on 8 April, Maureen Dlamini, Executive Head of the JSE Africa Board said: “The Africa Board Advisory Committee will help us achieve the objectives espoused by the JSE Africa Board that include attracting foreign direct investment to Africa in order to provide the finance necessary for development, and to allow the people of Africa to share in the African growth story.”
Mr Mintah said his appointment as Chairperson of the advisory committee is a timely and important challenge: “We need a concerted effort to successfully promote the growth of capital markets on the African continent and the JSE Africa Board is the ideal platform to achieve this goal.”
Dlamini said the world has become aware of the business opportunities in Africa. “The JSE Africa Board is ready and able to provide African companies that have pan-African strategies with a springboard to increase their footprint in Africa, using a trading platform that is widely respected,” she says.
The JSE, which operates Africa’s largest stock exchange, has had two listings since creating its Africa board in 2009. Trustco, a micro financial services group, has seen a 20% boost in its share price since it was listed in February 2009. Wilderness Holdings, a Botswana-based ecotourism company, has climbed 8.7% since it listed in April 2010. Both companies have primary listings in their home markets.