Stock Exchanges News

  • Botswana supermarket raising $48m in JSE dual-listing 13 May 2015

    Botswana supermarket chain Choppies Enterprises Limited has launched a roadshow this week to raise $48 million and dual-list on the main board of the JSE Ltd on 27 May. It is offering to sell 117.4m new shares and 160m shares from existing investors.

    Choppies was founded in 1986 and now operates 125 stores in Botswana, South Africa and Zimbabwe and employs over 11,000 people. It hopes to expand in Tanzania and Zambia, while Kenya and Namibia have also come up in reports.

    The listing will be a secondary inward listing, so far only a few African companies have taken advantage of this opportunity offered by the JSE. The share price will be finalized after a roadshow which began on 11 May and a book-build run by Rand Merchant Bank. The offer should raise about R574m based on the current share price on the Botswana Stock Exchange.

    Choppies store (credit Chronicle, Zimbabwe)

    Choppies store (credit Chronicle, Zimbabwe)

    Mr. Ramachandran Ottapathu, Group CEO said in a press release: “This is a really exciting moment in the life of the company. The listing on the JSE gives us further impetus for our ambitious growth plans. We are on track to have over 200 stores by the end of next year and we will be opening our first stores in Zambia and Tanzania by mid-2015. Choppies is a strong cash-generating business that has traditionally supported our organic growth of new store openings. The listing will allow us to fast-track the continued roll-out of new stores, unlock opportunities in new markets and fund acquisitions where opportunities arise.” Full details of the offer are available at their investor portal.

    Media coverage on Reuters, Bloomberg and Business Day highlights the growth but adds that South African retailers Shoprite and Spar Group are also going after middle-income consumers in African markets. Bloomberg says it trades at 24x estimated earnings, compared to 21.4x for Shoprite and quotes Sasfin senior equity analyst Alec Abraham: “If Choppies can raise money at this price-to-earnings ratio, good for them. But it’s a very competitive space and companies are having to really invest to keep their market share.”

    According to the company, Choppies has seen superior growth over recent years with a compound annual growth rate of 27% in total revenues from BWP2.4 billion for the year to 30 June 2011 to BWP5.0bn for the year to June 2014. Earnings before interest, tax, depreciation and amortisation (EBITDA) have grown at a CAGR of 19% to BWP352m in 2014, from BWP207m in 2011.

    Mr. Ottapathu said: “We continue to establish ourselves in areas where we see great potential with the transition to branded convenience. We have the benefit of many years of experience identifying the right places to start up new stores for our target market. Our differentiated approach of partnering with local operators and sourcing from local suppliers provides us many advantages as we expand into new markets”.

    Choppies locates its stores near taxi ranks and bus routes and is not in large shopping centres, Ottapathu told Bloomberg it has not experienced “significant pressure” on sales in South Africa. “We see growth opportunities in the current markets in which we operate and the retail penetration of the markets we are going into is low,” he said.

  • Woes of Zimbabwe Stock Exchange 4 May 2015

    ($ refers to USD)

    The value of shares traded on the recently demutualized Zimbabwe Stock Exchange fell by 22.2% in the first quarter of 2015, compared to the same quarter last year. A story from The Herald newspaper said that turnover to 31 March was $70 million, down from $90 million in the first quarter of 2014. However, the volume of shares traded was up to 586 million from last year’s 306 million for the period.
    Trading in January was $16m (down from $63m in 2014), in February $35m ($26m) and in March $19m ($27m). The share bought by foreigners was down to $41m ($64m) over the quarter.

    Zimbabwe Stock Exchange liquidity to 30 April (source ZSE website)

    Zimbabwe Stock Exchange liquidity to 30 April (source ZSE website)

    Meanwhile the exchange seems to be hit by a series of controversies and several companies have delisted, or removed their shares from trading.
    The exchange in March was reported in the Herald newspaper that “go-live” date would be 19 June for its new automated trading system, Capizar ATS trading software from Infotech Middle East FZ, part of Infotech Group of Pakistan. This was in terms of a contract signed in March 2014, as reported here last September. However there has been little news of progress and the project missed previous deadlines, including for February.
    There has also been criticism of the ZSE’s relocation to Ballantyne Park, a suburb 8.5km from the central business district effective 1 April before the automated trading system was ready. The new office has a smaller trading area. The Herald newspaper reported that parliamentarians and lobby groups had protested and Chairman of the Parliamentary Portfolio Committee on Budget and Finance David Chapfika said that relocating the exchange to Ballantyne Park will mean that small players will be excluded. ZSE interim chairperson Mrs Eve Gadzikwa said the move was necessary because of high rentals.

    SECZ investigates ZSE CEO
    In February the Herald newspaper reported that the Securities and Exchanges Commission of Zimbabwe (SECZ) was investigating ZSE CEO Alban Chirume after complaints over the suspension of Meikles (see below). He is said to have acted unprocedurally when he suspended Meikles and then unprofessionally when the decision was reversed. There were also complaints after he placed a notice in a newspaper urging investors to exercise caution when dealing with the shares.
    If SECZ finds against him, he could be suspended or fired, according to the Herald report. Past CEO Emmanuel Munyukwi, who had been in post for many years, was suspended after an SECZ investigation and subsequently left the ZSE “on mutual agreement”.
    According to the Herald: “Away from the Meikles issue, Mr Chirume has faced criticism over the purchase of a residential building in Ballantyne Park, the overshooting of the budget in the purchase of a vehicle and the numerous instances he has undermined the ZSE board and stockbrokers.”
    An amendment in 2013 to Zimbabwe’s Securities Act gives the SECZ the power to dissolve the board of a registered securities exchange or dismiss one or more of its members, but only on certain grounds, and subject to appeal. If it dissolves a whole board it can appoint someone to run the exchange but only until a new board is elected in accordance with the articles of association, which should be within 3 months.

    Delistings
    Paint and chemical products manufacturer, Astra Industries, was the latest to leave at the close of business on 30 April after majority shareholders Kansai Plascon Africa (listed in Tokyo) and Hermistar investment vehicle for Astra management and staff increased their combined holding to 80.2%, breaching the rule of 30% free float, and applied to the ZSE to leave. Regional manufacturer ART Corporation may follow after buying out minorities.
    Other recent delistings include TA Holdings and ABC Holdings in February. According to an article in Financial Gazette, 16 companies have delisted since 2007 when the hard currency (USD) economy was adopted – 8 of these chose to delist, and 8 were insolvent. Such is the turmoil in the Zimbabwe economy that many other companies are probably insolvent but it has not been announced yet as local manufacturers with high hard-currency costs and ancient machines cannot compete with imported goods. Meanwhile, another 4 companies are suspended: PG Industries, Cottco (formerly AICO Holdings), Phoenix and Celsy.
    The article warns that more delistings are due this year, including Meikles (see below), Dawn Properties, African Sun. It says that companies do not see the benefit in being listed (see bottom of article). They cannot raise money successfully on the bourse due to the liquidity squeeze and shares being listed at a small fraction of their true value, unless money comes from foreign investors, who usually prefer to buy out minorities and delist. The peak had been over 80 listings.
    The only new listing was in 2010 when Innscor Africa’s unbundled Padenga Securities and listed it through dividend in specie. The ZSE did particularly better than most parts of the economy during the years of hyperinflation as desperate investors turned to properties, equities or foreign currencies. It slowed dramatically after allowing trading in foreign currencies.
    Creating a second-tier exchange for small companies is unlikely to have an overall positive effect on liquidity or the market.

    Meikles row
    A leading hotel group, Meikles Limited, is suing the ZSE for $50m in damages and is also warning that it may not remain listed. According to a Reuters report in March, Meikles filed papers on 26 February at the High Court, after its shares were suspended from trading for a week in February and then allowed again from 23 February. Meikles said its share price had fallen and its reputation suffered and it is seeking compensation for “potentially irreparable” consequences of its suspension. The ZSE also issued a warning that people should use caution when trading the shares.
    Meikles also operates retail including supermarket chain TM Supermarkets (South Africa’s Pick’n’Pay has 49%), Tanganda Tea, the Victoria Falls Hotel and has a stake in Cape Grace Hotel in Cape Town.

    New governance?

    Meanwhile ZSE governance could change dramatically after the demutualization was completed recently, as reported last week. Some market participants were said to be surprised when stockbrokers ended up with a 68% majority of the company, after Government took 32%. There had been some suggestions of ownership wrangles.
    This could mean that stockbrokers can hold a General Meeting and replace directors or otherwise take action on how the company is managed.

    Why the stockmarket does not help business
    (quoted from Financial Gazette)
    Horticultural concern, Interfresh, which delisted on the last day of trading in 2013, highlighted the problems with being listed.
    Chief executive officer, Lishon Chipango, said: “At the moment for us there is not too much (gains from listing). If you look at the contextual framework of the stock market, one of the benefits of being listed is to raise capital, but if you raise capital when the shares are so depressed, you are not going to raise that much. So the issue of benefiting if listed maybe down the road. (I) would not be surprised if others followed (us by delisting).
    “The other aspect is there is no money in Zimbabwe. All the capital being raised is external. For us, it is not attractive,” Chipango said.
    He then mourned over the discounted rate at which the company’s shares were trading.
    “The rights issue to raise the US three million dollars (in 2012) caused a dilution of 75 percent because we used stock market valuations. Now if at that time we had raised money using Net Asset Value instead of stock market valuation, the dilution would have been 15 percent. You see why we are running away from the stock market? We are running away from the stock market valuation,” said Chipango.

    zimbabwese50502_tradingboard

  • Zimbabwe central depository brings shares on board 4 May 2015

    Chengetedzai Depository Company Ltd, Zimbabwe’s central securities depository (CSD), was reported that the last securities had been brought on board in March 2015, according to a report in Zimbabwe Mail. Old Mutual announced that its shares were also dematerialized with effect from 30 March.
    CDCL announced last year that it had received due approvals to start operations and it went live in September 2014 with 3 securities onboard, and had extended that to 43 counters by January 2015.
    CDCL had been publishing announcements as new shares are brought on board, and latest additions were Mashonaland Holdings, Old Mutual, Dawn Properties and others. There are some delays in the automation of Zimbabwe Stock Exchange trading system which is supposed to link to the CSD.
    A CSD keeps a computerized register of securities ownership and also registers transfers after shares have been bought, sold or otherwise transferred. It replaces paper share certificates for most shareholders, in a process known as “dematerialization”. It links to systems for payment and clearance of trades.
    The previous system saw clearing and settlement done between the stockbrokers on a T+7 schedule, Chengetedzai says it reduces settlement this to T+5.
    Apparently local retail customers initially found it hard to understand that they must address settlement queries to a custodian, not to their stockbrokers as previously. Campbell Musiwa, Chengetedzai Depository Company chief executive said that CBZ Custodial Services had been set up as an “affordable” custodian for retail customers.
    NewsDay reported in January that investors and stockbrokers were still breaking regulations by selling shares before dematerialization is complete. It added that only 1,557 accounts had been opened at Chengetedzai, of which 61% are for foreigners who work through global custodians (usually banks) who then relate to local custodians. Chengetedzai has been criticized for not doing enough to educate local shareholders to switch although it has worked with media and produced pamphlets.
    Musiwa said there had been some delays in trade settlements if investors had traded before meeting the requirements but also: “There has been a marked improvement which resulted from continuous lobbying with market players to observe the rules,” he said
    In April 2014 Chengetedzai Depository Company Ltd was reported by Standard Newspaper saying it was still waiting for licensing and for the award of a CSD levy by SECZ. Chengetedzai Depository Company won the tender to introduce the CSD in 2009 as reported on AfricanCapitalMarketsNews. After a shareholding dispute, it installed core software for operations that were planned for September 2013 but was held up while waiting for the licence.
    In 2013, Chengetedzai raised nearly $2.5m through share issues, according to its annual report, including a successful $1.5m rights issue to finance the roll out of the CSD. The ZSE has invested $643,000 including $287,000 in the rights issue, according to its 2013 annual report, and holds a 15% stake after scaling up from 12.93% in January 2014. Chengetedzai’s 2013 annual report says that “quasi-government financial institutions” owned 56% and private investors 44%. Main shareholders were Infrastructure Development Bank of Zimbabwe, First Transfer Secretaries and ZB Financial Holdings with 15% each and the National Social Security Authority with 13% at 31 Dec 2013.
    The software is Depo/X system supplied by CMA Small Systems ab of Sweden.

  • Zimbabwe SE aims to issue 50% shares following demutualization 29 April 2015

    The Zimbabwe Stock Exchange completed its demutualization last month (March) and is now a fully fledged private company. It plans to issue up to 50% of its shares to new shareholders, according to reports.
    Company registration was completed earlier in the month and Finance Minister Patrick Chinamasa issued share certificates at a ceremony on 26 March. According to a report by Xinhua news, the Minister said demutualization transformed the bourse from a statutory body into a viable public company: “The main crux of demutualization is separating ownership of the exchange from management in line with internationally accepted code of corporate governance. The process will see the exchange being transformed from its current not for profit status to a profit making organization.” Demutualization progress is not mentioned on the ZSE website.

    Previous trading floor at the Zimbabwe SE (photo from www.4vf.net)

    Previous trading floor at the Zimbabwe SE (photo from www.4vf.net)


    The shareholding is now 32% Government and 68% stockbrokers, split equally among the holders of proprietary rights. According to an earlier report in The Herald, ZSE has 48 stockbroker members.
    A planned future step is to raise new capital so that the exchange would ultimately be owned 16% by Government, 34% by stockbrokers and 50% by new shareholders.
    Demutualization is the process through which an exchange converts from a non-profit mutual association, often a company limited by guarantee, into a for-profit company which follows the usual structure of shareholder ownership. It is meant to result in separation of trading rights, ownership and management. The shareholders are expected to convene a meeting to appoint a board of directors. In terms of usual corporate governance, the ZSE CEO would report to the Board of Directors in terms of performance and meeting objectives. The exchange can also list on its own trading boards and become a public company.
    According to The Herald, corporatization is also needed for the ZSE to register as a stock exchange with the Securities and Exchange Commission, as required by the Securities and Exchanges Act.
    The demutualization process began last year and in July 2014 a Memorandum of Understanding (MoU) was signed by the Ministry of Finance and Economic Development, the Securities and Exchange Commission, the Zimbabwe Stock Exchange and the Stockbrokers, according to a notice issued last year by SECZim.
    Market capitalization was $4.07 billion with 59 companies listed and 37 trades during the course of yesterday (28 April).

    History since 1896
    The first stock exchange in Zimbabwe opened in Bulawayo in 1896 but only lasted 6 years and other exchanges were set up in Gweru and Mutare, according to the ZSE website. Dealing started again in a new exchange in Bulawayo in 1946 and a second floor was opened in Harare (then Salisbury) in 1951. The ZSE was formed as mutual society by a group of stockbrokers who put capital in return for shares of the exchange (proprietary rights). The exchange was funded through the issue of these proprietary rights. SECZim added last year “and over time non-member institutions also funded the exchange, including the Government which also contributed indirectly by way of corporate tax exemptions”.
    The present exchange was created in terms of the ZSE Act which was passed in January 1974, although trading was not interrupted and the change was legal only. A Securities Act of 2004 replaced the ZSE Act and became operational in September 2008. The Securities Commission of Zimbabwe became operational in October 2008 and is regulator, governed by commissioners appointed by the Minister of Finance.
    According to the SEC: “The major benefit of demutualization is that it leads to the separation of the ownership, trading rights and management of ZSE, which eliminates the conflict of interest between exchange and broker members. If successfully implemented, demutualization should indeed lead to sustainable governance of the exchange premised on transparent, independent and efficient decision making for the benefit of all stakeholders, particularly investors.”

  • Zimbabwe Stock Exchange new premises 29 April 2015

    Zimbabwe Stock Exchange (www.zimbabwe-stock-exchange.com) moved to its new premises 44 Ridgeway North Highlands, Harare on 1 April. It owns its new office, which is near Borrowdale Race Course and some 8.5km from its previous rented city-centre office which was at 4th Floor, 101 Union Avenue Building, Kwame Nkrumah Avenue,
    It kept a minimum staff at the old office until 30 April. In a notice on 24 March 2015, the exchange said there would be no interruption in terms of the services offered. The exchange has new telephone numbers: +263-4-886830-8.
    How did the move affect participants in the market? Please add your observations below.

  • How do stock exchanges stay relevant to their societies? SMEs and exchanges 24 March 2015

    “How do we become relevant to society again?” This is the challenge posed to world’s securities exchanges this morning by Ashish Chauhan, CEO of BSE India securities exchange. He told the World Exchanges Congress in London this morning (Tue) that stock exchanges that concentrate only on trading for the sake of trading are in a zero-sum game.
    They should look to add value in areas where there will be gains. He sees the gains will be huge for proactive securities exchanges: “In next 20 years we will create more wealth than in last 10,000 years – will the exchange industry participate in that”.
    Chauhan points out that India has 1 in 6 of world’s population but only 2% of its land mass, there are more people than Europe and USA combined and 50% of population are under 25 years old. The challenge is to create jobs and to provide the skills for employment. Exchanges should ask if that will be done by private equity and other channels, or will the exchanges be able to play a major part?
    BSE India’s response is to set up BSE SME Platform. Its website “offers an entrepreneur and investor friendly environment, which enables the listing of SMEs from the unorganized sector scattered throughout India, into a regulated and organized sector.”
    Chauhan says that going forward technology will change the world and India with its young population skilled in technology will be driving that change. How does each exchange solve the problems of the society it is operating in?

    Europe’s integrated capital solutions to big issues

    Earlier Cees Vermaas, in his first engagement as CEO of CME Europe, spoke of his vision of Europe in 2030. A centralized market and Europe-wide clearing and settlement will allow relentless pursuit of efficiency and falling costs. London will remain the financial centre, but smart networks will allow other specialist centres to grow all over Europe. This will include more exchange centres to provide funding for SMEs and for infrastructure. Exchange-linked investment into all forms of energy and will support transitions into new and efficient forms of green energy. European bond markets are only 30% of USA volumes at present but in coming years that will change fast with less fragmented bankruptcy regulatory frameworks

  • What are Africa’s pension funds investing into? 13 March 2015

    Do you agree or disagree with this view? Comments are welcome below

    Pension funds in 10 African countries already have $379 billion in assets under management – 85% or $322bn of it based in South Africa – and they continue to grow very fast. That means careful thinking about how to nurture Africa’s savings pool while the need to deploy these resources most productively puts the spotlight on the search for quality investment assets.

    For example, Ghana’s pension fund industry reached $2.6bn by Dec 2013 after growing 400% from 2008 to 2014. Nigeria’s industry has tripled in the last 5 years to some $25bn in assets by De 2013, and assets under management are growing at 30% a year. There are 6 million contributors, but many more Nigerians still to sign up pensions.

    Pensions have a special place in the capital market as they take a longer-term view and can be patient in the hope of greater returns. Some pension funds, in Africa and elsewhere, argue that pensioners are not just looking at the value of their retirement income but also the quality of their lives, opening the way to carefully chosen investments in infrastructure, healthcare and other benefits which pensioners and their families might enjoy.

    What are the African factors driving the growth of pension funds?
    • Many countries have set up new regulators and even more are introducing regulations, including forcing more employers to provide pensions. With the new regulatory frameworks come structural changes such as the need for professional third party asset managers
    • Changing demographics: The age group over 60 years is the most rapidly increasing, according to some research
    • It’s a virtuous circle, many Africans want savings opportunities. If pension funds produce results, and are well run and good at communicating, people will respond.

    The growth is only beginning. So far only 5%-10% of the population in sub-Saharan Africa are thought to be covered by pension funds and 80% in North Africa. Pension funds are still tiny in comparison to gross domestic product (GDP), which in turn is growing fast in many African countries – for example pension funds are about 5% of GDP in Nigeria, compared to 170% of GDP in Netherlands, 131% in UK and 113% in America.

    Southern Africa is generally better served: Namibia has some $10bn in pension assets representing 80% of GDP and Botswana $6bn or 42% of GDP. The biggest pension schemes are usually government and social-security funds as well as local government and parastatal funds (such as Eskom in South Africa), as well as those of big corporations and multinationals.

    Economist Charles Robertson of Renaissance Capital says conservatively that pension funds in the 6 largest sub-Saharan African markets will grow to $622bn in assets by 2020 and to $7.3 trillion by 2050.

    What to invest in?

    The challenge is how to invest the capital productively. Are Africa’s entrepreneurs, corporate finance and investment banking houses and capital markets rising to the challenge of bringing a a strong pipeline of investment-ready projects to keep up demand for capital?

    Capital markets need to offer liquidity and transparency both to channel the foreign capital looking for African growth opportunities for their portfolios and now for domestic funds too. Liquidity can be a key problem, even in Africa’s world-beating Johannesburg Stock Exchange, where the Government Employees Pension Fund (GEPF) is thought to account for 13% of market capitalization and to be the country’s biggest investor in commercial property.

    Big funds in small other Southern African capital market swamps can be like hungry hippos, snapping up promising new investments as they surface. Even if they feel satisfied from a good run of success on some of these investments, they can hardly disgorge them back into the liquidity pool for other traders because of the gnawing fear they would not find other local investments to fill their bulging portfolios.

    Others share the worry. Eyamba Nzekwu of Nigeria’s Pencom was reported as saying: “Savings are growing much faster than products are being brought to the market to absorb these funds”. Pension fund growth is thought to have contributed to a 79% surge in Ghana stock market in 2013 as funds chased too few investments.

    Regulators should encourage the fund-managers to upgrade skills fast to be more proactive in picking and trading stocks and African fixed income. They should also widen the space in the interests of helping the markets and the funds to grow through liquidity. This means, for instance instance, urgently relooking restrictions on cross-border investments, including into other African markets.

    Private equity and infrastructure

    The pension funds provide a huge opportunity for alternative assets, especially private equity. According to research by the African Development Bank’s Making Finance Work for Africa and the Commonwealth Secretariat, African pension funds are estimated to have invested some $3.8bn-$5.7bn in private equity and to have scope to invest another $29bn (see table below). Many countries are passing new regulations to allow investment into private equity and other unlisted investments. Funds have been experimenting – sometimes disastrously – with small and medium enterprise and other developmental investments.

    table50313_pensions

    International private equity fund managers such as Helios and LeapFrog have also seen the future, making investment in pension fund providers – Helios took equity in Nigeria’s ARM Pension Fund Managers and LeapFrog into Ghana’s Petra Trust.

    Africa has huge need for infrastructure finance and pension funds could be the ideal pool of patient capital but more work needs to be done to increase the supply of investable projects and to increase capacity of pension funds to invest in projects directly or through infrastructure fund managers.

    Savings are good for growth, provided there are productive assets for them to go into. Africa’s savings are rising, often driven by regulation, and international interest has been strong for years. Can Africa’s entrepreneurs, their advisors, private equity funds and the capital markets institutions rise to the challenge of building a big enough pipeline of great investment opportunities suited to the needs of these investors?

    For more reading:
    This article is heavily based on work by: Ashiagbor, David, Nadiya Satyamurthy, Mike Casey and Joevas Asare (2014). “Pension Funds and Private Equity: Unlocking Africa’s Potential”. Making Finance Work for Africa, Emerging Markets Private Equity Association. London. Commonwealth Secretariat. Available through MFW4A.
    Another book is by Robertson, Charles (2012). “The Fastest Billion: The Story Behind Africa’s Economic Revolution”. Renaissance Capital. Read more here or buy it on Amazon (link brings revenue to this site).
    Other articles are at The Economist on Nigeria’s pensions, African Business and Wall Street Journal.

  • Meet the new CEO of Uganda Securities Exchange 12 March 2015

    Paul Bwiso, the former general general manager of stockbroker Dyer and Blair Investment Bank of Uganda, has big plans as new CEO of the Uganda Securities Exchange. His challenges include a challenger exchange, plans to win more listings, more automation, hopes to demutualize the exchange.

    Low liquidity in the Ugandan capital market has not deterred a rival exchange, ALTX Uganda, which is currently testing and plans start trading from 1 May. ALTX was founded by Joseph Kitamirike, a previous CEO of the USE. Last month ALTX announced backing from GMEX Group which is offering an “exchange in a box” hosted trading solution and has backing from Deutsche Börse AG and Forum Trading Solutions Limited through its investment vehicle.

    Paul Bwiso, the new USE chief executive officer. Photo by Mark Keith Muhumuza

    Paul Bwiso, the new USE chief executive officer. Photo by Mark Keith Muhumuza

    According to a recent interview in Uganda’s Daily Monitor newspaper, Bwiso, who has been on the exchange’s governing council, says: “My plan is to correct the way we have been doing things… We know the problem with the way things have been done. We shall review some of regulations in order to open up the market.”

    He is confident on ALTX: “They were only putting us on the edge but I believe we are in a stronger position.”

    He admits the market has struggled to attract listings while Ugandan companies are also seeking to raise money: “We’ll have to sell the potential of the main market segment, growth enterprise market segment and corporate bonds. In about 18 months, if we can fix the system here, then I see about 7 listings,” he said.

    Market capitalization on the USE was UGX 28.6 trillion ($9.8 billion) including dual-listed stocks, according to today’s (12 March) market report. A recent news report put the value of 8 local stocks at $1.27bn, dominated by Stanbic Bank Uganda with $600m of market capitalization (measured by number of shares multiplied by closing share price). Power distributor Umeme attracted a lot of interest when it came to the market in November 2012 and since then the share price is up from UGX340 to UGX500 today.

    So far only 40,000 Ugandans have registered as shareholders, according to the 2014/15 national budget speech, out of a population of 37.6 million. Liquidity both to invest and to exit have been some of the major worries.

    It took the USE governing council more than a year to find the right successor to Kitamirike, according to the report.

  • Nigeria’s SEC asks for comments on exchange demutualization 5 March 2015
    CEO Oscar Onyema shows top managers of NASDAQ OMX the NSE trading floor. (Credit: businessdayonline)

    CEO Oscar Onyema shows top managers of NASDAQ OMX the NSE trading floor. (Credit: businessdayonline)

    Nigeria’s Securities and Exchange Commission has published rules on demutualization of securities exchanges on 20 February and this week is the end of the 2-week deadline for comments from stakeholders in the capital markets.
    The Nigerian Stock Exchange (NSE) has decided to demutualize, by agreement of the Council and members. However, it had not been able to go ahead because there were no SEC rules on demutualization. According to this press report in This Day newspaper, the announcement comes 3 years after an SEC committee had submitted its report.
    Demutualization is a process in which a member-owned exchange, sometimes a company limited by guarantee, is turned into a normal company with shareholders and investors. Usually it is a for-profit company and it can even list on its own exchange, with good examples set by the Johannesburg and Nairobi securities exchanges.
    The proposed draft rules and regulations suggest “no single entity/person or related entities/persons should be permitted to own, directly or indirectly, more than 5% of the equity and/or voting rights in the demutualized securities exchange. The aggregate equity interests of members of any specific stakeholder group (for example, brokers and broker/dealers) in the demutualized securities exchange should not exceed 40%.”
    Trading participants who are shareholders need to reduce their cumulative holding in the exchange to not more than 10% within 5 years of demutualization.
    “Strategic investors” can get equity if they provide evidence of technical expertise through managing other exchanges. “The aggregate number of shares to be offered to the Strategic Investors shall not be more than 30% of issued and fully paid up capital of the securities exchange. However, if the exchange is in dire need of funds, it could issue a higher number of shares subject to approval of the Commission.”
    The Board of Directors of the demutualized exchange should be up to 13 members with at least a third are independent, non-executive directors and all board and executive management appointments must be approved by the SEC. The exchange must comply in all other respects with the SEC Code of Corporate Governance for public companies.

  • Capital markets course offered in Nairobi 5 March 2015

    The Nairobi Securities Exchange is calling for applicants for a “certified capital markets specialist” course, to be held on 16-20 March at the Ole Sereni Hotel, Nairobi. Registration has been extended to 10 March. Places cost $1,995 + VAT.
    The course for 30 participants is organized by Intellisys Business Solutions Ltd in partnership with the International Association of Finance Management, headquartered in Luxembourg. According to its website it is a global organization that provides financial training courses to professionals, institutions and corporations around various locations and programmes in banking, insurance, capital markets, wealth management, risk management and project finance.
    The course is facilitated by Michael Preiss, a member of the Interfima management committee. According to his bio he is a senior investment advisor based in London, advising ultra high net worth and key clients in Russia, Middle East and Africa. He has also worked at HSBC Private Bank in Dubai and the Middle East and Standard Chartered Bank in Hong Kong and Singapore.
    There is not an obvious connection with the regional-focused training courses organized by the Securities Industry Training Institute (SITI) and funded by International Finance Corporation as part of its Efficient Securities Markets Institutional Development (ESMID) programme (www.ifc.org) with the Swedish International Development Authority and the World Bank. According to this story, this was launched in 2009 and is based in Kampala, aiming to offer certified courses that would be recognized across the region to thousands over a 10 year period.