African Capital Markets News » Regulators

Zimbabwe Securities Commission refuses licence for ZSE bourse

Tom Minney — Sat, 17 Dec 2011 18:45:57 +0000

The Securities Commission of Zimbabwe (www.seczim.co.zw) has declined to grant the Zimbabwe Stock Exchange (www.zse.co.zw – under maintenance), an operating licence, according to local media, and is challenging the exchange to provide a business plan. The Financial Gazette reports that the ZSE failed to provide critical information demanded by the regulator. ZSE CEO, Emmanuel Munyukwi, reportedly dismissed the SECZ claims, saying the exchange had complied with all requirements in terms of the law: “There is nothing like that. As far as I know we have confirmed and verified that all the required information is with the regulator,” he said.
According to a report in Zimbabwe Independent SECZ CEO Tafadzwa Chinamo summoned all members of the ZSE to attend a meeting. The Commission is reported to be concerned that the exchange has not automated and done away with the current paper-based trading system, despite suggesting that could happen by the end of 2011. However, the call-over meetings in Zimbabwe are often more active and lively than the screens of some of the less liquid African exchanges, which may even only record a few deals a day.
SECZ also said only 3 out of 20 stock-broking firms had been registered by the commission as having sufficient capitalization to continue and would issue their licences by circular. The regulator said there was concern that the exchange and most stock-broking companies did not get enough income to cover their expenses and remain viable, due to falling trading volumes. The Commission charges a yearly fee of US$3,000 for stock-broking firms and US$1,500 for individual stockbrokers.
According to the reports, the SECZ accused members of abandoning the exchange, given its current state of affairs, saying they needed to be proactive in the development and running of the exchange. It issued a circular to stockbrokers saying the ZSE had to comply with its licencing requirements and had to provide SECZ with information specified in Section 30 of the Securities Act, like other capital market intermediaries and “given that it operates as a Self Regulatory Organisation”.
The capital markets regulator reportedly wrote: “It is worrying therefore that the commission has not yet issued the ZSE an operating license due to the failure by the ZSE to provide the required information. Of particular concern to the commission is the non-submission of the 2010 financial statements which would enable the commission to verify the exchange’s capital adequacy. Also of concern is the lack of a business plan to satisfy the commission that the ZSE is working towards specific goals in developing the market.
“The exchange is owned by the members and as such it is the responsibility of members to ensure its smooth running. Members have a responsibility to resource the ZSE and see to it that the necessary management structures are established and supervised for the day- to-day operations of the exchange,” said Chinamo. “As the Commission we have reason to conclude that members have abandoned this responsibility and we seek to establish members’ position.”
The meeting was adjourned after brokers failed to reach consensus and they have nominated a 5-member committee, working under acting ZSE board chairperson Eve Gadzikwa, to sort out several issues affecting the viability and integrity of the exchange and report within a week. The committee includes veteran stockbrokers, Tediuos Matsaira, Bart Mswaka, Jeff Mhlanga, Edward Mapokotera and Rufaro Zengeni.
Chinamo reportedly added: “Given the important role members play in operating the exchange the Commission is concerned by the non-transparent manner in which new members are admitted. Several applications are awaiting approval months after submission resulting, in a number of firms operating without two brokers as stipulated in the SEC rules.” One broker was reported as saying that only having 30 stockbrokers was a limitation: “I believe that if the membership grows the bigger the pool of ideas we have and this can increase the pace of transformation of the market,” a leading broker indicated.

African Stock Exchanges Association conference tackles key issues

Tom Minney — Fri, 28 Oct 2011 14:02:27 +0000

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.”

Mobius remains bullish on Nairobi Securities Exchange, says FT

Tom Minney — Fri, 28 Oct 2011 12:21:18 +0000

Mark Mobius, the veteran emerging markets investor and head of Templeton Emerging Markets (www.franklintempleton.com), is bullish about the Nairobi Securities Exchange (www.nse.co.ke), although it is the worst-performing stock market in sub-Saharan Africa this year, according to an article on 27 October in the UK’s Financial Times.
According to the article, by Katrina Manson: “A long-term investor, Mr Mobius makes his money from yo-yoing frontier markets. Kenya’s has see-sawed between losses of 41.4% after post-election violence in 2008 to best sub-Saharan performer excluding South Africa last year, with a rise of 28.3%. Domestic investors tend to have both less money and less time to play with.” She also cites Aly-Khan Satchu, chief executive of Rich Management (www.rich.co.ke), a Kenyan financial services firm as saying the 2011 collapse is a “rout”. Domestic confidence is low, including among many of the 800,000 people who invested into Safaricom’s 532% subscribed IPO (KSh5 in the 2008 IPO, KSh3.05 at present).
Kenya has seen currency weakness, foreign capital flight, high inflation (it was 17% in September) and drought. The NSE has seen big cuts in volumes and much less participation by foreigners, who used to dominate trading, partly because of a global flight from risky assets. Share price indices have slid, losing the strong gains of 2010. Local investors see better gains from bonds, real estate and family firms.
The IPO of British American Investment Company Kenya only achieved 60% of its target (as reported on this website) and Kenya Airways seems to be holding back a share offer in which it wanted to raise $250 million for expansion. According to the article, Satchu said: “You can’t be issuing IPOs that flunk at the first hurdle. There has not been a successful IPO since Safaricom and that has impaired the stock market. They need a flagship discounted offer and will languish until they do it. Right now, the government couldn’t raise tuppence.”
The also article quotes Stella Kilonzo, head of the Capital Markets Authority (www.cma.or.ke), as blaming the stressed economy. She says there have been 3 years of reforms to boost disclosure and set more stringent requirements and these will eventually pay off. This year the NSE was renamed a “securities” rather than “stock” exchange in anticipation of a new bond index, futures and derivatives trading, exchange-traded funds and a new small and medium sized business index among others. If these come into operation, diversification could help the market.
There is still a cloud over the bourse from a scandal after stockbroking firms collapsed owing their clients money, some after allegedly trading their clients’ money illegally. No-one has yet gone to prison although court cases continue, and not everyone has been compensated, partly because the compensation fund does not have enough resources. Ms Kilonzo says regulation is now tighter.
Reportedly, a court case against the CMA by a collapsed brokerage firm that has been under statutory management since 2007 last month halted a plan to demutualize the NSE, including selling part of it and listing its shares on the Nairobi bourse. According to some analysts, demutualisation could help clean up the market by separating stockbrokers from the exchange’s owners.
Sentiment may be changing, after the Central Bank of Kenya (www.centralbank.go.ke) moved aggressively to push up interest rates by 4 percentage points this month, which may stabilize the currency and bring back investors. Good rains and strong investment in infrastructure could fund growth in 2012, although worries remain about elections.
Manson quotes Mobius: “People are fearful of coming in, so whoever goes there makes a bundle. We may go and buy more at a cheaper price.” The Frontier Markets Fund is invested in Kenya Airways and Safaricom.

UK’s regulator FSA warns on unregistered “ethical” tree investment schemes

Tom Minney — Fri, 28 Oct 2011 11:14:50 +0000

The UK’s regulator, the Financial Services Authority (FSA), has issued a warning on its website about unregulated “sustainable, ethical and alternative” investments. It says: “We are seeing an increasing number of overseas schemes that offer investment opportunities in tree and crop plots abroad, and other ethical investments.
“These schemes may be promoted by an operator ‘cold calling’ with an offer for you to buy a plot on a plantation which harvests agricultural commodities such as teak trees, jatropha, paulownia and biofuels. The investment is usually stated to be low risk but promising high, often guaranteed returns of around 15-25%. The investment period is typically about five years, after which your plot will be harvested and sold on your behalf and the profits forwarded to you.”
They note that some of the schemes being offered to UK investors are structured so they do not meet requirements and therefore then do not have to be registered. However, UK investors should know that the schemes are not covered and they will not be protected by complaints procedures or compensation if things go wrong.
According to the FSA: “We have heard reports of promoters using aggressive, high-pressure sales tactics, and often claiming we do not need to authorise the schemes, as they are not collective investment schemes (CIS). While we regulate CIS, we do not regulate the sale of land, trees or crops.”
The FSA (www.fsa.gov.uk) has been investigating and says that some tree and crop schemes seem to be structured to avoid CIS rules. In simplistic terms, a CIS would be involved if the investors do not have day-to-day control over managing their plot, where investors’ funds are pooled or where the operator is responsible for managing the scheme as a whole.
The regulator wonders how investors do have day-to-day control over business performance, when the plot is thousands of miles away. According to the FSA “We are continuing to look into several schemes to establish whether they are CIS, but we suggest investors treat such opportunities with caution.” It advises that if you think a scheme is suitable for you and you are aware that you may not be protected, you should consult an independent financial adviser or lawyer. It also offers a consumer helpline.
The FSA issued an earlier warning in July 2010 about the rise of unregulated CIS and says: “sustainable, ethical and alternative investment opportunities are increasingly being offered to investors without the protection of UK complaints procedures or compensation schemes if things go wrong.”
COMMENT: This blog supports sustainable, ethical investment 110% and strongly believes individuals have the right to choose what to do with their money and to follow their beliefs. But they need to be aware of the risks, to understand what they are investing in, and to be aware that social business can sometimes be harder to make succeed.

Nigeria’s Securities and Exchange Commission (SEC) to set up Investor Protection Fund

Tom Minney — Tue, 25 Oct 2011 16:43:28 +0000

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.

Conference: African technology and innovation banking

Tom Minney — Thu, 08 Sep 2011 10:58:50 +0000

[SPONSORED STORY] Banking is changing fast and nowhere more than in the African markets, where growth opportunities are huge with some 250 million households still unbanked, but only for banks with the skills and technology to chase them. Banks are expanding fast across Africa, heralding new competition. Innovative banks are seizing opportunities served up by technology to reach out to millions of new customers and find ways to offer financial services that will help them increase bank revenues, through agency or branchless banking, microfinance, SMME lending, or mobile money, e-wallets and biometrics.
Banking strategies for the future revolve around “base of the pyramid”, “technology convergence”, “cloud” and “inclusive banking”. In order to grow against competitors, banks are moving into technology, from core banking systems, adding a range of user interfaces, including Internet, mobile phones, call centres. In 2011 banking leaders are moving to agency banking and branchless lending. Lessons can be learnt and the future charted for emerging markets, including India, South Africa, Kenya and Malaysia.
Speakers at a top conference “Technology Innovation for Banks in Growth Economies” set for London from 28-30 November include global banking leaders in development, SMME and micro-finance institutions such as Anil Kumar, (CEO of IFMR Rural Finance, India), Yolanda van Wyk (CEO Smart Services at First National Bank, South Africa), Sandeep Indurkar (Head Mobile Payments – Internet Banking and Mobile Banking, ICICI Bank, India). Technology and finance expert speakers include Gerhard Romen (Director Mobile Financial Services Nokia), Dr Tim Kelly (Lead ICT Policy Specialist, The World Bank) and Menno van Doorn (Director VINT Research Institute for the Analysis of New Technology). The agenda covers software-banking partnerships, the impact of broadband, government pressures towards financial inclusion, biometrics including fingerprinting, cloud-based technology for banking, e-wallets and banking in growth economies and technologies for scale.
The conference is aimed at banks across the emerging and frontier markets, particularly where their growth will be linked to new customers with growing incomes, also technology experts and banking system vendors, development finance experts, policy-makers and leading commentators.
Together they will discuss potential solutions to challenges such as:
• Poor connectivity – satellites, cable and changing national and regional regulation
• Central and development banks plans to upgrade current ICT infrastructure
• Infrastructure of tomorrow being prepared for the next stage of branchless banking
• Understanding infrastructure needed to support the alliance between telecoms and banking providers
• Can microfinance banks be a delivery channel hard-to-reach regions?
The first day, 28 November, consists of workshops: i) the fast-track on how ICT creates better delivery channels for financial products to reach the unbanked and ii) branchless banking – seize opportunities and mitigate risks.
The conference website http://technologyinnovation-banking.com gives details and bookings. Or call: +1 212 537 5898 or email: info@hansonwade.com. Early bird discount of up to GBP300 expires in 8 days.

Electronic trading and central securities depository coming for Zimbabwe?

Tom Minney — Sun, 04 Sep 2011 14:00:40 +0000

A company has been engaged to supervise the transition of the Zimbabwe Stock Exchange to electronic trading. A document on the change has been presented to Cabinet and issues around setting up a Central Securities Depository including the shareholding structure. According to a report in the Government’s Herald newspaper, Finance Minister Tendai Biti told a breakfast meeting organized by the Securities and Exchange Commission of Zimbabwe and the ZSE that the CSD could be in place by year-end.
The aim is to improve stakeholder relations and explore possibility for other capital or financial markets to be set up. Minister Biti said the CSD was a critical part of a modern capital market system as it reduced the payment cycle, enhanced transparency and helped monitor the shareholding thresholds of foreign investors participating on ZSE.
He said that the CSD would help prevent irregularities. Apparently the minister said that currently only about 20 investors accounted for most of the trading in the 79 listed counters. He claimed that the CSD will improve liquidity, promote market integrity and transparency while minimising market manipulation, fraud and financial crime.
According to a report in a South African newspaper called “Sunday Times Zimbabwe”, the Minister would also like to modernize the ZSE Act and the Securities Act and possibly introduce a “super regulator”, similar to the UK’s Financial Services Authority (in June 2010 the UK Government announced plans to abolish the FSA and split its functions). This report claims that 20 of the “shadowy players” were virtually controlled by the same individuals, and Renaissance Financial Holdings Limited was accused of wrongdoing because of insufficient measures to detect insider dealings.
According to the Herald, the Minister said: “The main issue being dealt with is the shareholding structure of this systematically important institution (CSD), which should reflect national ownership by both the public and private sector players.” He said that the National Social Security Authority, the Reserve Bank of Zimbabwe or the ZSE would own at least 51% of the CSD company. Another significant shareholder will be Chengetedzai, a local private firm which is overseeing the establishment of the electronic trading system (the website http://chengetedzai.com/) appears to be just a title page.
The government seeks to demutualise the bourse, which it believes will enhance accountability and speed modernisation. Currently the bourse is still an association of stakeholders while demutualization would mean turning the exchange into a company driven by the profit motive or other goal. Minister Biti said demutualisation was critical to prevent cartels of members from dictating the affairs of the bourse, which created credibility crises and could put off investors. There has long been tension between the ZSE and the SEC over jurisdiction and self-regulation.
ZSE trading is done in daily “call-over” sessions when brokers gather around a table and bid against each other. However, trading is more active than on many more automated neighbouring exchanges.
According to the report, the Minister said: “When you go to the Zimbabwe Stock Exchange and see the way they trade it gives the impression that we are still stuck in 1950. It is as if someone pressed a pause button on the TV and everything stopped. We have to modernise and part of it is coming up with a CSD,” he said.
SECZ chairperson Mrs Willia Bonyongwe said the country wanted to set up more securities and capital markets and challenged innovative Zimbabweans to come forward with proposals. She suggested markets could assist in trading equities, bonds, quasi or hybrid financial instruments, asset securitisation and unitisation, hedging or risk commodity markets and private equity instruments, or even trade in agriculture and mining products. The ZSE is the only active capital market.
In early August the ZSE website (www.zse.co.zw) was hacked twice in early August and used phishing and has currently disappeared.

South Africa’s Financial Markets Bill open for comment, due 2012

Tom Minney — Wed, 10 Aug 2011 19:13:54 +0000

South Africa’s Government has released the Financial Markets Bill for public comment, with comments due by 5 September. The new law would replace the Securities Services Act (No 36 of 2004) which took effect on 1 February 2005.
South Africa is committed to a global regulatory reform agenda after the global financial crisis, according to a Government press release. This means a stronger regulatory framework, more effective supervision, improved crisis resolution, and enhanced accountability through international assessments and peer reviews for the financial sector, including financial markets.
The Financial Markets Bill includes:
• Strengthening the self-regulatory organisation model of supervision (which has proven efficient and effective in delivering on the objectives of securities regulation)
• Aligning financial markets regulation with international best practice
• Giving effect to recommendations made by the 2008 World Bank and International Monetary Fund Financial Sector Assessment Programme
• Implementing South Africa’s commitment to the UNIDROIT Convention to improve investor protection in cross-border transactions
• Ensuring alignment between legislation that governs financial markets and the wider legislative framework, including the new Companies Act and the Consumer Protection Act
The 2004 Act governs the regulation of securities services including securities exchanges, central securities depositories, clearing houses, and their respective members. It consolidated the South African regulatory framework for capital markets and aligned the regulation and supervision of South African financial markets with the prevailing international developments and regulatory standards.
After consultation the Bill will be tabled in Parliament and is expected to be implemented in 2012. The Bill and accompanying documents are available on the National Treasury and Financial Services Board websites. Draft subordinate regulation to be issued in terms of the Bill will also shortly be released for public comment. An FSB policy document is available here.

Nigeria’s Securities and Exchange Commission educates, partners Nollywood film

Tom Minney — Tue, 09 Aug 2011 08:20:43 +0000

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.

Egypt travel ban lifted on PE firm Citadel Capital chairman

Tom Minney — Mon, 20 Jun 2011 09:00:24 +0000

Leading African and Middle Eastern private equity investor Citadel Capital (www.citadelcapital.com) said yesterday (19 June) that Egypt’s public prosecutor has lifted a travel ban imposed in April on its chairman Ahmed Heikal, according to a report on Reuters.
The company announced on 16 June that Citadel Capital Partners Ltd. (CCP), the vehicle through which members of the Executive Committee hold their equity in Citadel Capital, sold approximately 13.4 million shares in Citadel Capital with a total amount of approximately EGP 74 mn (US$12.4 mn) last week and lent the money to Citadel “to strengthen the firm’s cash position”.
According to the Reuters report, the Government had ordered Heikal not to travel while investigators probed corruption allegations against several business leaders and government officials linked to former President Hosni Mubarak. Heikal and former prime minister Atef Obeid were accused of links to profiteering and embezzling public money. Reuters reports that Citadel shares fell 10% after the ban on 14 April and have lost a third of their value since the start of the year. Citadel is listed on the Egyptian Exchange (CCAP.CA).
According to the report, Citadel said: “The public prosecutor has agreed today to remove the name of Ahmed Heikal, the company’s chairman, from the list of people banned from travelling.”
Reuters also says that Dubai-based Abraaj Capital (www.abraaj.com) has talked with Citadel about possibly buying a stake. FT Tilt also has an interesting story on the deal, discussing whether Abraaj is seizing an opportune moment and noting that Citadel shares climbed sharply in trading on 19 June.
CCP owns approximately 33% of Citadel Capital SAE shares as of 16 June 2011 and the company statement does not say who bought the shares. CCP has lent the funds to Citadel Capital “until regulatory approvals are obtained for the planned capital increase”.
According to the company, Citadel Capital has $8.7 bn in investments under its control. It “focuses on building regional platforms in select industries through acquisitions, turnarounds, and greenfields executed via Opportunity-Specific Funds. The firm’s 19 OSFs now control Platform Companies with investments worth more than $8.7 bn in 14 countries spanning 15 industries, including mining, cement, transportation, food and energy.
“Since 2004, Citadel Capital has generated more than $2.5 bn in cash returns to its co-investors and shareholders (on investments of $650 mn), more than any other private equity firm in the region. Citadel Capital is the largest private equity firm in Africa by PE assets under management (2006-2011, as ranked by Private Equity International).”