Archive for the 'Telecommunications' Category

Ethiopia aims for stock exchange by 2020

Ethiopia has set itself a tight timetable for economic reform, including privatization of telecoms by the end of 2019 and a domestic stock exchange by 2020. A World Bank team was due to arrive in Addis Ababa in December to provide technical help to develop the capital market.

Last week Financial Times repeated the timetable in an interview with Prime Minister Abiy Ahmed, given to FT Editor Lionel Barber and Africa Editor David Pilling, billed his first one-on-one international media interview. Prime Minister Abiy told them: “My economic model is capitalism… If you give me $100bn now, I can’t use it. There is not only money, there is talent and experience. That’s why we need the private sector.”

The Reporter newspaper in December highlighted a “one-page template issued by the Office of the Prime Minister”, which “cited poor financial infrastructure, limited financing and poor financial inclusiveness as the major impediments in the finance sector. The government plans to develop a road-map for introducing a trade financing instruments including capital market. Increasing loans to the private sector by 20 percent annually and ensure its fair disbursement and expanding credit registry to micro finance institutions are the key areas that will be addressed in 2019, according to the document.”

Reporter Kaleyesus Bekele highlighted debates at the third East Africa Finance Summit on 18-19 December, organized by I Capital Institute. Zemedeneh Negatu, Global Chairman of Fairfax Africa Fund, told the summit: “We are going to have a stock market this time. We have been on this path for 18 years. But now it is no more an academic discussion. We do need a capital market. We are part of the global economy,”

He said Ethiopia is by far the largest economy in the world today that does not have a stock market. “We are going to join the global capital market club. We have a bigger GDP than Kenya, there are only two sub-Saharan African countries which have bigger GDP than us — Nigeria and South Africa. I think it is time. We have companies ready to be listed in the stock exchange.”

He says that top priority is to set up a regulatory institution and create a government regulatory framework, and the private sector can incorporate the stock exchange. “We need to have stock brokerage firms and investment banks. Stock traders have to be trained and the local accounting and auditing firms have to build their capacity.. The financial media has to be established or the existing ones should extend their financial news coverage. Financial media is also the key component.”

Zemedeneh says that 50 to 70 local companies can be listed in the stock exchange. “All the banks and insurance companies, which are well regulated, can offer an IPO (initial public offering) the day the Addis Ababa stock market is ready for launch,” Zemedeneh said.

“The bottom line we are ready and it is timely,” he added.

Business community leader and insurance veteran Eyessuswork Zafu said that technical studies for the establishment of the Addis Ababa Stock Exchange were done by Ernst and Young 20 years ago: “Miracle is happening in this country. I can see the twinkling light at the end of the tunnel. Two years ago we were not able to discuss such matters openly.” He called for urgent action to start preparations.

Ethiopia has a commodity exchange and regulator, new regulator needed for capital market

Financial analyst Abdelmenan Mohammed was reported as saying 2 years is a tight timetable to build financial and technological infrastructure, including improvements in auditing.  Although the Government enacted a proclamation that compels local businesses to adopt International Financial Reporting Standard (IFRS) and has established an Accounting and Auditing Board, Abedelmanan says progress is slow: “Not many companies are adopting IFRS and the board is not yet strong enough to oversee that. How can we have a stock exchange where there is no reliable accounting information?” However, Zemedeneh, former Managing Partner of EY Ethiopia, said that the banks and insurance companies have adopted IFRS and other companies and government entities are moving towards it. “That is a start.”

Establishing the stock exchange will require rapid boosts in capacity and understanding. According to Zemedeneh: “We need to set up the regulatory body and formulate the regulation. All the other things have not yet started except the adoption of the IFRS.” He warns there is a lotof work to be done to prepare. “I hope they would be able to roll out these things quickly. Two years is a very short period of time. It could be at the end of 2020 or slide to 2021. All the infrastructure need to be prepared.” 

Privatizations including 49% in Ethio Telecom

Other steps highlighted by the FT in a follow up news story include completing “a multibillion-dollar privatisation of its telecoms sector by the end of this year, followed by a sell-off of stakes in state energy, shipping and sugar companies”. It says the stock exchange is “part of a gradual but decisive shift towards economic liberalisation… alongside other ambitious and transformative programmes.”

“The Government is planning to sell off a 49% stake in Ethio Telecom, according to people familiar with its plans. Ethio Telecom is the biggest telecoms company in Africa in terms of customers in a single country, with more than 60m subscribers.

“But its opaque debt structure and low earnings per customer mean it might fetch less than the government expects, say bankers.

“Mr Abiy said that earning cash from a state monopoly was less important than launching services such as electronic money, e-commerce and virtual government, in which African peers such as Kenya are more advanced.

“To promote competition, Ethiopia is also likely to auction off spectrum to two additional telecoms companies, with Vodacom, Orange, MTN and others expected to bid, according to bankers.

“Miguel Azevedo, head of investment banking for Africa at Citibank, said: ‘When I speak with international investors about opportunities in Africa, the first name that pops up is Ethiopia.’

“The prime minister said he would proceed cautiously on privatisation in order to avoid any hint of corruption. ‘We do telecom, we learn something, we evaluate seriously, we continue,’ he said.”

Full interview

Read the full interview with Abiy Ahmed here: Commentary by FT: “Mr Abiy’s emergence has unleashed opportunity and danger in equal measure. Some fear that rapid liberalisation could spin out of control, leading to anarchy or violent ethnic separatism.”

Ethiopian Prime Minister Abiy Ahmed

Describing himself as “capitalist”, he nevertheless cites Meles as saying it is the government’s job to correct market failures. “The economy will grow naturally, but you have to lead it in a guided manner.”

Still, unlike Meles, Mr Abiy is less wedded to the idea that the state must control the economy’s commanding heights. He is moving swiftly towards privatisation of the telecoms sector in an exercise that should raise billions of dollars, as well as modernising a network that has fallen badly behind African peers.

Here too there are risks. “I need to realise the privatisation with zero corruption,” he says, adding that people who have stashed money abroad want to launder it back into the country.

Successful privatisation of telecoms could potentially lead to a similar exercise in energy and shipping, as well as sugar refineries and, most controversially, the successful national airline that has turned Addis Ababa into a continental hub. Mr Abiy says that, for the moment at least, he draws the line at banking.

“The biggest challenge for Abiy is not politics. It is jobs, jobs, jobs,” says Zemedeneh. With 800,000 students in university or college and 2.5m Ethiopians being born each year, lack of opportunity could quickly catalyse unrest, he adds.

The stock exchange will be a critical component of building domestic savings and capacity in Ethiopia’s private sector so that Ethiopians can take charge of their future, see previous opinion article on this blog. The World Bank has pledged $1.2bn to supporting financial sector growth in Ethiopia.

IPO report – Airtel Africa looking for $1.25bn in 2019

++ STORY UPDATED AFTER ARTICLE IN SUNDAY TELEGRAPH IN UK ON 3 FEB 2019 ++

Airtel Africa, a UK-based company, is on track for an initial public share offer (IPO) on an international stock exchange in 2019 expected to raise $1.25 billion. Last November 2018 the board announced it had appointed 8 global banks JP Morgan, Citigroup, BofA Merrill Lynch, Absa Group Limited, Barclays Bank PLC, BNP Paribas, Goldman Sachs International and Standard Bank Group for the IPO. It aims to value the African business at some $8bn.

The company has denied a report on Bloomberg that the IPO could be delayed from March 2019 for 6 months due to emerging markets turmoil.
By that date parent Bharti Airtel had raised $1.25 bn in pre-IPO placements to 6 global investors, according to a regulatory filing on the Bombay Stock Exchange (reported in Economic Times of India).

On 3 Feb, an article in the Sunday Telegraph newspaper suggested the IPO would come to the London Stock Exchange later in the year, after delaying the float because of volatility. At $8bn it would be the LSE’s biggest listing since 2017. It adds that Airtel Africa in January secured a further $200m investment from Qatar’s sovereign wealth fund to reduce cash borrowings ahead of the listing.

According to journalist Christopher Williams: “Airtel Africa has turned around in ¬recent years, after making heavy losses in competition with financially stronger players in Africa, including Vodafone-controlled Vodacom. In its most recent quarter profits doubled as mobile data consumption increased across its territories, building on its first full year of profit.”

For various reports, the IPO is expected to raise another $1.25bn. After the IPO Bharti Airtel will only hold some 65%, down from around 92%-93% at present. The pre-IPO investors include Warburg Pincus, Temasek, Singtel and Softbank Group International, according to the report. The money will be used to cut back debt and free up cash to combat rival Reliance Jio Infocomm in India.

Airtel Africa is the holding company for Bharti Airtel’s operations in 14 countries, including Kenya, Tanzania, Nigeria and Ghana. It is Africa’s second largest telco with over 94 million customers, and ranked in the top 2 carriers in most of the countries where it operates, offering 2G, 3G and 4G services, plus mobile commerce through Airtel Money.

In December, the tax authority in Niger had ordered the closure of Airtel Niger which has 4.4m customers, over a tax dispute. French-owned Orange said it had also been threatened with closure in Niger over a tax demand, according to this report.

Airtel also announced a new board from the parent company and the investors: Sunil Bharti Mittal, Raghunath Mandava, Akhil Gupta, Vishal Mahadevia, Alok Sama, Arthur Lang, Shravin Bharti Mittal and Richard Gubbins. In a press release it said the board: “brings extensive experience across industry verticals including – telecom & ICT, financial markets as well as in technology, software development and consultancy”.

African revenues rose nearly 13% for the quarter to September, and net income compared to a loss a year earlier.

Some African IPOs – August 2018

Uganda – CIPLA-Quality Chemicals IPO closes 24 August
CIPLA-Quality Chemicals Ltd opened its initial public offer (IPO) on 13 August and will close on 24 August, aiming to list on the Uganda Securities Exchange on 24 September. The pharmaceutical company aims to raise $45 million through offering a 18% stake via 657,179,319 shares at UGX256.50 per share, according to Reuters. The company manufactures drugs that include anti-retroviral, anti-malarial and Hepatitis B medicines and its products are sold in Cameroon, Comoros, Kenya, Namibia, Tanzania, Uganda and Zambia.
India’s Cipla Limited, Uganda’s Quality Chemicals and the Government of Uganda set up the company as a joint venture in 2005, and TLG Capital and Capitalworks Investment Partners invested in the company in 2009, holding stakes worth 12.50% and 14.40% respectively. Lead transaction advisor was reported to be Renaissance Capital in Kenya and Crested Capital in Uganda is the lead sponsoring broker.
it ends a 6-year listing drought as the previous IPO in Uganda was Umeme in 2012.

CIPLA-Quality Chemicals in Kampala (file photo)

Egypt – Giza Spinning & Weaving probably Q4
The IPO of garment maker Giza Spinning & Weaving is set for the fourth quarter, probably November. According to reports, the aim is to sell a 40% stake to finance investment of EGP250m ($14m) into expanded production of garments and yarn. The company employs around 4,800 and was set up in 1979. It is the biggest garment exporter in Egypt by volume and the sixth largest by dollar value, with 87% of production exported to the USA and Europe in 2017. Beltone Financial will be the global coordinator and book runner and a roadshow will run in October, according to Bloomberg.

Uganda – MTN under pressure to list
MTN Group Ltd, which has 55% of the mobile market in Uganda with about 10.9m subscribers, is seeking to renew its 10-year licence in October. Godfrey Mutabazi, executive director of Uganda’s telecom regulator, says that selling shares on the local bourse isn’t a pre-condition for the granting of a new 10-year contract, but Uganda wants “Ugandans to be part of the company,” according to this Bloomberg report.

MTN Ghana – IPO closed 31 July
The IPO of Scancom PLC, the name of telco MTN in Ghana, closed on 31 July as par of bids for a local licence. It was selling 35% of the company, in line with discussions with the regulator. Details are to be announced soon and trading could begin from 5 September. It is set to be the largest listing on the Ghana Stock Exchange and shares could also be bought using the MoMo Wallet mobile-money platform. MTN has more than 221m customers across 22 markets in Africa and the Middle East. It had agreed with telecom regulators in Ghana and Nigeria to list its local units, and the offer was set to raise GHS3.5bn ($725m).

MTN Nigeria “not yet applied”
MTN had not yet applied for a listing by 9 July, according to a news report which quoted the Securities and Exchange Commission. Previously it had been reported that the listing could go live in August, when Reuters reported on pre-IPO documents in February 2018. It said that MTN planned to list by July and raise at least $400m to cut debt in its Nigeria unit, which was valued at $5.23bn. The Nigerian pledge to list cwas part of a settlemetn whcih also included a $1bn fine in 2016.

Airtel – London or Johannesburg in 2019
Airtel is reported to be aiming to raise up to $1.5bn by listing 25% of the equity in its Africa unit in early 2019, according to this report on Bloomberg, as part of plans to reduce its debt by $4.6bn over three years. Airtel is India’s top wireless operator. It also was reported to be planning to sell part of its stake in a $14.6bn company owning tower infrastructure, formed when Bharti Infratel Ltd merges with Indus Towers Ltd. It is owned by billionaire Sunil Mittal and is hoping to keep its Moody’s credit rating at Baa3. It sold about 8,300 towers in 7 African countries for some $1.7bn in 2015 and in 2016 sold its towers in Tanzania for $179m and sold its Burkina Faso and Sierra Leone units for some $1bn the same year. In 2010 it paid an enterprise valuation of $10.7bn for the African assets of Kuwait Mobile Telecommunications Co, also known as Zain.

Kenya – National Oil Corporation aims at Nairobi and London in 2019
The Government of Kenya plans to raise up to KES103bn ($1bn from a dual listing of shares in state-owned National Oil Corporation in Nairobi and London, according to this news report in Business Daily. NOC needs the money to exercise its rights to buy back shares before production at the Turkana oil field, discovered in 2012.
Petroleum principal secretary Andrew Kamau told the Business Daily that the contract for the concession of oil blocks in the Turkana oil fields to existing operators has a clause allowing the government to exercise a back-in right, which essentially means buying back a percentage of the ownership before production kicks in. “When you sign a contract you have a right to buy back some share, before production. The percentage we can buy back is 15 in one block and 20 in the other. The listing should raise enough money for the purchase,” said Mr Kamau, without indicating whether the State would exercise its rights for the entire stake under the clause. The two blocks are owned by British firm Tullow (50%), Africa Oil (25% and Total (25%). The Government and Tullow was to start small scale crude production of about 2,000 barrels a day in 2018, with full production due from 2021 after building a $2.1bn pipeline to Lamu on the coast, according to Reuters.

London – Intercement delays to 2019
Intercement is to delay its $1.8 billion IPO on the London Stock Exchange from the second half of 2018 to early 2019, according to reports. It makes cement and related products in Brazil, Portugal, Argentina, Mozambique, Cape Verde, Paraguay, South Africa and Egypt and was founded in 2008.

For fuller analysis of recent and upcoming IPOs across Africa, see the website of the Enko Africa Private Equity Fund, a $63.4m fund focused on pre-IPO opportunities across Africa.

Vodacom Tanzania’s $213m IPO results due 7 August

According to the latest timetable on the website of Vodacom Tanzania, the extended $213 million initial public offer (IPO) of shares closed on 28 July. Shares are due to be allotted, the register delivered to the Dar es Salaam Stock Exchange (DSE) and the offer results announced on Monday, 7 August.

Refunds and CSD receipts will be printed on 14 August and the listing and trading of shares will be on 15 August. The offer had been extended previously, see our June story here , most recently from 10 July.

A total of 560m shares had been offered at TZS850 each, for an offer value of TZS476bn. It is the biggest IPO so far in 2017 on African capital markets.

The IPO follows the Electronic and Postal Communications Act of 2010 (EPOCA) which requires all telecom companies to list, and the June 2016 Finance Act requiring them to list at least 25% on the DSE to boost domestic ownership. According to news reports the law was changed in June (Finance Act 2017) to allow foreigners to participate.

According to a Business Report article, Vodacom spokesperson Byron Kennedy said in July that opening to international investors: “.. is a positive move for the more than 40,000 Tanzanians that have invested in the IPO as it is expected to improve liquidity of the Vodacom Tanzania shares once they are listed.”

Vivek Mathur, the chief operating officer for Vodacom’s international business, said in a prospectus in February that the capital raising and listing were in line with the government’s intention to strengthen the country’s telecommunications sector to play a key role as the engine of economic growth and socio-economic development: “This process also aims to widen financial inclusion among Tanzanians, and to economically empower the people of Tanzania.”

Reuters reports that two other major telecoms operators, Millicom’s subsidiary Tigo and the local business of India’s Bharti Airtel, have also submitted prospectuses to the regulator the Capital Markets Supervisory Authority CMSA and are awaiting approval for their IPOs.

Vodacom Tanzania wrapping up $213m IPO on Dar es Salaam bourse

Some 40,000 Tanzanians subscribed for the TZS476 billion ($213 million) initial public offer (IPO) of Vodacom Tanzania Ltd, part of South Africa’s Vodacom Group. The figure came from company’s MD, Ian Ferrao, quoted in the Citizen newspaper.

It is the largest IPO in the history of the Dar es Salaam Stock Exchange (DSE) and attracted many first-time buyers.

The company says it has 12.4m customers and 31% market share of a telecoms market it estimated was worth $996m. It says TZS2.6 trillion ($1.17bn) is transacted every month by over 7m customers of its M-pesa mobile money solution. It had offered 560m shares (25% of the company) at TZS850 each. The IPO opened on 9 March and was extended for 3 weeks after the closure date of 19 April and ended 11 May. The announcement of results was due on 26 May, and the listing was expected on 12 June 2017 but has not yet been reported. According to news reports, the Capital Markets and Securities Authority (CMSA) is busy with verification, according to Orbit Securities which is Vodacom’s lead advisor.

Mr Simon Juventus, General Manager of Orbit, said the time extension meant more investors could be reached: “This time around we reached many investors unlike the first six weeks … the progress was good.”

The IPO follows the Electronic and Postal Communications Act of 2010 (EPOCA) which requires all telecom companies to list, and the June 2016 Finance Act requiring them to list at least 25% on the DSE to boost domestic ownership, with foreigners barred.

So far only Vodacom is busy with the process. On 1 June, President John Magufuli said that telecoms licences would be revoked if telecom companies did not list on the Dar es Salaam bourse saying they made enough profit to pay the fines of TZS300m and ordered the Tanzania Communications Regulatory Authority (TCRA) to act tough against telcos that do not list.

According to the President, as reported in Daily News: “Listing at the bourse will enhance transparency and enable the Government to collect its fair share of revenues,” He noted that Ethiopia’s state-owned monopoly telephone company has 30m-35m subscribers and made $1.5bn profit. Tanzania Telecommunications Company Ltd (TTCL) has not paid any dividends since shares were sold to foreign investors in 1990s.

Other companies which list are Airtel (Bharti Airtel Ltd of India and Government each offered to sell 12.5% of the shares), Tigo (local subsidiary of Millicom International Cellular SA of Luxembourg) and Maxcom Maxcom Africa (MaxMalipo), which have presented their prospectus to the CMSA. According to Daily News, the Tanzania Communciations Regulatory Authority (TCRA) says there are 86 tele-firms which that s must list. andOthers include TTCL, Halotel Tanzania, Zantel and Smart. Finance Minister Philip Mpango proposed that smaller companies should be exempted from IPOs as he presenting the Finance Bill 2017 to Parliament.

Opening the IPOs to foreigners
Mpango on 22 June told parliamentarians that Government would bring legislation to allow foreign investors to buy shares in telecommunications companies listing on the DSE. According to Bloomberg , after the IPO stalled.

The combined value of expected telco listings would be $1bn, compared to stock exchange capitalization of about $8.4bn. The Daily News reported that the law change would probably be through a 2017/18 Financial Bill to amend EPOCA.
“We want to open up the mandate of companies listing 25% of their shares to allow Tanzanians, Tanzanian companies, Tanzanians in the diaspora, joint ventures between Tanzanians and foreigners, East Africans or companies owned by East Africans, or citizens from other countries.”

The article quotes George Fumbuka, CEO at stockbroker Core Securities: “We are now doing it the way it should’ve been done. I can understand trying to give special treatment for locals, but in the stock market it should be open market.” He said he thought Vodacom was overpriced and an open market would encourage compaies to price IPOs “more competitively”.

George Kalebaila, director for telecoms and Internet of Things in Africa at International Data Corporation, was quoted by The East African newspaper: “Equity markets need time to develop and I think 25 per cent is rather ambitious, as there is limited equity in local hands waiting to be invested. That’s why you see the shareholding structure of a couple of large organisations favour wealthy and politically connected individuals, who have access to capital.” Foreigners will also be able to buy the shares after the IPO

System to track electronic payments

On 1 June President Magufuli launched Electronic Revenue Collection System (e-RCS), which will be operated by Tanzania Revenue Authority (TRA) and Zanzibar Revenue Board (ZRB). The system is designed to track and directly collect Value Added Tax (VAT) and Excise duty on all electronic transactions by communication companies and financial institutions, with the views of enhancing efficiency in the collection of government revenues.

Tanzania Revenue Authority Commissioner General Charles Kichere said only 3 companies – Halotel, Smart and TTCL – have so far joined e-RCS. He said it was an efficient tool for tracking and collecting revenues through electronic payments without human intervention.

Africa IPO round-up

A roundup of some recent initial public offers (IPOs) of shares on Africa’s stock exchanges to raise capital

In early October, MTN launched plans to sell up to 35% of shares on the Ghana Stock Exchange. Ghana’s Securities and Exchange Commission Director General Adu Anane Antwi confirmed they had started the listing process and were working on the prospectus but no timeline had been given. According to local reports, MTN received its 15-year 4G licence in 2015 after spending $67.5m and on condition that it lists. It hopes to raise up to $500m.
MTN Nigeria is also working on plans for an initial public offer (IPO) of shares on the Nigerian Stock Exchange in 2017 which could raise up to $1bn. Nigeria is among several African governments encouraging telcos to list on local bourses and listing is among conditions to settle a record NGN330bn ($1.1bn) fine for failing to disconnect 5.1m unregistered subscribers. Nigeria contributes a third of sales and profit for the Africa’s biggest phone company, which is listed in Johannesburg with market capitalization of ZAR212.8bn ($15.3bn) in early October.
Listings and capital-raising momentum has been maintained on the Nairobi Securities Exchange. Deacons Kenya is the first listed fashion retailer, after joining the Alternative Investment Market Segment (AIMS) of the NSE on 2 August. CEO Muchiri Wahome said the extra funds were to fund expansion into towns with “a vibrant middle class” across Kenya, spurred Kenya’s rapid and ambitious devolution and setting up 47 counties under its 2010 Constitution. Deacons is also eyeing opportunities in neighbouring Rwanda and Uganda. It will also help existing shareholders who want to sell. The retailer listed about 123m shares at an opening price of KES15 ($0.15) each, but by early October the price had slumped to KES8.55.

 

Nairobi centre (credit www.kenya-advisor.com)

Nairobi centre (credit www.kenya-advisor.com)

In June, leather and shoe retailer Nairobi Business Ventures, which operates the brand KShoe, had become the fifth listing on the NSE’s Growth and Enterprise Market Segment aimed at smaller businesses. It was listed through introduction and valued at KES118m ($1.2m). Previous 2016 share issues included Longhorn Publishers in May. In June power generator Kengen succeeded in the Kenyan bourse’s largest rights issue, raising KES26.4bn ($262.1m) by offering 4.4bn new shares at KES6.55 each, with a 92% subscription rate. Kengen has projects to generate another 700MW of power, of which 605MW is geothermal.
However, Fusion Capital had to cancel its IPO despite extending twice after only getting 38% uptake and four investors for its KES2.3bn offering and failing to meet the minimum threshold.
The Johannesburg Stock Exchange had its second private equity listing. Universal Partners raised R1.3bn ($93.7m) in an IPO which was only open for 4-5 August and started trading on the Alt-X market on 11 August. The company was registered in Mauritius in April and also listed on the Stock Exchange of Mauritius. Its mandate is to invest in properties across Europe, at £10m-£30m ($12m-$37m) each and it aims to start investing within six months. The IPO was for 72m shares at R18.07 each. Several companies aiming to raise capital for African and international investments have dual-listing on the Mauritius and Johannesburg exchanges.
Liberty Holdings is likely to follow up its Kenyan IPO success with a South African Real Estate Investment Trust (REIT) called Liberty Two Degrees in December. This will include some ZAR6bn of its existing portfolio, including iconic malls around Gauteng, and ZAR4bn of new money. As in Kenya, the property investments are managed by Stanlib.
West Africa’s integrated regional stock exchange, Bourse Regionale des Valeurs Mobilieres (BRVM), based in Abidjan, Côte d’Ivoire, plans to build a platform for listing mining shares and raising capital locally. The exchange is talking with Canada’s Toronto Stock Exchange (TMX Group), a favourite bourse for early-stage mining entrepreneurs. BRVM General Manager Edoh Kossi Amenounve says it could open by 2018 and will be for companies exploring or operating mines in the region. There is likely to be a waiver to the usual requirement for 2 years of trading history. The BRVM links eight West African countries, including gold exporters Mali, Burkina Faso and Côte d’Ivoire, and fourth-largest uranium producer, Niger.
Egypt’s Minister of Investment Dalia Korshid says the Government aims to raise up to $10bn over the next three to five years with IPOs of government-owned companies in the oil sector but will start with restructuring state-owned electricity companies.

Tech will drive African IPOs

Telecoms, e-commerce and technology will be the driving force behind many of Africa’s coming initial public share offers (IPOs) as the continent’s telecom, media and technology (TMT) sector continues to grow fast. Ben Nice, editor of specialist news provider TMT Finance, says in a press release: “Despite global volatility, regional macroeconomic uncertainty, and a rout on commodity prices, recent forecasts are predicting that the next 12 months could see a rebound with IPOs set to reach their highest levels in Africa since 2010, and several TMT companies looking likely to float in 2016 and 2017.

Africa Internet Group (AIG) – which runs the Jumia ecommerce brand – just raised a further EUR75 million ($84m) from Orange, in addition to the recent EUR300m ($338m) from investors including Goldman Sachs, MTN and Rocket Internet. The company is the first real African tech unicorn and we understand that it will be targeting an IPO (initial public offer) by 2017, and is also on the hunt for a new CFO. Orange Egypt (formerly Mobinil) is also preparing to list shares in Cairo to fund US$3.2bn investment into infrastructure, and IHS Towers, the Lagos-based mobile tower operator, is also expected to float over the next 12 to 24 months.”

Other African tech which may bring IPOs in the near and medium term include: Dark Fibre Africa of South Africa, Nigerian payment services provider InterSwitch, Africa’s largest independent fibre operator Liquid Telecom, and South African media company Primedia. According to a previous news story, Interswitch may scoop the prize (and publicity) as Africa’s first tech unicorn, as it is working on a London and Lagos IPO for Q2-Q4 and could be worth at or close to $1bn.

AIG, which was founded in 2012 and now operates in 23 countries with 71 companies, is said to be planning an IPO by 2017. Jumia e-commerce is present in 11 countries and linked to online and mobile consumer services such as Kaymu (shopping), hellofood (food delivery), Jovago (hotel booking) and classified ads Vendito (general merchandise), Lamudi (real estate), Everjobs (jobs) and Carmudi (vehicles).

Orange Egypt, rebranded from Mobinil in March, is preparing an IPO for the Egyptian Exchange, with an offering of up to 20% of the shares. It has 33.4m customers and is Egypt’s second biggest operator after Vodafone. In March it announced Orange intended to invest EGP2.5bn ($281.5m) into upgrading networks and services.

IHS Towers, based in Lagos and owner of over 23,300 mobile phone towers in Nigeria, Cameroon, Côte d’Ivoire, Zambia and Rwanda, is expected to float shares within 12-24 months. In December, chief executive and founder Issam Darwish said it would be “the biggest IPO ever in Africa”.

Next week on 14 June, over 200 industry and finance executives, including African telecom CEOs, private equity investors and leading international bankers and advisers, are meeting in London to talk investments at the 7th annual TMT Finance & Investment Africa 2016 conference. Sessions include: Africa telecom leadership; TMT M&A; broadband investment; mobile towers; raising finance for Africa TMT; datacentres Africa; private equity Africa; mobile money and M-Commerce; and digital Africa. Speakers include leaders from Millicom, Google, IHS, Helios, Eaton Towers, Avanti Communications, BNP Paribas, Citi, UBS, Standard Bank, IFC, the World Bank, TransferTo, Icolo, Bima, Dentons and Hardiman Telecommunications.

Tech wizards to IPO (from www.africainternetgroup.com)

Tech wizards to IPO (from www.africainternetgroup.com)

Mwalimu Bank shares soar as Dar es Salaam enterprise market gains momentum

The market for small and medium size businesses is picking up momentum on the Dar es
Salaam Stock Exchange. Mwalimu Commercial Bank Plc was the fourth listing on the Enterprise Growth Market segment on 27 November, and Prime Minister Majaliwa Kassim Majaliwa spoke at the listing. The share launched at TZS500 ($0.23) after its initial public offer (IPO) and then soared by 40% to TZS700 on the first day of trading before gradually falling back to TZS665.

The IPO also registered a success for the mobile phone trading platform launched by the DSE in August 2015. DSE Chief Executive Officer Mr Moremi Marwa told Daily News that at the end of September, a month after the launch, some 700 investors used mobile phone trading. The paper says that because of the mobile platform, upcountry buyers outpaced Dar es Salaam residents in buying shares in the Mwalimu Bank IPO. It is good step forward for financial inclusion in Tanzania. The IPO was oversubscribed by 24%.

DSE CEO Moremi Marwa, (photo credit 24Tanzania)

DSE CEO Moremi Marwa, (photo credit 24Tanzania)

Previous EGM listings were Mkombozi Commercial Bank (December 2014), Swala Gas and Oil (August 2014, local exploration subsidiary of Australian Swala Energy), and Maendeleo Bank (November 2013). There are four registered nominated advisers to help companies apply to the EGM for listing and to sponsor their listing and compliance, employing a model based on London Stock Exchange’s Alternative Investment Market (AIM).

The EGM was launched in 2013 as part of a successful project backed by the Financial Sector Deepening Trust (FSDT).

The name of Mwalimu bank means “teacher” in Swahili and was also the affectionate honorific title for Tanzania’s founding President Julius Nyerere. The bank is supported by the Tanzania Teachers Union, which has 200,000 members according to this DSE press release.

It has not yet opened its doors as it needed a banking licence approval and to raise capital, before it can establish systems and procure core banking and other systems. CEO Ronald Manongi was reported in The Citizen newspaper saying it will start offering services in May 2016 with a branch at Samora Avenue in central Dar es Salaam and later at Mlimani City. It has a capital base of TZS31 billion.

Ethiopian Commodity Exchange gets online trading platform

ECX buyers and sellers make deals. (Photo credit - John Humphrey. From www.globalisationanddevelopment.com)

ECX buyers and sellers make deals. (Photo credit – John Humphrey. From www.globalisationanddevelopment.com)


The Ethiopian Commodity Exchange (ECX) has unveiled an online trading platform that has capacity for nearly 5,000 times more transactions than its current “open outcry”. Since the ECX was started in 2008 trading has been done on a trading floor in its Addis Ababa headquarters by dealers trading directly with each other, and about 200 transactions a day could be done.
Initially, dealers using the eTRADE Platform would be based at the ECX HQ’s trading centre. However, eventually market players will be able to trade electronically from anywhere. The platform will be gradually rolled out to newly built ECX trading centres in regional cities Hawassa, Humera, Nekemte and, in the near future, an additional 4 centres. The ECX has trained and certified more than 445 ECX trading members and representatives who are qualified to trade on the platform.
The trading platform has been under construction for the past 2 years and was developed in-house at the ECX. It was unveiled on 8 October and, on launch day, a record $400,000 of coffee was traded according to this news release.
A test run was done on 20 July with trading in local washed and unwashed byproduct coffee. ECX says 2,390 metric tonnes of farm produce has been traded on the platform so far with a trade value of ETB 120 million (about $5.7m).
ECX chief executive officer Ermias Eshetu said: “The inauguration of this eTRADE platform sets a new course for Ethiopia and brings with it unparalleled economic and social benefits. The platform inevitably breaks the physical and time barrier of the current open-outcry trading platform and provides the ECX with vital economies-of-scale to trade a number of additional new commodities.”

Transforming life for small farmers
The Investment Climate Facility for Africa (ICF) and other partners have been supporting the programme, according to this news release. William Asiko, CEO of ICF, said the platform would bring a revolution to Ethiopia’s agriculture sector: “The modernization of ECX will help to improve the business environment for stakeholders involved in the commodities sector and give Ethiopian agricultural products a competitive advantage.
“But for farmers, this modernization will be life-changing. It will enable farmers to get better pricing for their produce, thereby creating a more equitable distribution of wealth that has far-reaching social implications.”
The ECX was founded with the aim of improving agricultural marketing – a large part of its success is due to the large network of warehouses, quality controls and logistics up and down the country, and its main aim is to empower smallholder farmers, including through better information about prices. The current Government 5-year Growth and Transformation Plan II, launched from July 2015, sees state-run ECX serving 24 “agro-centres” with increased storage and warehousing facilities and better transport links.
Ermias, who became CEO in January after coming from Zemen Bank, said in April that the Government is establishing an enterprise to oversee the upgrading of warehousing, which will rely on a mixture of public and private capital. Donors including the World Bank and Bill & Melinda Gates Foundation are considering supporting what will require “huge investment,” he said.
One key tool for ECX has been its short message service (SMS) and interactive voice response (IVR) notifications of market data to farmers and others. This was introduced in 2011 in Amharic and English and gives real-time access to commodity prices. The SMS service processes 800,000 transactions a month and the IVR handles 1m calls a month, according to the news release. An upgrade was unveiled on 8 October which expands to Oromiffa and Tigrinya languages and introduces menu-based services (USSD) and new interfaces.

ECX mulls trading securities
Earlier this year it was also considering whether it could trade securities, including stocks and bonds, as part of its 5-year expansion plan. Ermias told Bloomberg in April: “We want to be a marketplace for any kind of stock, be it derivatives, agricultural commodities, financial instruments. That’s the ultimate vision.” He added that formal discussions have not yet begun on trading securities.
“With the two components, logistics and scalability, we will be able to introduce multiple commodities to the market,” he said. “ECX must offer the truly transparent marketplace for anything that’s going on in the Ethiopian economy.”
He said the market could move from coffee and sesame seeds, which account for more than 90% of volumes and are the two biggest generators of foreign exchange in Ethiopia, to sugar and grains such as corn and then add equities, government debt, power and metals.
Bloomberg cites Yohannes Assefa, the director of Stalwart Management Consultancy, a Dubai-based group working on Kenyan and Tanzanian exchanges, saying that ECX has capacity to expand beyond agricultural commodities within 12 months: “The existing platform is robust and the regulatory system is mature and well managed.”
The main problem would be changing government regulations, and Yohannes warned this “may require serious internal consultation before a change of policy.”

Exporters want futures
Bloomberg adds that coffee exporters such as Fekade Mamo, general manager of Addis Ababa-based Mochaland Import and Export, criticize the ECX for not allowing futures trading to hedge positions in a volatile global market. Ermias said it would take more than a year to build necessary steps for this, including insurance options for farmers in case they can’t deliver, better access to credit and the strengthening of the legal system.
Donors including USAID and the United Nations have supported the ECX when it was launched in order to boost efficiency of food markets in a nation where millions regularly went hungry. It had strong support from the Government, which decreed that exporters of coffee – Ethiopia is Africa’s biggest producer – must buy from traders on the bourse before they can export and within a year the ECX was the main route for coffee exports.
In 2014 it traded ETB 26.2 billion birr ($1.3bn) worth of goods.

ETB 1.6m for trading seat
In May the 17th trading seat was auctioned and won by an individual, Abayneh Zerfu, who bid ETB 1.6m ($76,000), according to this story in Addis Fortune newspaper, which said there were 4 bids. The ECX manages the bid if a member sells his or her seat and they are only allowed to do this after trading for 3 years and meeting requirements. Yohannes Hamereselassie, member development specialist at the ECX, said the original price for a seat was ETB301,000.

The new e-trade facility (credit ICF Africa)

The new e-TRADE facility (credit ICF Africa)


The ECX developers of the eTRADE platform (credit ICF Africa)

The ECX developers of the eTRADE platform (credit ICF Africa)

Kenya’s revolutionary mobile phone M-Akiba bond on 21 Oct

Nairobi centre (credit www.kenya-advisor.com)

Nairobi centre (credit www.kenya-advisor.com)

Kenya’s National Treasury will float a KES5 billion ($48.6 million) M-Akiba bond which will only be purchased through mobile-phone platforms. The minimum investment will be KES3,000 ($29.13) and the maximum KES140,000, which is the maximum allowed in a single mobile-money transaction (it can be increased by making more applications).
The 5-year infrastructure bond will float on 21 October. The National Treasury and Central Bank of Kenya will set the rate, which will be free of income tax. Finance Cabinet Secretary Henry Rotich said the rate will be higher than rates offered by commercial banks (currently 1.37% on cash in savings accounts) but did not give more details.
It is unlikely to be as high as the soaring rates in local money markets – a 91-day treasury bill was at 20.637% at the auction for value dated 5 Oct, up from 18.607% on 28 Sept according to the CBK and 182-day paper on 28 Sept was 14.5%. The Government’s 1-year KES30bn bond sold at a record rate of 19.062%, offering the biggest returns for investors in 3 years. Kenya’s inflation in Sept 2015 was 5.97%, up from 5.84% the previous month and above expectations, according to www.tradingeconomics.com.
The new bond will only be available to Kenyans, who currently make up 2% of investors into bonds listed on the Nairobi Securities Exchange (NSE).

Innovative mobile money tech
The innovative Treasury Mobile Direct (TMD) platform means individuals will buy the bonds instantly instead of the previous 2-day process. Potential customers will only need to have a mobile phone line and subscription to a mobile-money transfer service, which will enable telcos to open an electronic account with the CDSC on their behalf, as well as a valid ID. They will dial *889# and follow the prompts. Treasury will pay the coupons every six months through Safaricom mobile transfer service M-Pesa.
M-Akiba aims to help more people save and invest and make it easier for the Government to raise funds and diversifying their investor base. Stephen Chege, corporate affairs director of mobile phone company Safaricom, was quoted in this news story in Nation as saying it would help build a savings culture: “Currently, only 11% of Kenyans save on a regular basis as compared to 22% in Rwanda and Uganda, while in Qatar this figure stands at 60%.” Up to 23m Kenyans could participate. The National Bureau of Statistics says the rate of savings has stagnated and remains far below the medium-term targets.
The bond was launched on 28 September, and NSE chairman Eddy Njoroge said: “Our bond market is currently dominated by foreign and local institutional investors, M-Akiba is in line with NSE’s strategy of enhancing financial inclusion by driving retail investor participation.”
The prospectus will be released on or after 16 October.
Rose Mambo, CEO of the Central Depository Settlement Corporation (CDSC) was reported as saying: “This will be a vanilla bond attracting a fixed rate of interest and redeemable in full on maturity which will not be affected by changes in the market interest rates and the principal is secure.”
Previously the minimum investment possible in a Treasury bond was KES50,000.

Mobile money reach
Mobile money bond investments will be a technology revolution for world capital markets.
According to CNBC, mobile penetration across Kenya was last recorded at 83.9% for the period between April and June 2015, according to the Communications Authority of Kenya. The mobile money service M-Pesa has become a formidable competitor for local banks since it was launched by Safaricom in 2007 and last recorded a total of 23.3m customers, more than half of the country’s near 44m population. Statistics from digital finance researcher Financial Inclusion Insights show over 62% of Kenyans actively managed money on their mobile phones in 2013, compared to 21% who held bank accounts.