African Capital Markets News

Africa investor conference, New York, 17 September

Tom Minney — Mon, 30 Aug 2010 22:14:20 +0000

Africa investor is holding its annual Index Series conference at the New York Stock Exchange on 17 September. The aim is to bring African CEOs and capital markets leaders to meet investors, including sessions on private equity, bonds markets and stock exchanges. Special focuses include
• African opportunities for US pension funds,
• Socially responsible investment (SRI) a fast growing field with some $2 trillion under management already, and what are the opportunities for global SRI investors and African listed companies, and
• The impact of China’s Qualified Domestic Institutional Investors (China has apparently licensed 58 QDII’s since 2006, and these have some U$60 billion for investment out of mainland China).
The conference will also include the Ai Index Series awards for most innovative stock exchange and regulator, the best investment bank and research team, and best company, best CEO and best-performing African hedge fund, among others
According to the conference website: “The Summit will allow investment professionals, capital markets experts and corporate leaders to engage each other on a subject that is going to determine the growth in regional equity capital markets. With more IPOs in the pipeline across many African markets, the need for professionals to share information and network with each other is more important than ever”.
Africa investor is an organization which supplies a broad range of investment data, research, broadcast and published content to a growing number of investors with interests in Africa. It provides strategic research, African stock market indices, communications and investment publishing services to support its clients investment and communication programmes. These include a magazine, a newswire and a television service.
Through its sister organization, African Investment Advisory the group also provides project advisory services.
To find out more about the Ai Index Series conference, check this website (www.africa-investor.com). The sponsors include NYSE Euronext, Thomson Reuters, Ecobank and the African Development Bank.

Volatility boosts JSE first half year results

Tom Minney — Sun, 29 Aug 2010 20:53:57 +0000

After a strong first half performance, the JSE Limited (www.jse.co.za), which operates the Johannesburg Stock Exchange, is making 2010 a year of consolidation. Africa’s biggest exchange reported a 14.5% increase in revenue but managed to control its operating costs, leading to increased net profit after tax of R207.6 million (US$28.4 mln) up 13.1% on H1 in 2009, when it was R183.5 mln.
The press release quotes Russell Loubser, CEO of the JSE: “These results come at a time of increased competition in the global exchange industry, the growing success of alternative trading venues and increased regulation of both exchanges and the trading of financial products to try to reduce the chance of another financial fallout on the same scale as the global financial crisis.”
Plans for the coming year include increasing liquidity and competitiveness:
• Introducing a strategy to grow the exchange traded interest spot and derivative market, in consultation with market participants and industry groups. Earlier the JSE acquired the Bond Exchange of South Africa.
• The Africa strategy seeks JSE still seeking new listings for its Africa Board, which encourages African companies domiciled outside South Africa to take a secondary listing. The second Africa Board listing was Wilderness Safaris in April 2010.
• The exchange is replacing its back office technology, and is in test phase with all “satisfactory”.
• It aims to encourage on-exchange central order book trading in the equity derivatives market and will provide services to bring clients who previously traded off-exchange to trade on the JSE to manage their risk.
• Additional hard commodity instruments – silver and copper derivatives – were launched under licence from the CME Group in August 2010.
With regard to the results, the JSE has experienced more volatility, like other global markets, and this has meant more trading and boosted JSE Ltd. Group revenue to R623.3 mln ($85.3 mln), up 14.5% from R544.5 mln in H1 2009. This is mostly increased trade on the spot equities market. Foreigners were again net investors, investing R19.1 billion ($2.6 bln) in South African equities and R36.2bn in local bonds. Liquidity on the equities market rose to 53% for the period (H1 2009: 48.8%). Investors are slightly less hesitant about equity derivatives and commodity derivatives recovered, with revenue rising 15.9% to R20.6 mln (H1 2009: R17.8 mln).
The JSE is predominantly a fixed cost business, and its main expenses are technology and people. Expenses rose 13.3% to R393.2 mln (H1 2009: R347.0 mln) largely due to increased headcount as a result of the BESA acquisition as well as additional IT personnel.

For capital markets managers – how the JSE gets its revenues

Tom Minney — Sun, 29 Aug 2010 20:47:38 +0000

For full details, the interim results for the first half year to June 2010 are published on the JSE website. A recent JSE press release summarizes the Group’s revenue for the period as coming from the following:
• Listings – 6 new company listings occurred during first half of 2010 – 5 on the main board (including Wilderness Safaris on the Africa Board) and 1 on AltX – compared with 4 in H1 2009. Revenue in the JSE’s Issuer Services division, which handles new listings, increased 17.5% (H1 2010: R45.8 mln, up from H1 2009: R39.0 mln).
• Spot Equities market – The number of spot equities market transactions rose 22.4% (H1 2010:12.2 mln transactions, up from 10.0 mln in H1 2009), generating revenue of R164.8 mln (up 13.5% on H1 2009: R145.3 mln). Marketing initiatives include: i) A new billing model introduced in March 2010 to reduce total trading costs, encourage high-frequency trading and reward high-volume participants. Trade volumes have increased since. ii) The exchange added an anonymous trading facility which allows for the execution of large trades through hidden order functionality in the central order book. iii) The JSE continued to pursue its strategy of increasing the financial knowledge of South Africans in order to increase the number of retail investors and add to trade volumes. iv) New product innovation continued, including a new range of commodity warrants and collective investment products including exchange traded funds.
• Equity derivatives market – contracts traded rose by 6% to 84.2 mln (H1 2009: 79.4 mln), with the biggest increases from international derivatives, and value traded rose 26.2%. However revenues fell slightly by 0.7% to R53.3 mln (H1 2009: R53.7 mln) mainly owing to two shifts in the product mix: i) a move from options to futures and ii) a drop in the value of Can Do derivatives traded during H1 2010 compared with the previous period. The JSE adopted a “maker-taker model” for its equity derivative market effective 6 July 2010 to bring greater liquidity and encourage greater activity and transparency and says it is noticing increased use of the upgraded derivatives engine following the introduction of the new pricing.
• Commodity market – derivatives contracts traded increased by 12.1% (H1 2010: 1.01 miln, up from 902,370 in H1 2009). Commodity options accounted for most of this growth, owing to volatility in agricultural prices at the start of 2010. This shift in product mix impacted favourably on revenues which rose 15.7% to R20.6 mln (H1 2009: R17.8 mln) during the period.
• The Interest Rate market generated trade reporting revenue of R16.4 mln. Reported cash volumes in H1 2010 climbed to R7.33 trillion (H1 2009: R6.88 trillion).
• Revenue generated by the Information Products Sales division, which is focusing on new and existing offshore clients in a tough market following the downsizing of several global institutions, climbed 6.5% to R58.7 mln (H1 2009: R55.1 mln). Marketing efforts are currently focused on the FTSE/JSE Equally-Weighted Top40 Index, launched during the period. There was a fall in the number of live terminals issued to corporate clients in 2009, but this has now stabilised.

The following table is compiled by AfricanCapitalMarketsNews.com
.
R million % of total
Issuer services (listings) 45.8
Equities (spot) trading 164.8
Equity division total 394.7 63.3%
Equity derivatives 58.3 9.4%
Commodity market derivatives 20.6 3.3%
Interest rate 16.4 2.6%
Information Products Sales 58.7 9.4%
Other 74.6 12.0%
Total 623.3

Equity division includes equity trading fees, risk management, clearing and settlement, membership, issuer services and technology (BDA).

Standard Bank to lend $100 mln to farmers in 4 African countries

Tom Minney — Sun, 29 Aug 2010 17:00:15 +0000

South Africa’s Standard Bank (www.standardbank.com) will provide $100 million as credit to up to 750,000 farmers in 4 African countries in the next 3 years, according to an interview given by Clive Tasker, CEO for Africa, to Reuters newsagency. The bank is to offer the credit in Uganda, Ghana, Mozambique and Tanzania to help boost agricultural production and economic growth. It is a pilot scheme agreed with some institutions and aims to boost export crops.
Reuters quotes Tasker as saying: “This scheme will disburse loans to small-holders of up to $100 million over the next 3 years and will potentially benefit up to 750,000 small-scale farmers.” He said the bank was also planning a broader financing scheme for other farmers in Africa and would consider projects that aimed at raising production of cash crops: “We are committed to financing agriculture across the full scope of the industry.”
Priority will go to growing crops such as cocoa in Ghana and cashew nuts in Mozambique. “We will help farmers with the right seeds, fertilisers, and ask them to have crop insurance to mitigate our risks,” Tasker said. He added the bank would finance farmers’ co-operatives and agro-businesses to boost trade. Increased production of crops would help African economies to grow and lift millions of people out of poverty.
Reuters reports that Africa has vast water resources and arable land but also food shortages, and says analysts partly blame this on mismanagement of funds, poor government policies and lack of support infrastructure for farmers.
Standard Bank said there was increasing global demand for African produced cocoa, coffee, tea and horticultural crops. Reuters says there is also increased investment, including equity funds seeking land deals and South African and other farmers who are investing in other African countries to grow cash crops.

Swaziland issues first 3-year Government debt, raises $34 million

Tom Minney — Sat, 28 Aug 2010 20:59:03 +0000

The Central Bank of Swaziland (www.centralbank.org.sz) on 27 August sold the first longer-term Government bonds to raise money for development projects. It plans further sales this year, a central bank official told Bloomberg news agency. Bloomberg quotes Phumzile Mkhatswa, a domestic debt officer at the bank, as saying: “Yesterday was the first time the central bank has released a 3-year bond. We plan to issue 5-year and 10-year bonds before the end of this year.”
The Central Bank sold 250 million elangeni ($34.2 million) worth of three-year bonds with an 8% coupon. Previously the bank had only sold short-term Treasury bills with regular auctions of 28- and 56-day bills. Although interest rates are often lower than in South Africa, which surrounds the kingdom of Swaziland, the Treasury bills are often oversubscribed. Bloomberg reports there were 383.2 million elangeni of Government debt outstanding in June. Yesterday’s bond sale attracted 519 million elangeni in bids, the central bank said.
According to Bloomberg, Mkhatswa said, without providing further details, the bonds are “intended to raise money for the Kingdom of Swaziland’s development projects.”
The Swaziland currency is the lilangeni (plural elangeni), pegged to the South African rand at parity. Current debt listings on the Swaziland Stock Exchange (www.ssx.org.sz) include 2 Government debt securities listed, both expiring in 2010, as well as corporate bonds from Newera Partners, Inyatsi Construction and Standard Bank SD. Only the Standard Bank bond has any duration, and expires in 2019, while maximum duration of the other bonds is 2012.
Equity listings are: Nedbank Swaziland, Royal Swaziland Sugar Corporation, Swazispa Holdings, Swaziland Property Investment and Swaziland Empowerment.

GEF Africa sustainable forestry fund.

Tom Minney — Fri, 13 Aug 2010 22:28:35 +0000

British development finance institution, CDC (www.cdcgroup.com) has committed US$50 million to the GEF Africa Sustainable Forestry Fund (GASFF), the first private equity fund to focus solely on sustainable forestry in sub-Saharan Africa. The fund is to be run by the investment team of Global Environment Fund (GEF) which has a long history of investing in sectors that make a positive impact on the environment and quality of life.
It is a pioneering investment to help develop and grow businesses in Africa’s expanding forestry sector and bring jobs to those communities, as well as broader potential ecological benefits.
The first close of GASFF is US$84 mln, which is being committed principally by development finance institutions. Private investors are expected to invest later, and this should eventually bring the fund to its US$150 mln target size.
The fund is targeting commercial returns and is expected to invest in and develop 5-10 forestry businesses across sub-Saharan Africa, with a particular focus on “greenfield” and existing plantations. The forestry businesses will grow, process and market timber products to meet the growing global demand from industries including construction, energy, furniture and bio-fuel.
GEF has around US$1bn funds under management, including an emerging markets forestry fund which has invested in businesses in South America, South-East Asia and Africa. In 2009, GEF received the Financial Times’ award for Sustainable Investor of the Year. GASFF is managed by John Earhart, one of the creators of the Forestry Stewardship Council (FSC), and Ole Sand, who joined GEF from the forest investment team at the International Finance Corporation. Their combined experience and that of their team in the forestry industry in emerging markets will mean that the fund and its investments will be subject to world-class environmental, social and sustainability standards.
The GASFF fund closed on 24 May and planned to start to make investments immediately, with an investment size typically between US$15 mln and $30 mln. There are several countries within sub-Saharan Africa that provide good opportunities for forestry investments including Mozambique, Tanzania, Swaziland, South Africa, Uganda, Ghana, Malawi and Zambia.
The fund’s investments will drive economic improvement in the communities in which it invests through direct employment, local taxes, support for local schools, and other community projects. The fund’s investments will also support the basic needs of employees and families, including housing, schools, clinics, clean water, nutrition programs and job training.
GASFF’s forestry assets will also sequester significant quantities of carbon dioxide, and will avoid deforestation and degradation through its sustainable management of plantations and natural forests.

Comments from CDC’s Chief Executive Richard Laing (per press release):
“The climate and conditions in sub-Saharan Africa give it a compelling natural advantage in developing sustainable forestry, but the continent has traditionally failed to attract investment because of high perceived risks. An improving political and economic backdrop, combined with growing local and global demand for timber and increased attention on climate change issues, means that African forestry is now well placed to receive the investment its people and governments are calling out for.
“As well as the economic impact that this investment can bring, plantation forests also provide important environmental benefits, including reducing carbon emissions, protecting soil and reducing pressure on natural rainforests. Sub-Saharan Africa has the potential to reap these rewards.”
“CDC has been instrumental in the creation of this fund, the first of its kind in Africa. From identifying the need for a sustainable forestry fund, selecting the manager to run it, through to providing the US$50m cornerstone investment that is essential to getting it off the ground, CDC continues to play its part in bringing innovative and vital investment to developing countries.”

UN-REDD
The international community has realized the importance of protecting African forests in order to fight against global warming of the planet. Talks had stalled on an initiative called the UN-REDD programme (The United Nations Collaborative Programme
on Reducing Emissions from Deforestation and Forest Degradation in Developing Countries – www.un-redd.org) which aims that rich countries should provide an international fund to finance developing countries who manage to preserve their forests. Africa supported this.
On 27 May, in Oslo, the rich countries announced they would contribute about $4 billion on their fight against deforestation by 2012, mainly United States ($1 bln), Norway ($1 bln), Japan ($500 mln), the United Kingdom ($480 mln), France ($375 mln) and Australia ($120 mln), joined by Germany ($464 mln) and Denmark.
It could mean more funding for forest protection in the Congo Basin, which is reportedly 26% of global tropical forest.

Up to $30 billion investment needed for health sector

Tom Minney — Thu, 12 Aug 2010 23:24:22 +0000

According to a recent study, $25–$30 billion in new investment will be needed in health-care assets, including hospitals, clinics, and distribution warehouses over the coming 10 years to meet the growing health care demands of Sub-Saharan Africa. The study is “The Business of Health in Africa: Partnering with the Private Sector to Improve People’s Lives”, prepared by the International Finance Corporation (www.ifc.org) with consultancy McKinsey & Co www.mckinsey.com.
It notes that health care in most of sub-Saharan Africa remains the worst in the world. The region has 11% of the world’s population, yet bears 24% of the global disease burden and commands less than 1% of global health expenditure. Increased attention from outside donors has resulted in some remarkable initiatives, funneling billions of dollars to help combat HIV/AIDS, tuberculosis (TB), and malaria the worst health scourges of the region. In spite of billions of dollars of international aid, an astonishing 50% of Sub-Saharan Africa’s total health expenditure is financed by out-of-pocket payments from its largely impoverished population. Because of economic growth, the study estimates the market for health care will more than double by 2016, reaching $35 billion.
Most of the sub-Saharan Africa lacks the infrastructure and facilities to provide and deliver minimal levels of health services and products. It also faces a severe shortage of trained medical personnel, with just 3% of the world’s health workers deployed there.
The IFC report highlights the critical role of the private sector in meeting the need for more and higher-quality health care and identifies policy changes that governments and international donors can make to enable the private sector to take on an ever more meaningful role in closing Africa’s health care gap. About 50% of health-care provision already comes from for-profit companies, non-profit organizations and social enterprises, along with insurers, providers, and manufacturers. Their role is growing.
The expected improvement in Africa’s macroeconomic climate over the next decade will expand the health care gap, as higher incomes will create new demand. The biggest individual investment opportunities will be in building and improving the sector’s physical assets. Around 550,000–650,000 additional hospital beds will need to be added to the existing base. An additional 90,000 physicians, about 500,000 nurses, and 300,000 community health workers will be required over and above the numbers that will graduate from existing medical colleges and training institutions. Demand for better distribution and retail systems and for pharmaceutical and medical supply production facilities will also be strong.
An estimated $25–$30 billion in new investments will be needed to meet demand between now and 2016—of which $11–$20 billion is likely to come from the private sector. A broad range of investment opportunities exist across all components of the health care industry in the region (as described in detail in the annexes to this report). These opportunities can deliver compelling financial returns and have an enormous potential development impact.
Health care provision accounts for roughly half the investment opportunity, with the remainder split across distribution and retail, pharmaceutical and medical product manufacturing, insurance, and medical education. These investments will fund capacity expansion, new businesses, and renovation of existing assets. About half of these investments are expected to be made by for-profit entities, the remaining portion of private sector investment being equally spread between social enterprises and nongovernmental organizations (NGOs).
The vast majority of the investment opportunities in the near term will be in the SME sector. Only a quarter of the opportunities are expected to have a project size larger than $3 million. This report also highlights the availability of investment opportunities in social enterprises that, while delivering lower financial returns, can have a tremendous role in the positive development of Sub-Saharan Africa.

How to Leverage the Private Sector to Improve Access to Health Care?

Tom Minney — Thu, 12 Aug 2010 23:20:59 +0000

Agenda to mobilize the responsible development of private sector health care in sub-Saharan Africa:
1. Develop and enforce quality standards. Initial efforts at enhanced regulation could have large and immediate benefits. Financial and technical support is needed to strengthen the ability of public and private regulatory bodies to develop and enforce transparent and effective quality standards.
2. Foster risk-pooling programmes. Risk pooling arrangements— such as government-funded national payment schemes, commercial insurance, or community non-profit mutual schemes—have enormous potential to improve the financing of health care in the region, thereby encouraging the development of higher-quality, more organized private sector providers.
3. Mobilize public and donor money to the private sector. Donors can help build health-care capacity by earmarking some aid to fund private sector entities directly while also assisting local governments to expand their procurement capabilities and manage contracts with the private sector. Employers can foster the development of the local private health care sector by outsourcing provision of health care for their employees.
4. Modify local policies and regulations to foster the role of the private sector. Opportunities exist to reform the regulations that inadvertently block the development of the private health sector. The primary focus should be streamlining bureaucratic processes, liberalizing human resource regulations that perversely reduce the number of active health care workers, and reducing tariffs and other import barriers that impede access to or raise the cost of health supplies.
5. Improve access to capital. Entrepreneurs and business enterprises in Sub-Saharan Africa have trouble securing financing from established institutions. Three initiatives could tackle this issue: (i) educating local banks about the true risk profile of the health care sector; (ii) using international financial backing to encourage local financial institutions to lend to health care enterprises, including small and medium-sized enterprises (SMEs); and (iii) developing equity-focused financing vehicles for health care enterprises.

How to do it, how to measure returns, how it is growing – the Impact Investing Forum in UK on 30 Nov-1Dec

Tom Minney — Thu, 12 Aug 2010 16:13:37 +0000

Top names in Impact Investing are gathering in London on 30 Nov-1 Dec for an Impact Investing Forum organized by Hanson Wade. This is a fast-growing sector, both for investors who want to see their funds contribute to sustainability in the world and support development and fight poverty, and for investors who are looking for an alternative asset allocation strategy. The theme is “Engage as an Investor: Identify the Right Products, Ensure Commercial Returns, Measure Impact”.
Organizer Amy Miller says the meeting “will bring together investors who are looking to diversify their investment portfolio, tackle global environmental and social challenges and make a strong commercial return on investment”.
The agenda is aimed at practical lessons so that today’s largest commercial, institutional and philanthropic investors will learn how to overcome the barriers and risks presented by impact investing. Delegates will have the chance to learn from experienced speakers and many case studies to determine how to benefit from the social, environmental and financial returns of impact investing and become pioneers in this space.
It puts special emphasis on project identification, infrastructure building and impact measurement.
Confirmed speakers include many of the leading names of impact investment, including industry bodies, experienced investors and new funds:
• Rob Lake, Head of Sustainability, APG
• Emily Bolton, Director, Social Finance
• Mark Campanale, Founder, Social Stock Exchange
• Roger Frank, Managing Director, i3
• Matt Christensen, Executive Director, EUROSIF
• Adam Ognall, Deputy Chief Executive, UKSIF
• Bernie Morgan, Chief Executive, CDFA
• Ebba Schmidt, Responsible Investment Manager, Pension Protection Fund
• David Carrington, Independent Consultant
• Vineet Rai, Managing Director, Aavishkaar
• Gerhard Pries, President, Sarona Asset Management
• Simon Merchant, CEO, Jacana
• Nigel Kershaw, CEO, Big Issue Invest
• Audrey Selian, Director, Rianta Capital
• Katinka Vacranenburgh, Secretary General, The International Interfaith Investment Group
• Michele Giddens, Executive Director, Bridges Ventures
• Tanya Beya, Investment Director, IGNIA
• Beth Richardson, Director, GIIRS
The meeting will be at The Montague Hotel, London, from 30 November-1 December. For more information look at www.hansonwade.com.
The provisional agenda includes action-packed days, with some of the sessions focusing on important tools and topics such as:
1. Measuring financial returns and detailed discussions on ways of measuring social and environmental impacts
2. The roles of foundations, faith-based investors and family offices, with speakers from leading institutions
3. Social infrastructure, including the development of a Social Stock Exchange in UK and Nexii in South Africa.
4. The potential of impact investing for retail investors
5. Four funds highlighting their roles
6. The potential for partnerships between profit and not-for-profit
7. Case studies on investing in micro-finance, small and medium enterprises, education, clean tech, reforestation and emerging markets.
For more information, contact Amy Miller, Programme Director, Impact Investing, tel: +44 203 141 8727,
email amy.miller@hansonwade.com or see the conference website www.hansonwade.com.

AfDB aims for $10bn a year infrastructure finance

Tom Minney — Wed, 11 Aug 2010 22:22:19 +0000

The African Development Bank (www.afdb.org) is aiming to commit up to $10 billion a year to infrastructure in Africa, according to a story on Reuters. Alex Rugamba, the bank’s Director for Regional Integration and Trade, told the newsagency on 26 July that the bank hopes to nearly double infrastructure funding over the coming 5 years.
“There’s a big interest in projects that can transform economies… for instance there’s big talk about railways. We want to revamp our railways. So if the trends continue as they are now, I would say within five years’ time we’ll be committing up to $10 billion per year on infrastructure.”
Rugamba said the AfDB was particularly interested in cross-border infrastructure ventures to drive economic growth by promoting trade within and between African countries. Other possible investments include regional power grids, cross-border highways and submarine telecommunications cables. For instance in January, the bank lent Ethiopia $125.6 million to finance the construction of the Mombasa-Nairobi-Addis Ababa Road corridor project phase II.
He reportedly added that countries, including Egypt, Morocco, South Africa and Tunisia, were absorbing large amounts: “South Africa last year took a loan of over $2 billion, which is almost about half our annual infrastructure budget and Egypt now takes in $400 million worth of credit for its energy sector per year.” Africa has always been able to absorb large amounts of infrastructure finance, but the AfDB had too little capital to meet demand.