Archive for the 'Integration' Category
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.
March 17th, 2011 by Tom Minney
West Africa’s regional stock market the Bourse Regionale des Valeurs Mobilieres (www.brvm.org) has started trading from a new base in Bamako, Mali, after leaving Cote d’Ivoire because of the political crisis. Trading restarted in the new office on 1 March, reports Bloomberg news agency, but volumes are much lower.
The bourse suspended operations on 11 February, after security forces loyal to incumbent Cote d’Ivoire president Laurent Gbagbo seized its main offices in Abidjan to prevent it relocating. Once senior personnel were safely out, the BRVM managed to move enough of the settlement and clearing operations to start operating in the new offices. At least 10 commercial banks in Cote d’Ivoire closed and Gbagbo’s forces “nationalized” them.
Bloomberg says that it is only operating for foreign investors since most of the stockbrokers were based in Cote d’Ivoire and their offices were part of the closed banks. However stockbroker Securities Africa says that only locals can trade. Clearing and settlement would also require banks, although the BRVM has an associated regional central depository Dépositaire Central/Banque de Règlement S.A.
The political crisis in Cote d’Ivoire is getting closer to civil war. International bodies including regional grouping ECOWAS and the African Union says that opposition leader Alassane Ouattara, won a 28 November presidential election and is the legal president of the country, but Gbagbo refuses to accept the verdict. The United Nations says that almost 400 people have been killed and tens of thousands have fled. The economy has virtually stopped, with all financial systems, and Cote d’Ivoire’s €2.3 billion Eurobond went into default on 30 January.
The BRVM lists some 39 securities and acts as the regional exchange for 8 countries as an African innovation when it opened in 1998. Bloomberg reports BRVM head Jean-Paul Gillet saying that the value of trading on 15 March was CFA 86 million (US$182,300), down from a daily average of CFA 200 mn to CFA 500 mn in 2010: “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.
“Given the situation in the country, Ivorian companies face difficulties in taking part in trading, so we mostly have international clients at the moment. Companies can’t work from Abidjan because members of their staff are missing or their offices are closed.”
Stockbroker Securities Africa lists the market capital of the BRVM at CFA 3.5 trillion CFA francs. Sonatel (SNTS), 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 has since fallen 7.5%, in line with many emerging markets indices.
March 7th, 2011 by Tom Minney
The Uganda Securities Exchange (www.use.or.ug) has today (7 March) extended its trading to 5 days a week, up from 3 days.
USE Chief Executive Joseph Kitamirike said at a press conference on 4 March that it would help meet local and international demand. It will also match trading on other East African exchanges such as Dar Es Salaam and Nairobi, as the exchanges harmonize in terms of an East African common market.
The Daily Monitor newspaper reports him as saying: “This development will offer investors maximum opportunity to execute investment decisions and respond promptly to market changes.”
He earlier told the paper reasons for the extension were: increasing demand for company shares, regional integration and the desire to make trading easier: “It’s just to give an opportunity for people to trade. People sometimes make their decisions on Tuesday but they have to wait until Thursday to trade. We cannot keep our market closed on days when we can be trading across the border. If your market is closed and the other markets are open then investors who come through your market don’t have access to others.”
There are 14 companies listed for trading on the USE, including 6 cross-listing with the Nairobi Stock Exchange.
Another cross listing being processed is for UK’s Tullow Oil PLC (www.tullowoil.com), which operates Uganda’s three oil blocks. African Alliance is the adviser but the listing application was held up over a tax dispute on Tullow’s $1.45 billion purchase of 50% interests in exploration blocks formerly owned Heritage Oil PLC stakes completed last July. This dispute is reportedly close to conclusion.
February 25th, 2011 by Tom Minney
The world is moving into fast consolidation of stock exchanges through mergers and acquisitions among the giant exchanges. London Stock Exchange chief executive Xavier Rolet said: “In five years there will be three, four international exchange groups with global distribution capabilities”, according to a report in London’s City AM newspaper (24 Feb).
African stock exchanges have not announced any changes to their style of operations.
The LSE is busy with a £4.3 billion merger with Canada’s TMX exchange. The Ontario Securities Commission chairman Howard Wetson said the regulator would review the value of the deal. In 2010 Canadian regulators blocked mining giant BHP Billiton’s $39 bn takeover bid for Potash Securities.
New York’s NYSE Euronext is planning a $9.5 bn merger with Germany’s Deutsche Boerse, which could face challenges on grounds of reducing competition. According to the report, Rolet said: “There’s going to be big competition issues because, between them, they control 93% of equity and index derivatives in Europe. It cannot be said that this is going to be anything but a monopoly.”
Also complicating the transaction is speculation that US stock exchange NASDAQ is contemplating a rival bid for NYSE Euronext. NASDAQ is valued at $5.7 bn and is worried that it may become a takeover target if it does not grow. The holding company of Chicago Board Options Exchange reportedly said on 23 February that it is open to “strategic transactions” such as a sale or merger with another operator of securities exchanges.
The Singapore Stock Exchange is merging with the Australian Stock Exchange as a growing share of world trading and capital-raising moves to Far Eastern and Chinese markets.
A few years ago South Africa’s JSE Ltd sought to acquire a stake in the Stock Exchange of Mauritius but this was blocked by regulators. Traditionally African leaders and regulators see them as national institutions, preferring sovereignty to liquidity and efficient capital markets. Structures have also been designed to link African exchanges without compromising these principles but these are awaiting funding.
December 31st, 2010 by Tom Minney
What are your wishes for improvements to the African securities markets, including markets for equities and bonds, in 2011?
Who are the key movers and shakers in our continent’s capital markets development and who should this blog ask for their opinions?
Is 2011 the year that impact investing will have an impact in Africa?
It would be much appreciated if you would kindly make your suggestions using the comments boxes below. Question 1 is your ideas on the changes and improvements you would like to see and question 2 who should we ask about what difference he or she aims to make to African capital in 2011, question 3 whether you know of impact investments that make a difference. You can also discuss on the African Securities Exchange discussion forum on Linked in. In the meantime, here are a few ideas from Rob Stangroom’s excellent African IR blog -8 ideas to improve African capital markets on www.africanir.com.
We wish all our loyal readers a very happy, successful 2011 full of joy and business success. May your bull runs be elephants and may crocodiles eat the bears. Thanks for your support which encourages the blog and we hope to give you useful posts in 2011.
December 6th, 2010 by Tom Minney
According to an interview on America.gov, the firm NYSE Euronext Inc. (www.euronext.com) — the home of the New York Stock Exchange and other exchanges — has seen a threefold increase in the trading of African stocks on its exchanges over the past 5 years and twice as many exchange-traded funds (ETFs) focused on Africa in the past 12 to 18 months.
Altogether, these increases stand as clear evidence of a “strong and growing focus” on doing business in Africa, said Stefan Jekel, managing director for Europe, Middle East and Africa at NYSE Euronext, last month in the interview: “The measure of trading in African firms on our platforms has basically tripled in the last 5 years..So we now have three times the liquidity in African stocks today on our platform compared to 5 years ago.”
There are 16 African stocks listed and traded on NYSE Euronext from 6 African countries: Cameroon (1), Cote d’Ivoire (1), Gabon (1), Morocco (3), Senegal (3) and South Africa (7). The total market capitalization of those listed African companies is $90 billion.
For a fund that give investors a cross-section of African companies, Jekel suggested the many Africa-focused ETFs. “We have seen the number of exchange-traded funds that are focused on Africa double in the last 12 to 18 months. There are funds that cover South Africa, Africa, Africa’s top 40 investments, and those are all available on our platforms here in Europe and the U.S. … all with different specializations, differentiations. … So investors find a variety of solutions and opportunities to participate in the growth that can be found across Africa.”
NYSE Euronext is “very closely monitoring” the African investment climate, Jekel said. “I do not mean that in a passive way. We are very involved in initiatives in highlighting investment in Africa.”
One such initiative, he said, is its annual Ai Index Series Summit held in conjunction with Africa-investor.com (Ai www.africa-investor.com). The 2 companies recently hosted their third annual summit, which featured Robert Rubin, former U.S. treasury secretary and a member of the Africa Progress Panel, and Tony Blair, the former British prime minister, who addressed the summit via a video message.
On African stock exchanges, Jekel said, NYSE Euronext enjoys its closest ties with its client-partner exchanges in Casablanca, Tunis and Gabon, but has close ties with exchanges in South Africa, Egypt and others. There are some 29 functioning stock exchanges across the continent, with Egypt, Nigeria and South Africa accounting for 75% of Africa’s listings.
Jekel said: “We are a technology partner to the Casablanca Stock Market and to the … Bourse Régionale des Valeurs Mobilières d’Africque Centrale, or BVMAC, in Gabon and the Tunis Stock Market. By providing technology to these partners, these stock exchanges are using the same engine that NYSE/Euronext use.” He added that they share much of the insight and institutional knowledge as well.
Jekel said he soon plans to travel to South Africa for meetings with members of that country’s exchange to, as he put it, “grow our list of African issuers” and continue building momentum in the Africa investment area.
NYSE Euronext offers training for sister exchanges in Africa and worldwide “mini-internships,” he said, where visitors from other exchanges can “job-shadow” NYSE Euronext personnel.
Role of stock markets
Jekel pointed out the critical role of stock markets worldwide: “No matter where you are, developed or emerging markets, stock exchanges are where investors meet ideas — where companies come to raise capital to finance their business ideas, to finance their growth, and where investors come to participate in these success stories.”
Stock markets, he said, are also an important vehicle for bringing direct foreign investment into a country and serve as a vehicle that “allows investors to participate in the various growth opportunities that exist in emerging market nations and Africa in particular.”
Jekel stressed 2 key pillars of any functioning stock market: reliability and transparency. “I think those are some of the core principles and pillars of a stock exchange operation, and we see those philosophies being naturally adopted in Africa, so that is very comforting.”
Additionally, he said, “We see business and democracy going forward hand-in-hand in positive momentum” across Africa.
Jekel said industry experts who cover Africa on a daily basis all agree that there is a “strong and growing focus on Africa and that it will only grow from here. We see that due to the entrepreneurial spirit, the success stories that come out of Africa and the growing liquidity in its stock markets. We believe those are highly encouraging indicators of development and what is to come.” Entrepreneurs “are key everywhere, be it in the U.S. or Africa. They are the job engines. That is typically where job creation and wealth is coming from and starting.”
Looking to the future, Jekel said, “I think there is consensus among those who are following Africa that right now the BRIC countries [Brazil, Russia, India, China] have a very large role to play in world markets, but several industry insiders are pointing to Africa as a region and continent to pay close attention to over the next 10 to 20 years.”
November 17th, 2010 by Tom Minney
Africa’s capital markets have set themselves a tough programme of action, following the executive committee and annual general meetings of the African Stock Exchanges Association (www.africansea.org) held last week (10 Nov). According to an ASEA press release they are driven growing interest in African securities markets from local and international investors and decided: “..to harness the current and future growth potential of African markets and raise the visibility of African exchanges at the international level.
Plans include an improved website, development of a broad-based pan-African index which could also lead to a pan-African Exchange Traded Fund to be cross-listed on several exchanges. The continent’s securities markets are also to lobby on improving the business and investment environment in African countries as this could help Africa get a bigger share of business. They will also work closely with the African Development Bank and consider boosting the ASEA secretariat through permanent staff at their Nairobi base.
ASEA President Sunil Benimadhu, who is also the CEO of the Stock Exchange of Mauritius, chaired the meeting which was held in Livingstone, Zambia, ahead of the ASEA conference.
According to the resolution:
“ASEA Website: It is fundamental that ASEA’s website grows into a dynamic and integrated source of comprehensive and updated information on African securities markets for the wider investment community. ASEA has approved a proposal to engage a financial data services provider to revamp ASEA’s website into a highly informative website that provides extensive coverage of the daily activities of African securities exchanges.
“Development of broad based Pan African Indices: ASEA has resolved to finalize discussions with a major international index provider to develop and market a broad based Pan African Index. It is expected that this Pan African index will emerge as a reference benchmark for performance measurement for investors investing in the African markets constitutive of the index. The Pan African index may also help to create the necessary framework for the setting up of an African Exchange Traded Fund that can be cross listed across different African securities exchanges.
“Improving the environment for doing business in Eastern and Southern Africa: The Association mandated the ASEA President to engage with the World Bank and the Regional Multidisciplinary Center for Excellence (RMCE) in a regional initiative to improve the environment for doing business in Eastern and Southern Africa. This initiative aims at supporting countries to design and implement policies that will improve the business environment in Eastern and Southern Africa and ultimately increase this region’s world share of investment and exports. Securities exchanges in this region are expected to contribute to and benefit from this regional initiative.
“Establishing closer ties with the African Development Bank: The Association gave the ASEA President the mandate to pursue discussions with the African Development Bank’s “Making finance work for Africa” initiative, and the African Development Bank’s Private Sector arm in identifying areas of cooperation that can contribute to the deepening and broadening of African securities and capital markets and enable these markets to accompany the transformation of African economies, while ensuring that African securities markets emerge as key capital raising platforms to fund Africa’s future growth.
“Leon H. Sullivan Foundation: The Association resolved to issue a non binding letter of support to the Leon H. Sullivan Foundation in support of their Disapora Programme, which seeks to promote investment into African capital markets by African Americans.
“ASEA Secretariat: The realization of these initiatives underscores the importance of a Permanent ASEA Secretariat. The Nairobi Stock Exchange which currently manages the Secretariat on a voluntary basis has been requested to explore the modalities of setting up a dedicated Permanent Secretariat by the end of the first quarter of 2011. The Permanent Secretariat will be tasked with the implementation of a number of key initiatives to raise ASEA’s profile and the visibility of the member exchanges and to scale up ASEA’s activities to better service the different stakeholders of ASEA members.”
November 17th, 2010 by Tom Minney
African securities exchanges need to play a stronger role in harnessing Africa’s growth opportunities. This was the view of Sunil Benimadhu, President of the African Securities Exchanges Association (www.africansea.org) and CEO of the Stock Exchange of Mauritius (www.stockexchangeofmauritius.com), when he addressed the 14th annual conference in Livingstone, Zambia, held last week (10-12 November).
The theme of the meeting was “Integration of African Markets through Technology”. The Conference delegates included leaders and staff from African securities exchanges and representatives of the investment community and financial services sector. It was hosted by Zambia’s Lusaka Stock Exchange (www.luse.co.zm).
Mr Benimadhu, the ASEA President, said: “African countries and African stock markets being considered as the last growth frontier in the world.” He said the conference came “at a very propitious time when the African continent is increasingly being viewed by investors worldwide as a very promising investment destination with tremendous present and future growth potential”. He noted Africa is home to 25% of the world’s resources, many African countries have achieved growth rates exceeding 5% in recent years after embracing fundamental structural reform programmes, and investors are increasingly looking for superior returns outside their traditional markets.
He pledged that ASEA, as the apex body of securities exchanges in Africa, will implement a value-enhancing plan to strengthen the role of African securities exchanges in harnessing the continent’s growth opportunities, in partnership with private and public sectors.
The conference was officially opened by Hon. Dr. Situmbeko Musokotwane, Zambia’s Minister of Finance & National Planning, who said that African capital markets have a key role to play in mobilizing portfolio capital to facilitate economic development and create jobs for our youth.
Other topics discussed included:
• “Exchange liquidity – drivers of better liquidity”, Clifford Sacks (CEO South Africa and Head of Pan-African Equities, Renaissance Capital);
• “Creating a pan-African hub for seamless trading, clearing and settlement”, Anthony Mahinda Thomas Weerisghe (CEO of MillenniumIT and Director of Global Development, London Stock Exchange Group);
• “Financial literacy grows economies”, Maureen Dlamini (Senior General Manager, Education & Executive Head, Africa Board, JSE Ltd.);
• “The role of African carbon credit exchange in the development of African carbon markets”, Okey Oramah (Vice President, African Export–Import Bank);
• A fund manager’s perspective of asset management in African markets, Jonathan.Auerbach (Managing Director, Auerbach Grayson & Company, New York);
• A panel discussion on “Regional integration of African exchanges – what are the opportunities and challenges?” featured the CEOs of the Nairobi Stock Exchange, Bourse de Casablanca, and Zimbabwe Stock Exchange and chaired by Mr Benimadhu.
November 9th, 2010 by Tom Minney
Kenya’s Nation Media Group (www.nationmedia.com) has cross-listed its shares at the Rwanda Over-The -Counter (ROTC) market on 2 November. According to a report in New Times (www.newtimes.co.rw), NMG’s Chairman Wilfred Kiboro said the company was offering 157,118,572 ordinary shares to the official list of ROTC. The ordinary shares have a nominal or par value of Rwf 18.40 (US$0.03) each. The regulators, the Capital Markets Authority (CMAC) of Rwanda and the ROTC Market, approved the listing.
The paper quotes Mark Rugenera, the Chairman of Rwanda’s Capital Market Advisory Council (www.cmac.org.rw): “To attract both investors and issuers, fiscal and non-fiscal incentives were approved by Government. The income tax and value added tax were amended to include the tax incentives recommended under the (East African) Common Market Protocol..
Some of these include withholding tax on dividends on listed companies, which is now down to 5% from 15%; tax interest on listed bond with maturity of 3 years is now 5% from 15% and corporate income taxes were reduced to the lower rates ranging from 28% to 20%. All registered collective investments are exempted from taxes.”
Mr Kiboro added that the cross-listing on the ROTC market was mainly to enhance the profile of the company in Rwanda and to recognize the emergence of capital markets growth in Rwanda.
The paper quotes John Rwangombwa, the Minister of Finance and Economic Planning: “The cross-listing of NMG, the most established media house in the region, will help Rwandans mobilize long term savings and propel the integration of regional economies.”
NMG is the second Kenyan company to cross-list shares, following Kenya Commercial Bank in 2009. Its shareholders have also approved cross listings on the Uganda Securities Exchange and the Dar es Salaam Stock Exchange.
November 5th, 2010 by Tom Minney
The London Stock Exchange (www.londonstockexchange.com) issued the following press release about its trading halt on Tuesday 2 November: “Investigations into this morning’s trading disruption on London Stock Exchange’s pan-European MTF (multi-lateral trading facility), Turquoise, have revealed that human error was to blame for the disruption that began at 08:23 a.m. this morning (sic). The issue was swiftly isolated, and normal trading resumed at 10:30 a.m. Preliminary investigations indicate that this human error may have occurred in suspicious circumstances. The LSEG take this matter very seriously and a full internal investigation has now begun. The relevant authorities have been informed.
“In light of this incident, coupled with necessary network upgrades to address ultra low latency and high flow inherent in the new platform, the Group has regrettably been forced to postpone its Main Market LSE technology migration for SETS. Given that December is an agreed change freeze period, the London Stock Exchange Group will work in partnership with customers to agree a date as early and practicably as possible in 2011 to reschedule the Main Market migration.”
This may give participants at the African Stock Exchanges Association conference in Livingstone, Zambia (10-12 November) something to talk about. According to reports an announcement was due later on 2 November about the LSE’s migration of its main trading platform, TradElect, to faster systems designed by Millennium IT (www.milleniumit.com), which the LSE acquired in 2009. Millennium IT is also a sponsor of the ASEA conference and has a key position on the agenda to speak on technology links to create more urgently-needed liquidity on African stock exchanges. MillenniumIT’s trading and central depository systems are already in use in many exchanges across Africa (see previous blog) and its influence is likely to grow.
Turquoise had gone live with the MillenniumIT trading system on 4 October and the LSE’s main platform was due to switch early in November 2010.
However, none of the sources quoted in a Financial Times article seem to think there is any problem with the LSE strategy to migrate to MillenniumIT’s modern multi-instrument trading systems. They note that the LSE needs modern high-speed trading systems to stay in competition for market share, including for European equities against competitors Chi-X, BATS Europe and NYSE’s Euronext – several intermediaries switched trades to these on Tuesday when Turquoise went down. Traders will need to be reassured about the LSE’s reliability and there are some questions about such a long delay in implementing the new system. It was also noted that many leading exchanges worldwide have been affected by tech problems and none has suffered lasting damage.
Another UK source reported on 4 November that an IT contractor with access to the LSE data centres has been suspended.
South Africa’s JSE, the Namibian Stock Exchange and Norway’s Oslo Bors are all exchanges which use TradElect because of links to the LSE, and could switch to MillenniumIT trading platforms in 2011.