Archive for the 'Nigeria' 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 27th, 2011 by Tom Minney
Private equity managers (“General Partners” or GPs) have been able to exit some of their investments, spurred by good valuations, global private equity funds entering Africa and more interest from international companies. According to a story on excellent private equity website, www.privateequityafrica.com, data from research house Preqin (www.preqin.com) says that reported exits this year are worth $1.2 billion “as company values finally recover to reasonable levels despite uncertainty in the broader global economy.”
This compares with $79 million sold in the whole of 2010, according to Preqin data.
Here are some of the exits listed, plus a couple of others we added, which may not be included in Preqin’s data for various reasons. For more details take a look at www.privateequityafrica.com and other sites:
• Sweden’s Electrolux bought Egypt-based white goods manufacturing company Olympic Group Financial Invetment SAE for $404m, including a 52% stake previously owned by Egypt’s Paradise Capital Holding for Financial Investments SAE. The deal started in October 2010, and the price changed a bit during the revolution. Electrolux followed with a mandatory offer to other shareholders. A 2010 statement by Paradise Capital said the new funds would be put into other businesses: “Expanding the existing Paradise Capital business activities will help the Sallam Family realize its declared mission statement “80K by 2020” (to provide 80,000 jobs by the year 2020 in Egypt).”
• Mark Shuttleworth’s HBD Venture Capital sold its stake in South Africa-based mobile payment company Fundamo to Visa in a $110m trade deal.
• South Africa’s Ethos Private Equity Fund V sold a 70% stake in South Africa-based sporting goods company Holdsport (formerly Moresport), raising approximately $137m (R930m) through a pre-placement after a book-build by UBS. Holdsport listed on the Johannesburg securities exchange JSE Ltd in July, its first retail listing since 2004. According to reports, Ethos paid R681 million to acquire the retailer, including its debt, in a 2006 buyout with management, who retain their interest.
• Oil company Kosmos Energy Ltd raised $594m (more than expected) when it listed on New York Stock Exchange in May in an IPO, it had been backed by private equity firms Blackstone Group and Warburg Pincus.
• Aureos’ $381m Africa Fund achieved its first exit in February when it sold its stake in Nigeria-based biscuit maker Deli Foods to Tiger Brands, after holding the company for only 3 years. Tiger Brands paid a total of R275m ($35m) for the company. Aureos said it gained “solid” returns. In a press release, Ravi Sharma, partner for Aureos West Africa added: “Aureos’s involvement with Deli Foods has been about taking the company to the next stage in its development. As well as growing the company to the extent that it has been able to attract an international buyer, we are also proud that the improvements that we have made in health, safety and environmental procedures will bring significant benefits to the strong workforce, as well as the wider community in this part of Lagos.”
• Blackstar Group SE (linked to Blackstar Investors plc in UK) announced that it had reaped a 72% internal rate of return (IRR) in sterling and 4x returns on its sale of a 54% stake (shareholding and shareholder loans) in Ferro Industrial Products, after less than 3 years of holding the asset (it was acquired in January 2009 for GBP4.8m ($7.7m), according to a press release). The investor sold its stake in the company to Investec and Ferro management for R220m (about $30m at the time).
Other deals reportedly in the making include plans by Ethos and Actis to sell stakes in South Africa’s Savcio Holdings, an equipment repair company. This year’s arrival into African private equity Carlyle Group was understood to be one of the players looking at the company, estimated at $500m in value, according to reports General Electric and Siemens AG are also keen.
Look at the www.privateequityafrica.com for more and to subscribe to the October issue of the Private Equity Africa quarterly printed journal.
October 25th, 2011 by Tom Minney
The Securities and Exchange Commission Nigeria (www.sec.gov.ng) is considering setting up an Investor Protection Trust Fund. This comes after news that no-one has ever claimed from a reported N500 million (US$3.2 million) fund for investor protection at the Nigerian Stock Exchange (www.nigerianstockexchange.com) set up after a 1996 white paper on capital market reform.
Each stock-broking firm initially paid N1 million to the NSE fund as a contribution and all stock-broking firms have contributed. The fund has grown over more than 14 years to over N500 million in a fixed deposit at a bank, which in turn is backed by Fidelity Guarantee Bond. The fund is to compensate investors whose monies are trapped in cases of insolvency, bankruptcy or negligence of a stock-broking firm. An investor is entitled to a maximum claim of N14 million, depending on the amount deposited or sales proceeds unpaid at the time of the demise of the stock-broking company. NSE Head, Corporate Communications, Wole Tokede, was recently quoted in local newspaper The Daily Independent as admitting the existence of the fund, but he said there has never been a withdrawal from the NSE fund, possibly because of lack of knowledge among investors.
Director General of the SEC Arunma Oteh commented that the NSE fund “has not been as active as it ought to be. We shall write to NSE to ensure that the fund is administered accordingly.”
Ms Oteh said in September 2011 that the SEC will set up another fund to protect investors in the market, as provided for in the Investment and Securities Act (ISA) 2007. She expects that part of the money could come from recoveries from 260 capital market operators and individuals referred to a special Investments and Securities Tribunal in 2010, as the SEC has asked the IST to make the operators disgorge the profits gained from the illegal market activities. w, as by its predecessor. The fund would compensate investors who are defrauded by market operators. Typically an investor protection fund makes investors more confident in a capital market, as they know their funds are safe if their stockbroker runs into problems. However these funds do not compensate investors for share price movements or when investee companies or world markets run into problems.
August 17th, 2011 by Tom Minney
Leading emerging markets investment bank Renaissance Capital (www.rencap.com) has appointed Yvonne Ike as its Chief Executive Officer, West Africa. She will be based in Lagos.
Clifford Sacks, CEO of Renaissance Capital Africa, says in a press release: “Yvonne is an internationally regarded investment banker credited with pioneering a number of groundbreaking transactions in the West Africa region. The entire team is looking forward to working with Yvonne and benefiting from her local and global expertise.”
She has more than 18 years’ experience in financial services, including capital markets operations and fixed-income, derivatives and equities products. Over the course of her career, she has led senior teams in New York, Geneva, Hong Kong, Nigeria and South Africa.
Her degree is a Bachelor of Science in Economics. She started her career as an auditor with Ernst and Young International and has been an registered representative with the UK’s Financial Services Authority since 1994. Prior to her appointment at Renaissance Capital, Ms Ike was a managing director at JP Morgan, where she spent 15 years until 2009. More recently, she has worked as a partner at Africapital Management Limited, an advisory firm based in Lagos.
She succeeds Rotimi Oyekanmi, who has been appointed Chairman Emeritus, Renaissance Group, West Africa. Oyekanmi joined Renaissance in 2007 and will now be responsible for the build-out of Renaissance’s consumer finance business and help with Renaissance Partners’ land developments in West Africa.
Ms Ike commented: “Renaissance Capital is best placed to provide a broad range of financial solutions to help unlock the massive potential in Africa. I am excited about the firm´s unparalleled vision for Africa, the calibre of the people I will be working with and Renaissance’s execution capabilities. In addition to offering unrivalled financial, investment and management expertise in the West Africa region, we are uniquely positioned for cross-border business between Africa and other regions, particularly in emerging markets.”
Renaissance Capital, part of Renaissance Group, offers access to the emerging markets of Russia, the CIS, Eastern Europe, Asia and Africa through centres such as London, New York and Hong Kong. Its core businesses are: Mergers & Acquisitions; equity and debt capital markets; securities sales and trading; research; and derivatives. It is building practices across emerging markets in metals & mining, oil & gas and agriculture.
August 9th, 2011 by Tom Minney
Nigerian regulator, the Securities & Exchange Commission, is travelling the country to build education and awareness. Internationally it also is working hard to restore confidence in the capital markets, as regulation tightens since 2009.
SEC Director General Arunma Oteh, SEC Commissioners and senior officials visited Port Harcourt, capital of Rivers State, for 4 days of meetings with stakeholder groups such as business, civil servants, legislators, teachers and students.
Oteh challenged Nigeria’s state governments and corporates to seek long-term funds from the market to finance development projects, rather than using short-term financing. Short-term funds for long-term projects, she warned, would amount to a mismatch, with negative consequences and high default risk if, for instance, interest rates continued to rise.
Oteh said that no nation can develop without long-term capital and this was the “reason why governments make concerted effort to promote the market and ensure its stability as an integral part of the financial sector development.”
The SEC organized a 3-day investor/issuer education programme, themed: “The role of the capital market in mobilising funds for business expansion and infrastructure development.” Senior officials from the Nigerian Stock Exchange were present too, to encourage more companies to become listed on the NSE.
The SEC has also launched a partnership with Nigeria’s film industry (“Nollywood”), on using film to spread the word widely about capital markets and investing. According to a report of the SEC campaign in Daily Independent newspaper, the first fruit of the partnership was “Breeze,” a comedy/drama, which according to Kunle Afolayan, the producer/director, premiered on 19 July and teaches the essence of saving for the future.
Oteh explained the partnership with Nollywood was a good way to reach all strata of the Nigerian society. The SEC said “the capital market is key to transforming our society, because no nation has grown without its people saving to educate their children and to transform the country.”
She also said that the SEC is poised for more collaborations with Nollywood in the light of lack of share knowledge, significantly growing number of investors from only 4.5 million or 3% of the population (compared with 60% of U.S. households that invest in the capital market).
Collective investment schemes (CIS) are also on the rise. Oteh said there was an opportunity to pool funds for investment in infrastructure and the SME sector. Olumide Oyetan, CEO of Stanbic IBTC Asset Management Limited, was reported as saying CIS are not much used in Africa, unlike in the US where only 10% of individuals invest directly, and the majority through mutual funds and this is partly because of “poor awareness and low financial literacy amongst retail investors (less than 100,000 people use CIS in Nigeria); limited options available amongst operators and asset classes; aggressive return expectations from investors; safety of investment concerns since the global crisis; prevalence of unregistered and unregulated quacks.”
The Rivers State government is hoping to issue a N100 billion bond targeted at replacing the decaying infrastructure, helping to diversify from oil and preparing for the challenges ahead as first tranche of a N250 bn state issuance programme.
August 8th, 2011 by Tom Minney
The Nigerian Stock Exchange (www.nigerianstockexchange.com) has placed 24 companies on full suspension for failing to submit their financial statements for the year ended 31 December, 2010 (including some since September). The NSE is reported in Nigerian media as making the suspension effective from 2 August, after the companies were given a 1-month technical suspension from 1 July. The NSE has also suspended trading in 3 nationalized banks with effect from 5 August.
In addition, 9 companies were placed on technical suspension for failing to submit their audited accounts for the year ended 31 March, 2011. This means trading is allowed, but no price movement. Further action could be taken if they do not submit results.
Full suspension means there are no transactions on the shares of the companies until the suspension is lifted. Initially 48 companies were placed on technical suspension on 1 July, but 24 of them had submitted their account statements and the technical suspension was lifted. The compliance rate is now 89% of listed companies.
According to reports, affected companies include Dangote Flour Mills, African Alliance Insurance, UNTL Textiles Plc, Daar Communications Plc, Omatec Computers, African Alliance Insurance Plc, Great Nigeria Insurance Plc, Guinea Insurance, Standard Alliance Plc, MTI Pl, and Investment & Allied Assurance. According to one report, Omatek and UNTL had submitted results on 3 August, within 24 hours of being suspended.
The bourse CEO, Oscar Onyema, was reported as saying it was painful to place companies on suspension, but that the exchange would ensure that it enforces its rules.
3 banks suspended pending delisting
The banks were suspended after being sold to the Asset Management Corporation of Nigeria (AMCOM). According to an announcement by the NSE: “Pursuant to the nationalization of AfriBank Plc, Bank PHB Plc, and Spring Bank Plc by the Nigerian Deposit Insurance Corporation (NDIC) on Friday, August 5th, 2011 and subsequent purchase of the banks by AMCON, the NSE has placed the shares of the affected banks on full suspension as a first step towards their delisting from the Daily Official List. “This means that no trading will occur in the shares of these banks as these banks no longer exist following the revocation of their licenses by Central Bank of Nigeria
The Central Bank of Nigeria on 5 August revoked the 3 banks’ licenses and the Nigeria Deposit Insurance Corporation (NDIC) transferred their assets and liabilities to newly-formed “bridge banks”, which were then bought by AMCOM, which is to provide enough capital to restore the banks to capital adequacy. According to news reports the AMCOM statement read: “AMCON has identified independent and credible persons with significant and required experience to fill the board and senior management positions for the banks and will be seeking the approval of the CBN for their appointments. AMCON is confident that the new teams will manage the banks to establish strong market positions and effectively compete in the Nigerian banking sector, providing quality service to their customers and value to shareholders.”
AMCON would evaluate its options and consider the optimal exit strategy to maximize returns. According to a breakdown, AMCON would inject N285 billion into Mainstreet Bank, formerly Afribank, N283 billion into Keystone Bank, formerly Bank PHB, and N111 billion into Enterprise Bank, formerly Spring Bank.
Dr. Kingsley Moghalu, Deputy Governor, Financial System Stability, was reported as saying the move was to ensure all 9 banks rescued would be recapitalized by 30 September. The banks had failed a 2009 stress test. Recapitalization agreements signed with investors by 4 of the other rescued banks would solve around 80% of the banking crisis and the bailout package would be recouped from all rescued banks: “We believe we have drawn a line under the banking crisis. By September 30, all banks in Nigeria will be fully capitalized.”
Several organizations, including Nigerian Shareholders Solidarity Association, Afrinvest Research and Chartered Institute of Bankers of Nigeria (CIBN), were reported to have criticized the CBN move and said it should have waited until the 30 September deadline.
June 22nd, 2011 by Tom Minney
Pan-African private equity firm Helios Investment Partners (www.heliosinvestment.com) announced that it had raised $900 million for its second Africa-focused private equity fund. The final close for Helios Investors II L.P. was at the target set, and a 13 June company press release says that the fund was over-subscribed with more than $1 billion of demand. It is the largest Africa fund raised.
The new fund will follow the investment strategies of Helios’ first fund, looking at new businesses, growth equity investments, structured investments in listed entities and large leveraged acquisitions. It is focusing on high-growth sectors including sectors which have been deregulated, are core to the economy and where Helios has expertise, including telecommunications and media, financial services, power and utilities, distribution and logistics and fast-moving consumer goods (FMCG). The target investments are $25 million to $250 mn of equity per transaction ion various forms. It aims to make investments over 4 years and to hold assets for 3-5 years.
Helios II fund has already made 3 investments:
- It acquired Interswitch, Nigeria’s leading electronic payments processing company for $110 mn;
- It established Helios Towers Africa which builds and operates telecommunications tower businesses across Africa, and acquired portfolios of telecommunications towers in Ghana, Tanzania and the Democratic Republic of Congo (DRC);
- It acquired Continental Outdoor Media, Africa’s largest outdoor advertising company.
Helios has also recently announced the acquisition of Shell’s downstream fuels business across Africa.
According to the press release: “Continued political and market liberalisation and strong economic growth have prompted global investors to evaluate investment opportunities in Africa more closely. The Fund’s potential to make attractive risk-adjusted returns with comparatively low correlation to developed markets enabled it to attract a diverse investor base, which includes support from institutional investors in the predecessor Helios fund, as well as first-time commitments to Africa from a broad range of endowments and foundations, funds of funds, corporate pension funds, sovereign wealth funds and development finance institutions across the USA, Europe, Asia and Africa.”
Helios’ team of investment professionals have good understanding of African markets and global private equity experience. Helios has also developed a Portfolio Operations Group, who work with the managers of the companies which the fund invests into, in order to create value within the firm’s portfolio by driving operational improvements.
Helios Investment Partners operates funds and related co-investment entities, aggregating more than $1.7 bn in capital commitments, and is one of the largest investment firms focusing on Africa. It was established in 2004 by partners Tope Lawani and Babatunde Soyoye who still lead it and is among the few independent pan-African private equity investment firms founded and managed by Africans.
Helios’ portfolio companies operate in more than 25 countries and in various industrial sectors. The firm has experience across a broad range of industries and investment types – leveraged buyouts, recapitalisations, joint ventures, seed-stage venture capital, restructurings, and strategic public equity investments.
Limited partners in Helios’ funds include several leading global funds of funds, endowments and foundations, sovereign wealth funds, family offices, high net-worth individuals and development finance institutions. According to website www.privateequityafrica.com, 72% of its commitments are from private and institutional investors and the rest from development finance institutions.
June 15th, 2011 by Tom Minney
Commiserations on the passing of Tayo Aderinokun, CEO and MD of Nigeria’s Guaranty Trust Bank plc (www.gtbank.com), listed on the Nigerian and London stock exchanges, who died from cancer in Paddington hospital, London on 14 June, two months after he took sick leave and at age 56 years. He was a co-founder of the bank in 1990 and grew it to a top bank that has high regard across world markets, picking up many international banking awards on the way. The bank said in a statement on its website that Segun Agbaje, who was named acting managing director on 20 April, will continue to manage operations. Nigerian papers have published obituaries, such as this one in This Day.
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 16th, 2011 by Tom Minney
Nigeria’s Guaranty Trust Bank (www.gtbank.com) is coming to the market with a $500 million Eurobond, which could potentially roll out into a $2 billion offering, according to sources in the last few days. The bank is listed on the Nigerian and London Stock Exchanges.
According to a story on Reuters on 12 May the bank is about to launch the 5-year bond and the price could be set at 7.75%. The lead managers are to be JPMorgan and Morgan Stanley.
In January the Federal Government of Nigeria’s issued a $500 mn debut 10-year Eurobond at a yield of 7%, according to a previous Reuters story. The offer was apparently 2.5 times oversubscribed but the bond had been trading broadly flat at 6.9% ever since. It was not much shaken by the April elections, as it seems the market is betting on stability and growth going forwards and the price climbed to give a yield of 6.1% by last week.
Reuters reports that GT issued a $350 million bond in 2007 which matures in Jan 2012. The bond has a coupon of 8.5% and is yielding 4.8%.
A research note from Standard Bank also boosts the bonds. “We consider the new Notes due 2016 to be one of the best emerging market bank securities in our universe. GTB is one of the largest banks in Nigeria. It is well-capitalized and highly profitable operating in a market that is hugely underpenetrated. Liquidity is strong. Management is experienced and sophisticated and very importantly to us, experienced in successfully negotiating a banking crisis. During the 2009 Banking crisis in Nigeria, GTB was resilient and quite successfully underwent increased regulatory scrutiny.” The bank says the bonds are at a “significant spread” to the Government bond and compared to other emerging market financial institutions trade, they find the bonds “attractive” and add “with time and increased local participation, we would not be surprised to see the Notes trading inside of 7%.”
The bank was founded in 1990 and at the end of the last financial year was Nigeria’s fourth largest by assets, with market capitalization of $3 bn.
Broker Exotix has also praised its “diversified loan portfolio, conservative management and superior risk management” and says it has superior asset quality.