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December 11th, 2011 by Tom Minney
Excitement building in Marrakech,Morocco, ahead of the formal opening tomorrow of the 15th annual African Securities Exchanges Association conference. The theme is “Africa, alive with opportunities!” and the host is the Casablanca Stock Exchange.
I spent a great afternoon wandering in the Kasbah and the Medina!
Top speakers include Salaheddine Mezouar (Morocco Minister of Economy and Finance), Sunil Benimadhu (of the Stock Exchange of Mauritius and chair of ASEA), Aomar Yodar of the Casablanca SE and Andrew Ross Sorkin guest columnist of the New York Times. Expect speeches from, Karim Hajji of the Casablanca bourse, leaders of African and top speakers from several world securities exchanges. Also there will be finance ministers, bankers, analysts, traders, investors and many more.
Topics on day 1 include
• “The financial crisis: Is there a pilot in the plane?” with Oxford Analytica, and African and UK expertsrom the heart of the crisis
• Capital markets and the developments of BRICS (see previous story on stock exchange link-ups) – hear from CEOs and Executive Directors of key BRICS and Istanbul stock exchanges and Emergent Asset Management and Epoch Fund
• The economic implications of the “Arab Spring” for the continent: Top analysts, strategist and others.
• Casablanca Finance City with the CEO of the Moroccan Financial Board.
• Nursing Africa’s future IPOs: heads of top African stock exchanges Karim Hajji of Casablanca SE, Ekow Afedzie of Ghana SE and Sunil from Mauritius as well as speakers from Morocco and France.
• A new FTSE-ASEA African index.
Day 2 covers
• Regulation for cross-border development, moderated by your author, with top experts from France, Euroclear, Cosumaf and Morocco
• Cost-effective and scalable technology options for emerging markets exchanges – featuring Tony Weeresinghe of the LSE, Sandy Frucher of NASDAQ OMX and maybe Josef Dobrawez of Thomson Reuters.
• What’s hot in Africa today? is the wrap-up with a host of top speakers from politics, consulting, banking, mining, economics and development finance covering energy, infrastructure, mining, industry, agribusiness and others.
November 27th, 2011 by Tom Minney
Sierra Leone could be the fastest-growing economy in the world in 2012, according to a story on Bloomberg’s Businessweek, citing Finance Minister Samura Kamara. He told parliament on 25 November that growth will be 50% because of new iron ore mines coming on stream, and 10% in 2013 and in 2014.
African Minerals Ltd. started shipping iron ore from Tonkolili iron-ore mine 4 Nov. and London Mining Plc, is to start in Dec. Growth excluding iron ore would be 6%.
Sierra Leone has been seeking to attract foreign investment. It need to rebuild an economy destroyed almost completely by 11 years of civil war, which ended in 2002.
Kamara reportedly said the budget deficit (excluding grants) will be 10.4 % of gross domestic product (GDP) in 2012 from 11.8% in 2011. The 2011 gap is forecast at 3.9%, excluding grants. Revenue from mining licenses and royalties will increase to SLL242.3 billion (the currency is called “leones” and this is equivalent to about $55 million) in 2012, up 30% and higher exports will help narrow the country’s current-account deficit to 11.2 % in 2012.
Inflation slowed to 15.7% in September and in October, the Bank of Sierra Leone cut 300 basis points (3 percentage points) from its key lending rate, lowering it to 20 %. Inflation is forecast to fall to 11% in 2012 and “single digits” in 2013 and 2014. Spending will include
The country will spend SLL395 bn on road construction, SLL206 bn on energy and water and SLL 6.3 bn for the rehabilitation of the main airport at Lungi, outside Freetown. Donors are contributing to infrastructure development.
Giant iron ore mines have also started earlier this year in Liberia.
October 26th, 2011 by Tom Minney
Caravan Capital Management (www.caravancap.com), an investment fund based in the USA, aims to invest up to $90 million in African equity frontier markets. The fund has invested in 36 countries considered as frontier markets.
Chief Investment Officer Cliff Quisenberry told Bloomberg yesterday (25 Oct): “We expect to increase the share of frontier African equities to 30% of our portfolio in 2 years from a current 23%. The investment would reach $90 mn in 7 years when the fund reaches its capacity limit.”
Caravan Capital already holds investments in Zambia, Ghana, Malawi, Kenya, Burkina Faso, Senegal, Tanzania and Nigeria. It is exploring possible investments in Ivory Coast and North African countries. Quisenberry says of frontier markets: “These stocks offer the most returns on investment. Illiquidity is a challenge. They are tomorrow’s emerging markets”
He was speaking at a Society of Financial Analysts of Mauritius conference.
October 15th, 2011 by Tom Minney
The securities exchanges of the “BRICS” emerging market bloc have announced a joint initiative to expose investors to the dynamic economies of the bloc members, Brazil, Russia, India, China and South Africa. China and India are among the fastest-growing major economies over the next five years, according to forecasts, and all are increasingly attractive to investors worried about stagnation on US, European and other major exchanges. The initiative was announced on 12 October, during the 51st AGM of the World Federation of Exchanges (WFE), held in Johannesburg.
The stock exchanges will start by cross-listing benchmark equity index derivatives on the boards of each of the other alliance members. Following that, the alliance will develop innovative products to track the BRICS exchanges.
This brings together Brazil’s BM&F BOVESPA stock exchange, MICEX from Russia (currently merging with RTS Exchange), Hong Kong Exchanges and Clearing Limited (HKEx) as the initial representative of China, and South Africa’s JSE Ltd (the Johannesburg Stock Exchange). The National Stock Exchange of India (NSE) and the BSE Ltd (formerly known as Bombay Stock Exchange) have signed letters of support and will join the alliance after finalizing outstanding requirements.
The seven stock exchanges represent a combined listed market capitalization of US$ 9.02 trillion (source WFE and RTS website) with listed 9,481 companies2, equity-market trading value of US$ 422 billion per month and over 18% of all exchange-listed derivative contracts traded by volume worldwide (source Futures Industry Association) as of June 2011.
Ronald Arculli, chairman of HKEx and of the WFE, says in a press statement: “Global investors are increasingly seeking exposure to leading developing markets. The close relationship of the BRICS stock exchanges is behind this initiative, through which investors worldwide will gain easier access to benchmark equity index derivatives, which will now be offered in local currency on these exchanges. These cross-listings are planned to take place by June 2012.”
He adds that this is an important moment in the history of developing countries: “The alliance enables more investors to gain exposure to the BRICS bloc of emerging economies, with its increasing economic power. From a global perspective this alliance points to the growing relevance of the BRICS economies and financial markets in the coming decade and further underlines the reason for the BRICS relationship.”
Russell Loubser, CEO of the JSE, says: “As well as being barometers of market performance, indices also form the basis of other tradeable products, including exchange-traded funds. As a logical second phase in the alliance, the exchanges have agreed to work together to develop new products for cross-listing on the respective exchanges.” These products would combine exposures to equity indices of all alliance partner exchanges. Edemir Pinto, CEO of BM&F BOVESPA, explains: “These products would then be cross-listed and traded in local currencies. They will also allow investors to gain exposure to other emerging markets through a locally listed product.”
A third phase may include product development and cooperation in additional asset classes and services.
Madhu Kannan, CEO of BSE Ltd, says: “The BRICS exchanges alliance holds great promise, as it will create avenues for Indian investors to diversify and expand into other emerging markets. It will also provide unique opportunities to investors in other BRICS nations to participate and contribute in India’s growth. BSE will actively work towards bringing world-class products to India as well as developing new products for other BRICS markets.”
Investors worldwide and those whose homes are in the BRICS economies are increasingly interested in investing in high growth emerging economies. Most of the BRICS countries are predicted to have above-average economic growth. They are going through shifts in that there is rising consumer power generated by a growing middle classes in each, which will accelerate demand.
January 25th, 2011 by Tom Minney
Sorry, I am travelling in Ethiopia until 29 January with very limited access to Internet, so stories are a bit more sporadic until then.
December 3rd, 2010 by Tom Minney
According to a top economist of the World Bank, a total of $55 billion of private capital is estimated to be flowing into Africa this year, reports newsagency Reuters. No figures are given for 2008 and 2009, but the flows in 2007 were $49 bn.
Shanta Devarajan, the World Bank’s chief economist for Africa, told Reuters in an interview: “We are seeing private capital flow back into Africa after the recession.. The fact that African policymakers responded with prudent policies during the crisis means that the policy environment in Africa has never been better, the productivity of external resources in Africa has never been higher.” There was praise for maintaining prudent macroeconomic principles and public investment.
“There are risks in Africa, nobody is denying those, but look at the rate of return to investment in Africa, it’s the highest in the world.” The World Bank estimates Africa needs $31 billion a year for the next 10 years, just to get its infrastructure up to the level of the island nation of Mauritius.
The World Bank projects growth of 4.5% for 2010 and 5.1% for 2011, fuelled by good agricultural performance and public investment. Devarajan said: “Agriculture has been good in several countries, but also some of the investments that countries made in the past are beginning to bear fruit. During the crisis, countries did not neglect investment.” He added that Africa was poised to embark on two decades of economic growth of the kind that India in the last 20 years.
Major development challenges include youth unemployment, a huge lack of infrastructure and bad leadership. There are 200 million young Africans and 7-10 million of them join the labour force annually, mainly in the informal sector, Devarajan told Reuters.
Inflows also come from remittances, debt relief and aid. The Bank says that remittances sent home by Africans living abroad are forecast to grow by almost 2% in 2010 from $21 billion previously. In some cases, local currencies will appreciate as a result of the inflows, but that could be managed so the real exchange rate does not strengthen too much, said Devarajan.
He added that inflation in the mid-2000s was half its previous level – in 1993, 23 countries had inflation over 20%, but by 2007 only 2 did.
November 30th, 2010 by Tom Minney
The news on this website is put together by volunteer effort – it does not even pay the coffee (mostly Ethiopian) involved. Our mission is to give sustained and informativecoverage of Africa’s capital markets, including major institutional developments in the continent’s securities exchanges and in private equity and venture capital. We also believe the growing world of social impact investment is very relevant to Africa. If you would like to support us, inquire (tom.minney[at]afrigrow[dot]com) about sponsorship and advertising opportunities. Please add links on your sites. Simplest of all, just investigate the Ads by Google and see what the advertisers offer – we benefit from your clicks. Thank-you for your support.
September 11th, 2010 by Tom Minney
After your editor’s own bad experiences with Air France in August from London to Johannesburg, I would advise readers to reconsider them for business trips to Africa. In my experience, the problems seemed widespread and the ground operations let down the fine planes and nice and professional cabin crew.
1. The turnaround time booked by Air France for Charles de Gaulle airport was possibly too short, so we missed the connection and the next flight offered was 24 hours later.
2. For 12 hours in the airport, they provided only 1 meal voucher, which was not enough even to include a cup of coffee, and tried to refuse access to the luggage.
3. I could not find good facilities for working at the airport, and they refused access to business lounges which are only available to Air France business passengers, even though I was willing to pay for workspace
4. Ground staff appeared to me confused, untrained and unhelpful. Above all they promised and repeatedly failed to deliver. The same in Johannesburg where they promised to put the luggage onto the next flight and failed, then rang at 5:50am the next morning to promise to put it onto the next flight but failed again and instead it was lost for a day.
Luckily our African airlines are improving fast, and the African staff sometimes try to treat us passengers like humans and as their guests when they hold us up. I switched to SAA for the return trip. Perhaps some Africans should give Air France some training in customer care – but who needs to help a failing competitor?
July 22nd, 2010 by Tom Minney
Africa regional funds attracted $484 million inflows in the first half of 2010, says EPFR Global (www.emergingportfolio.com), and total investment fund allocation to Africa was a record $1.39 billion, according to a report in the Financial Times (www.ft.com). Africa regional funds have enjoyed 43 consecutive weeks of inflows totalling $579m since September 2009, despite the difficult world environment.
The article quotes Cameron Brandt, global markets analyst at EPFR Global: “In terms of sustained interest in Africa, this marks a real turning point.” The new element seems to be global perception.
Koffi Vovor of Kusuntu – Le Club, is quoted as saying: “The South African World Cup has been a major window of opportunity to shed light on Africa and rediscover it. People have started to realise they are perceiving the continent with a 20- to 30-year-old lens.” Kusuntu is an association of diaspora executives that promotes change and investment through private equity in Africa.
Chris Derksen, head of frontier markets at Investec Asset Management, agrees: “Nothing has changed on the continent itself. It’s been the right time to start investing in Africa for 10 years or so.”
The article says that investors are re-evaluating emerging markets, since developed markets themselves started looking risky in the global financial crisis It quotes Sonal Pandit, manager of the JPM Africa Equity Fund at JPMorgan Asset Management: “In the last few years, emerging markets have become more mainstream generally. As they get better known, investors have tried to look at who the next few candidates would be. The African continent still offers a lot of opportunities.”
Africa’s GDP has grown 4.9% a year since 2000, after 20 years of economic stagnation. Collective GDP in 2008 was $1,600 bn – equivalent to that of Russia or Brazil – and combined consumer spending totalled $860bn. Urbanization is nearly as high as China, with 52 cities of more than 1m people. By 2050 it will be home to one-third of the world’s under-25s. It has more middle-class families than India and they are under-penetrated in key areas including telecommunications, consumer goods and financial services.
China is a key growth driver, and trade with Africa has climbed from $10bn in 2000 to $106.8bn in 2008. It is not just exploiting resources, but also investing in infrastructure and the future. According to Ms Pandit, the relationship is symbiotic: “For example, because China wants access to oil and gas exploration in Nigeria, it has been prepared to put down $23bn for 3 oil refineries.”
However, governments need to improve and people to demand more from them. So do the investment structures – capital markets are shallow, many stocks are illiquid, information is scarce and the continent is very diverse. Investec’s Derksen says you need deep local knowledge at the micro level. Or you could invest in companies with a high exposure to Africa but listed abroad. Private equity is another option, but deal flow is not yet strong enough and government incentives are needed to speed the project pipeline.
However change is coming in the next 5 years: capital markets are expanding, diaspora executives returning to Africa for work, and intra-Africa trade growing. The FT cites Derksen: “African capital markets will become much easier to access and the number of investment managers looking at Africa will expand pretty dramatically.”
July 11th, 2010 by Tom Minney
The International Monetary Fund (IMF) has revised upwards its economic growth projections for sub-Saharan Africa and the world economy, compared to its April predictions. The revised World Economic Outlook forecasts growth of 5.0% for sub-Saharan Africa in 2009 and 5.9% for 2010, the former up 0.3% on its April prediction, the latter unchanged. World economic growth is now forecast at 4.6% (up 0.4% on the April forecast) for 2010 and 4.3% next year (unchanged).
The new figures were released on 8 July, but based on data collected until 21 June, before markets crashed on fears of a “double dip” recession. The commentary on the IMF website warns: “Nevertheless, recent turbulence in financial markets—reflecting a drop in confidence about fiscal sustainability, policy responses, and future growth prospects—has cast a cloud over the outlook. Crucially, fiscal sustainability issues in advanced economies came to the fore during May, fuelled by initial concerns over fiscal positions and competitiveness in Greece and other vulnerable euro area economies. At the same time, downside risks have risen sharply.. In this context, the new forecasts hinge on implementation of policies to rebuild confidence and stability, particularly in the euro area.”
Growth forecasts for the Middle East and North Africa are virtually unchanged at 4.5% (2010) and 4.9% (2011). Africa still lags behind other key economies, such as China (forecasts of 10.6% and 9.5%) and India (9.4% and 8.4%) but is close to Brazil (7.1% and 4.2%) and ahead of Russia (4.3% and 4.1%).
Projections for South Africa are also being revised up, according to a report in Business Day newspaper (www.businessday.co.za). On 8 July the IMF said SA’s economic growth was likely to reach 3.2% this year, up from an estimate of 2.6% published in April, according to Alfredo Cuevas, the IMF’s senior resident representative in SA. “The recovery in SA has been stronger than expected, and we don’t see ourselves making major revisions to the forecast at this point,” he told the newspaper.
The paper cites Finance Minister Pravin Gordhan as stating on 8 July that growth in the first quarter was 4.6%, up from 3.2% in the fourth quarter of last year. “We have seen a gradual improvement in economic conditions. The pace of growth probably moderated somewhat in the second quarter.” He said that SA was on target to beat the forecast of its Treasury Department, which had forecast 2.3% forecast, after contracting 1.8% in 2009.
Mr Cuevas said that although the European slowdown “weighed” on SA, the effect was less than the good news seen in the past few months, including the effects of the World Cup, which should contribute half a percentage point to overall growth: “It has been a much bigger success than people abroad have expected … SA has been seen in a very positive light as a result of the smooth running of the World Cup.”
The IMF raised its US growth forecasts a little to 3.3% and 2.9% for 2011, but warned unemployment would remain above 9% for both years. It warned that unemployment, a large backlog of home foreclosures and high levels of negative home equity, posed risks of a “double dip” in the US housing market.
According to the IMF statement: “The world economy expanded at an annualized rate of over 5% during the first quarter of 2010. This was better than expected in the April 2010 WEO, mostly due to robust growth in Asia. More broadly, there were encouraging signs of growth in private demand. Global indicators of real economic activity were strong through April and stabilized at a high level in May. Industrial production and trade posted double-digit growth, consumer confidence continued to improve, and employment growth resumed in advanced economies”.
The laggard remains the euro area where overall growth is forecast at 1.0% in 2010 (unchanged) and 1.3% in 2011 (revised down 0.2 percentage points). UK growth is revised downwards to 1.2% (down 0.1 percentage points) and 2.1% (down 0.4 percentage points). Japan is set to grow by 2.4% (up 0.5 percentage points) and then 1.8% 9down 0.2 percentage points).
African Development Bank says the continent is making a “spectacular” recovery from the global recession. Chief economist Mthuli Ncube was reported on 6 July as predicting growth for Africa of 4.5% this year and over 5% next year. It is then expected to return to the average of about 6% percent it enjoyed between 2006 and 2008. Growth was just 2.5% in 2009 (the IMF had 2.2% for sub-Saharan Africa for 2009).
Ncube is reported to link Africa’s recovery to trade with China and decades of market reform. He is reported on Reuters as warning the recovery could be threatened if Europe — to which many African economies are closely connected — fails to bounce back and a slowdown in Europe could see the AfDB trim Africa’s 2010 growth forecast by between 0.5 and 0.8 percentage points. “We think there’s a 50-50 chance that a major slowdown, a double-dip recession (in Europe), will become a reality.” Other threats include the possibility of political or social tension and problems associated with poor infrastructure.
Reduced trade would have the main impact from Europe on Africa, Ncube said, although tightening of credit lines by European banks was also likely to hit growth — as it did in late 2008 when the financial crisis struck. He also pointed to a likely reduction in aid from European governments such as Germany, Britain, Denmark and the Netherlands, where political opposition to domestic austerity measures is bound to grow. “We think that there will be about a 10% reduction in aid”.