Stock Exchanges News

  • JSE and ASEA host African exchanges for capacity-building 10 September 2014

    Best wishes to the organizers and all the African exchanges personnel attending the Building African Financial Markets (BAFM) seminar in Johannesburg from 10-12 September!

    The Johannesburg Stock Exchange (JSE) and the African Securities Exchanges Association (ASEA), supported by the World Bank Group, are hosting the third BAFM seminar this week, bringing together representatives from stock exchanges, regulatory bodies, stockbroking firms and other interested parties from several African countries including Nigeria, Mauritius, Zimbabwe and Malawi.

    Topics to be covered include the future of African stock exchanges and whether they can play a meaningful role in the growth and development of the African continent. Zeona Jacobs, Director: Marketing and Corporate Affairs at the JSE, says in a press release: “Stock exchanges play a crucial role in the development of economies by allowing companies to raise capital through an efficient and transparent platform.” Jacobs says the conference provides an opportunity for exchanges from around the continent to share ideas and learn from each other’s experiences.

    “Exchanges are key parts of the economies in which they operate. Initiatives such as this form an integral part of the continued development of sustainable economies within the continent by enabling open conversations about how to strengthen investor confidence, address governance issues and promote financial literacy.”

    The conference will also include sessions around the development of commodity markets, exchange traded funds, electronic bond markets and demutualisation.

  • Nairobi Securities Exchange CEO Peter Mwangi moves to Old Mutual Kenya 10 September 2014

    The well-respected CEO of the Nairobi Securities Exchange (www.nse.co.ke), Peter Mwangi, is to take up a new job as Group CEO at financial services company Old Mutual Kenya with effect from 1 October. Mr Mwangi has served at the NSE since 24 November 2008 and his contract was renewed in 2011 but according to regulations a CEO of an exchange can only serve 2 terms.

    Mr Mwangi and his top team have made huge progress in boosting the activity and standing of the NSE. Kenya’s Standard reports that major strategic projects implemented while he was CEO include:

    • Trading treasury bonds on the automated trading system,
    • Reducing the trading and settlement cycle to four days
    • Demutualizing the exchange and selling its shares to the public.

    Local press reports that in a statement sent to newsrooms Mr Mwangi says he expects the bourse to build on the foundations it set to be one of the most efficient and well capitalized exchanges on the continent.

    Old Mutual continues in expansionary form in Africa, and an analyst reports: “Old Mutual has been accelerating its growth agenda within the African continent, expanding its footprint both organically and inorganically and Mr. Mwangi’ s appointment comes at an exciting time for the Group as whole as he will be in charge of spearheading Old Mutual agenda in this region. In 2013, the Group announced that it plans to invest $500M in East and West Africa, and we have already seen this as the Group has established operations in Nigeria and Ghana. In Kenya, the Group acquired Faulu Kenya which is in the process of been integrated in Old Mutual’s operating model.”

    Tavaziva Madzinga, Old Mutual Africa Chief Operations Officer, was quoted on CapitalFM: “With the Group’s focus on growing in East Africa, and Kenya in particular, Mwangi will guide the delivery of Old Mutual’s commitment to provide affordable insurance and banking solutions to millions of Kenyans.”

    Peter Muthoka, Chairman of the Board of Directors of Old Mutual was reported as saying: “The importance of our customer cannot be emphasised enough. We are dedicated to our vision of becoming our customers’ most trusted financial partner and we look forward to working closely with Mr Mwangi in serving Kenyans to empower them financially to achieve their goals.”

    According to his profile on Businessweek: Before joining the NSE Mr Mwangi had been CEO and Managing Director of Centum Investment Company, (formerly, ICDC Investment Company until it changed its name in 2008) from December 2004 to October 15, 2008. He had joined been company secretary from 2000 to 2004 and has also been Investment Manager. His working career began as a Technical Officer in the Kenya Air Force, where he was involved in the maintenance of avionic communication systems and the development of the Air Force’s information and communication technology (ICT) strategy.

    His degree is BSc in Electronic Engineering from University of Nairobi. He is also a Member of Certified Public Accountant of Kenya (ICPAK) and the Institute of Certified Public Secretaries of Kenya (ICPSK) and is a Chartered Financial Analyst.

    He serves as a Director of UAP Insurance Sudan Ltd., Kisii Bottlers Limited, Mount Kenya Bottlers Limited, Rift Valley Bottlers Limited, Eveready Batteries Limited, KWAL Holdings Limited and Central Depository & Settlement Corporation Limited. He serves as a Director of Nairobi Stock Exchange Ltd., and Wildlife Works Inc. He is also a member of the Institute of Directors (IOD).

    Peter Mwangi

    Peter Mwangi

  • Zimbabwe stock exchange moving to electronic trading and CSD 1 September 2014

    Electronic trading is coming to the Zimbabwe Stock Exchange in terms of a contract signed recently with InfoTech Group of Pakistan. Meanwhile the central depository Chengetedzai Depository Company Ltd said that 3 listed companies – CBZ Holdings, Cottco Holdings and FBC Holdings – would be moved onto electronic registers from 8 September, according to local media reports.

    The InfoTech Capizar software is also installed at Ghana Stock Exchange since 2008.

    According to reports in the Pakistan Observer and The Nation in June, the contract with ZSE is a turnkey deployment of the automated trading system (ATS). According to a press statement by the ZSE in March, the contract was signed on 19 Mar for for the supply and installation of the Capizar ATS product by Infotech Middle East FZ LLC.

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

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

    The agreement was signed between Alban Chirume, CEO of the ZSE, and Naseer A Akhtar, CEO & Chairman of InfoTech Group, assisted by Murad Baig, VP Business Development at IFTL-London. According to the reports, the project was expected to start soon and to be finished within 6 months (by December). The ATS replaces the current manual trading system, which uses MS Excel and other packages to create and publish data, which the new system also does.

    The ZSE statement in March adds: “On 31 Jul 2013 we announced the appointment of Central Depository Settlement Company of Mauritius (CDSM Ltd) as our consultant to the automation project. The consultants have since successfully guided us through the tender and vendor selection processes.

    “The immediate next steps are the study of the local environment, and the gap analysis to be carried out by the Vendor in order for us to finalise the project plans. These limited activities will be followed by the procurement of computer hardware and construction of the data centre itself. We are expecting that in 3 to 4 months’ time, the project will be in the training and acceptance testing stages with the final live date being our target within a period of 6 months from now.”

    CSD going live

    Chengetedzai was approved by the Securities and Exchange Commission of Zimbabwe to run a CSD, after winning a competitive tender on 27 Dec 2010. According to a recent news report in The Herald and the Chronicle newspapers, its market update statement said: “Chengetedzai Depository Company Limited would like to advise all capital markets players, issuers of securities and the investing public that the necessary regulatory approvals to commence the Central Securities Depository (CSD) operations has been granted.

    “In this regard, CDCL is ready to commence the opening of investor accounts and dematerialisation (migration from paper based title to electronic securities) of approved securities, in preparation for the trading of electronic based securities.” The company urged the investing public to open securities accounts through registered custodians, who include banks, from 25 August and deposit their securities in the accounts.

    According to its website, Chengetedzai won the tender in which two bidders were invited to submit proposals after an initial expression of interest round in Apr 2010. This is in terms of the Securities Act 17/2004, which established the legal basis for the Securities Commission, its mandate and the establishment of a central securities depository (CSD) to maintain securities deposits in electronic form. The SECZ was only established in 2008 and the commissioners immediately embarked on setting up a CSD.

    The Ministry of Finance put a hold on the project in Feb 2011 and announced in Aug: “The CSD project was deemed by Government to be of national interest and thus Government would take 51% shareholding in Chengetedzai and that only one CSD to be set up in the country. The ZSE would also be included as a shareholder in Chengetedzai. Then followed protracted negotiations between Chengetedzai to value the “sweat equity” and this was settled on 13 June 2012 by Government and SECZ, and the Shareholders’ Agreement was signed on 26 Jun 2012, after which a new board of directors began.

    According to the CDCL report: “The first task was to confirm the software to support the CSD operations and a system selection process was kicked off immediately. After visits to South Africa, India and Moscow, the decision was made to select the Depo/X system supplied by CMA Small Systems from Sweden. The purchase and implementation contracts were signed in March 2013 and in April 2013 the implementation of the project started, exactly fourteen months after the tender was awarded.”

    Check this amazing profile in Daily News of 23-year-old Samuelle Dimairho who has been dreaming of transforming the ZSE (and trading on it) since he was 15 and is the driving force behind Chengetedzai.

    Background on the ATS

    The Africa Report magazine wrote in Jan that the contract is expected to cost $2 million and says daily turnover on the exchange was currently $1.5m on average and there were 68 listed companies, down from a peak of 83. According to the report: “Apart from enabling longer trading hours, the ATS would reduce the fraudulent sale of non-existent stocks. The automation of the bourse has been on the agenda since 2000 although plans have stalled due to liquidity constraints. However, as the new system comes on board, more companies are set to delist this year due to the harsh economic environment obtaining in the country.” It cites Chirume saying: “Tentatively, there are companies which have already shown that they might merge and there is a possibility of some de-listings.” He believed that the de-listings would not have any implications on the bourse as some of the affected counters were not trading.

    According to the ZSE press release in Jan, 11 vendors expressed interest, and 4 submitted full responses. They were:
    1. A consortium of local vendors led by Chartered Systems Integration in partnership with CMA Small Systems of Sweden.
    2. A consortium of Infotech Middle East FZ-LLC and local suppliers.
    1. National Stock Exchange of India in partnership with Valentine software of Zimbabwe.
    2. New York Stock Exchange Euronext Technologies.

    “The initial valuation of all bids submitted narrowed down the competing vendors to a short list of 2 – CIS/ CMA Small systems and Infotech Middle East. During the last week of November the shortlisted 2 vendors were given the opportunity to give oral presentations and demos to support their bids. The CSI /CMA Small Systems consortium was however unable to participate in the demo exercises due to other circumstances beyond their control. Additional due diligence measures were taken during the month of December and as a result of the report outcome of these efforts the Board of the Zimbabwe Stock Exchange has approved the engagement of Infotech Middle East FZ-LLC subject to a successful contract negotiations.”

  • JSE seminar on African capital markets development 24 August 2014

    Johannesburg Stock Exchange (credit www.jse.co.za)

    Johannesburg Stock Exchange (credit www.jse.co.za)


    The Johannesburg Stock Exchange and the African Securities Exchanges Association, supported by the World Bank Group, will host the 3rd Building African Financial Markets capacity-building seminar. This will be in Johannesburg, South Africa from 10-12 September.
    The aim of the seminar is to promote growth and development of African financial markets by giving representatives from stock exchanges, regulatory bodies, stockbroking firms and other interested parties the opportunity to learn about topical subjects in the area of capital markets.
    The seminar includes speakers from African and global securities exchanges, banks, stockbrokers, major financial institutions, issuers, multilateral organisations and regulators. The topics covered include Are exchanges playing a meaningful role in African growth and development?, Exchange demutualization – perspectives and considerations, Listings – what do exchanges need to do to get companies to list
    This year is the first to introduce a series of parallel workshop sessions to allow for a more interactive environment for engagement. Workshops include constructing exchange-traded funds, building electronic bond markets and the role of exchanges in bond markets, data commercialization, effective ways to enhance financial literacy, commodity derivative exchanges, increasing market liquidity, sustainable stock exchange initiative.
    The conference sessions will be held at the JSE during the day time of 11 and 12 September. The seminar will start with a cocktail function at the Johannesburg Stock Exchange (JSE) for all delegates and speakers on the evening of 10 September, and a stockbroker networking session will in the afternoon of 11 September.
    The detailed programme can be downloaded from the JSE website via the link BAFM Programme on this page.

  • 9 African IPOs in first half of 2014 raise $808m, passing all 2013 11 August 2014

    pic: Tom Minney

    Arabian Cement IPO on Egyptian Exchange in May was 18x oversubscribed. pic: Tom Minney


    Initial public offers (IPOs) on African stock exchanges for the first half of 2014 has raised capital totalling $808.5 million, compared to a total of $757.5m raised throughout 2013. The data show there have been 9 African IPOs in 2014 to 30 June, compared to 18 in 2013 and 10 in 2012 on stock exchanges in Casablanca, Dar es Salaam, Johannesburg, Nigeria and Tunisia when the total raised was $342.6m.
    The figures are given in a blog in the Wall Street Journal, citing figures from consultant EY.
    According to the WSJ blog, domestic and international pension funds and other corporate institutional investors are putting more cash into African markets. It highlights new money from Africa’s fast-growing domestic pension funds and growing confidence in African frontier market equities, quoting Joseph Rohm, portfolio manager at Investec Asset Management: “These are nascent capital markets and they are illiquid markets. But what has been encouraging is that, for the first time in a long time, we are starting to see more capital raisings.”
    He attributed the IPO increase to an earlier boom in private-equity investments: “We have known for a long time that the amount of private equity in African markets—and more broadly in frontier markets—is unprecedented and we are starting to see those opportunities coming to public markets.”
    Bourse de Tunis saw 2 IPOs in 2012, but this was up to 11 last year and 2014 is also looking strong. WSJ[ blog cites Slim Feriani, chief executive officer and chief investment officer of Advance Emerging Capital, a Tunisian, who said: “In the next 5 to 10 years we are bound to see more IPOs. As it stands, some of the hidden gems are still in private hands,”
    The blog also quotes Razia Khan, head of African region research at Standard Chartered, who said Africa’s IPO activity tends to be concentrated in key markets with most big deals so far in 2014 in North Africa. She added the current listing boom is evidence that the African markets are still recovering from the shock of the financial crisis in 2008: “The IPO activity lagged this recovery in growth—it’s not surprising that we’re seeing a rise, but the scale of it is interesting.”

  • Nairobi Securities Exchange IPO closes 12 Aug 5 August 2014

    Significant dates
    24 July – IPO opens
    12 Aug – IPO closes
    4 Sept – Share allotment announcement
    9 Sept – Self-listing ceremony
    nairobisecuritiesexchange_NSE21

    The Initial Public Offering (IPO) of the Nairobi Securities Exchange Limited (www.nse.co.ke) is open until 12 August. The NSE is seeking to raise KES 627 million ($7.14m) by selling up to 66,000,000 new shares (some 31% of the equity) at a price of KES 9.50 per share. The offer is open to domestic and international investors.
    The IPO will culminate on 9 September with the self listing of the NSE on the Main Investment Market Segment (MIMS), making it Africa’s second security exchange after the Johannesburg Stock Exchange (www.jse.co.za) to demutualize and list itself.
    Mr. Henry Rotich, Cabinet Secretary for the National Treasury, said during the IPO launch ceremony on 23 July (see press releases here): “One of the key objectives of the Capital Markets Master Plan is to build on recent market reforms to address regulatory and institutional constraints in order to strengthen market infrastructure, intermediation, oversight and governance standards. The demutualization and self-listing of the NSE form part of the government’s policies to enhance governance standards and facilitate access to our markets by a wider community of investors. “
    Mr. Edward Njoroge, NSE Chairman, said: “The success of our country and the region will be mirrored both in our market and our company, the NSE. We urge all Kenyans, and other investors both far and wide, to embrace this offer with the confidence that Kenya’s growth and future success will, in many ways, be accelerated through the development of our capital markets.”
    The minimum number of shares available for purchase is 500 at a cost of KES 4,750.00 (approximately $54). Thereafter purchases are in multiples of 100 shares.
    The NSE is celebrating its 60th anniversary and the demutualization and share offer have taken 5 years until the Capital Markets Authority approved all in June.

    Is the NSE IPO a bargain? Analysis by Ryan Hoover

    Ryan Hoover of the excellent Investing in Africa blog (www.investinginafrica.net) has published his analysis of the NSE IPO here, it is well worth reading. He looks at the NSE income and expenses in the prospectus, and shows that transaction levies (fixed at 0.24% of total trade value, i.e. 0.12% on each side) are the main source of income, earning the NSE KES 405m in 2013. He breaks down the baseline earnings to come with an after-tax figure of KES 0.80 per share, giving the offer a price/ earnings (P/E) ratio of 11.8x.
    Since Kenyan bonds currently yield around 11% he looks at future earnings, noting that trading volumes are up 37% in the first half of 2014. Using a forecast growth in earnings per share of 20% he believes the shares could be worth KES 19.90 in 2019 at a P/E ratio of 10x (the JSE is on P/E of 16x) and adding in dividends at KES 0.25 per year (the current level adjusted for the IPO) he sees the potential annual return at 17.4%.
    Check out his excellent blog, also for the discussion following the article, which points out that the offer is likely to be over-subscribed.

  • Nairobi Securities Exchange plans to offer 38% of shares in June IPO 14 May 2014

    nairobisecuritiesexchange_NSE21

    The Nairobi Securities Exchange (www.nse.co.ke) is pushing ahead fast with its demutualization plans and will sell up to a 38% stake in an initial public offering (IPO) in June. According to a report on Reuters, NSE chief executive Peter Mwangi said the NSE will offer up to 81 million shares, subject to regulatory approval.
    The offer price will be set by the IPO advisors closer to the offer date. The bourse will use the funds for new products and enhance transparency.
    Reuters quoted Mwangi saying: “We want to list through an IPO on the main market. We need to open this listing before 30 June. That conversion from a private to a public company will position us to be a very effective player.”
    “We are playing in a sweet spot where the frontier funds think Africa is rising. East Africa is a hot spot on the African map and we are the gateway into that east African region.”

    Soaring profits, new products
    The NSE’s pretax profit more than doubled to KES 379m shillings last year from 2012. It has been lifted by a surge in trading turnover after the 4 Mar 2013 presidential election went peacefully. The dynamic Nairobi exchange is a mutual company owned by its stockbrokers, and demutualization is the process converting into a private for-profit company, as reported on this blog. The ordinary shares have a nominal (par) value of KES 4 shillings ($0.05) each.
    Kenya’s Capital Markets Authority is reviewing the exchange’s advanced plans to offer currency and interest-rates futures and options. The NSE futures market will offer standardized contracts for currency futures that will be traded. Mwangi said: “We are seeing more and more international investors who might want to invest in Kenya and they might want to hedge the currency risk.” Local banks offer foreign-exchange forward contracts, which are negotiated directly with buyers, but they cannot be traded.
    Mwangi added that part of the funds raised in the IPO will be used to bankroll new products such as derivatives, exchange-traded funds (ETFs) and Sharia-compliant indexes. The NSE has already led the way with a number of FTSE-branded index products and is working with the CMA and CDSC to introduce a real estate investment trust (REIT) market in Kenya and trading platform and a futures and commodities exchange.

    Diversifying income
    The 60-year-old Nairobi stock exchange has been diversifying through new sources of revenue including sales of publications, provision of services through the Broker Back Office (BBO) and data-vending. It bought a prime commercial property in Nairobi’s Westlands area to tap into rental income, according to a report in Standard Digital.
    The region is enjoying many benefits from increasing regional integration under the East African Community (EAC). The Nairobi bourse is a key player in the East African Securities Exchange Association (EASEA), which aims to standardize regulations and operations within the region to make cross-border investing easier. Members are the Dar es Salaam Stock Exchange (DSE), the Rwanda Stock Exchange (RSE), the Uganda Securities Exchange (USE), and the Central Depository and Settlement Corporation (CDSC). It also has a memorandum of understanding with the Somalia Stock Exchange Investment Corporation (SSE) under which it will have primary responsibility for the technical development of the Somalia Stock Exchange including identifying the most suitable partners and expertise.
    Regional integration has also boosted expansion among listed firms and investor confidence after the discovery large quantities of gas and oil across several east African countries. There are many cross listing between the exchanges.
    Mwangi said they wanted to attract more listings on the NSE’s Growth Enterprise Market (GEMS) which is aimed at small firms wishing to list their shares. There is only one listing, property developer Home Afrika so far. The NSE hopes to attract more listings through easier listing terms such as allowing business owners to offer a minimum of 15% if the shares in the market. Mwangi told family business owners who may be reluctant to lose control: “With 85% you have effective control of your company but you enjoy all the advantages of being listed. We are in a sense offering the best of both worlds.”
    The NSE is a key member of the African Securities Exchanges Association and an affiliate member of the World Federation of Exchanges (WFE) and intends to become a full member.

  • Dar es Salaam Stock Exchange switches technology provider 9 April 2014

    daressalaamSE_logo

    The battle for stock exchange technology in Africa hotted up with the recent announcement that Dar es Salaam Stock Exchange (www.dse.co.tz) is switching its trading, clearing and settlement systems to use South Africa’s Securities and Trading Technology (STT). Previously it had been using the Millennium IT systems now owned by the London Stock Exchange Group.
    According to a press release from STT, Moremi Marwa, CEO of DSE said: “We are delighted to partner with STT in our endeavour to transform our exchange into being a focus for enterprises and government long-term fund-raising and a vibrant platform for value and liquidity creation to investors. STT’s robust, efficient and scaleable trading, clearing and settlement systems will facilitate our transformation intent and improve our risk management capabilities”.
    According to its website, the DSE’s current market capitalization is TZS 17.3 trillion ($10.6 billion) from a total of 18 listed companies. STT says Government and corporate bonds listed are worth more than $2bn and there are about 185,000 investors. Twelve companies have used the DSE to raise capital through share issues and 13 have issued and listed bonds.
    Newspaper Business Day reported that former JSE director Allan Thomson said: “things are happening in Africa quickly now” and the Tanzania development is “a very good move”. He is reportedly not involved in the Tanzania transaction but is working with STT in a consortium to rival South Africa’s authorised central securities depository, Strate. He is also setting up the Bond and Derivatives Exchange of Zambia, the Nairobi Securities Exchange’s derivatives exchange for the East African region and a third exchange, which cannot be named yet.
    Michelle Janke, MD of STT said: “We are delighted to have been chosen to provide trading and clearing solutions to the Dar Es Salaam Exchange. Tanzania is a dynamic and fast developing market and we look forward to working with the DSE to upgrade their technology.”
    Millennium IT has a good range of African clients, according to its website, including in Botswana, Egypt, Ghana, Kenya, Mauritius, Mozambique, Uganda and Zambia and it also powers South Africa’s JSE and the London Stock Exchange and other leading international exchanges. Recently it has been criticized by African exchanges for less service since the LSE takeover of the dynamic Sri Lankan company and for high annual licence fees.
    There is no notice of the latest deal on the DSE website, but there is notice of a system breakdown on 25 March that halted trading: “DSE Public Announcement: This morning, Tuesday 25 March,2014 one of the DSE’s key infrastructure failed to startup; as a result the trading system also failed to function. In this consideration, DSE had been forced to halt startup of today’s trading session to allow the system engineers to diagnose the source of problem and repair it accordingly.”

  • Algiers stock exchange signs MoU with NYSE Euronext Paris 8 April 2014

    The Algiers Stock Exchange is working with Euronext Paris to boost the market through cooperation. The two signed a Memorandum of Understanding (MoU) that they will work together to develop the market systems and make it easier for enterprises, especially small and medium enterprises (SMEs), to raise capital through the securities exchange.
    Euronext (www.euronext.com), a wholly owned subsidiary of Intercontinental Exchange Group (ICE), announced the MoU with Algiers Société de la Gestion de la Bourse des Valeurs (www.sgbv.dz) on 25 March. It will focus on initiatives including:
    • organize events for professionals in finance, including theme-based seminars, training and information sessions in Paris and Algiers, exchange of publications and experience, coordination of joint initiatives
    • back financial research and innovation on topics of common interest including sustainable, environmental and social finance, corporate governance
    • promotion and international development.
    Anthony Attia, CEO of Euronext Paris, said in a press release that the agreement with SGBV “.. will enable us to build on our expertise and work with the Algiers Stock Exchange to promote financial markets to companies seeking capital.”
    Yazid Benmouhoub, CEO of SGBV, welcomed “…this new alliance between Euronext Paris and the Algiers Exchange, which is right in line with our efforts to develop financial markets in Algeria.”
    SGBV is a stock company organized under Algerian legislative decree 93-10 of 23 May 1993. Its equity is 100% owned by certified brokers (IOB – currently state-owned banks) and it is supervised by Commission d’Organisation et de Surveillance des Opérations de Bourse (COSOB).
    Euronext is a main eurozone exchange, with over 1,300 issuers worth €2.6 trillion in market capitalization. It operates regulated markets in: equities, exchange-traded funds, warrants and certificates, bonds, derivatives, commodities and indices. Regulated markets include, Alternext and the Free Market as well as EnterNext, which facilitates SME access to capital markets. It also provides technology and managed services to third parties.
    ICE is a leading network of regulated exchanges – its portfolio includes the New York Stock Exchange (NYSE), ICE Futures, Liffe and Euronext – and clearing houses for financial and commodity markets. It delivers transparent, reliable and accessible data, technology and risk management services to markets around the world.

  • Nairobi Securities Exchange invites Ethiopian firms to list 28 March 2014

    Kenya has invited Ethiopian companies to list on the Nairobi Securities Exchange in a ground-breaking move that would let them raise capital and trade their shares. The Ethiopian Government has been slow to support development of its capital market, hampering investment and private-sector growth.

    Churchill Avenue, Addis Abeba (www.tourismethiopia.gov.et)

    Churchill Avenue, Addis Abeba (www.tourismethiopia.gov.et)


    The invitation came earlier this month as Kenya’s President Uhuru Kenyatta visited Addis Ababa to strengthen trade and other ties. According to Reuters he told a joint meeting of executives from both nations: “Kenya stands ready to begin consultations for the regulations and guidelines that would allow Ethiopian companies to raise investment capital and trade at our Nairobi Securities Exchange.”
    Ethiopia has one of Africa’s biggest economies, a fast-growing population of 85-90 million, and a booming economy which is forecast to grow at over 7% a year for each of the next five years, according to the International Monetary Fund (World Economic Outlook, Oct 2013).
    Foreign multinational companies such as Unilever, Danish pharmaceutical company Novo Nordisk and many Chinese and Indian companies are opening a wide range of operations, including manufacturing. However, many Ethiopian companies have found it hard to raise the risk capital to seize the many opportunities, despite a strong human skills base, as outlined in this perceptive article in Financial Times.
    The Government is 100% owner of the largest companies such as Ethio Telecom and Ethiopian Airlines and endowment companies linked to the key political parties are also major forces in the economy. There has been a programme of privatizing many state-owned companies in farming, manufacturing and others but Government retains key strategic industries and Reuters says they are resisting calls to liberalize the economy.
    Kenyatta took Kenyan companies to look for opportunities in Ethiopia including executives of dairy company Brookside, Equity Bank and telecoms operator Safaricom. The 2 countries signed a special status agreement in 2012, detailing various areas of co-operation in trade, energy and infrastructure. A large transport corridor could link Ethiopia and South Sudan to a new Lamu port in Kenya. Ethiopia recently opened a grid to export electricity to Kenya with $1.5bn financing from the World Bank and the African Development Bank.
    Analysts said Ethiopia would benefit if its firms take up the offer to tap Kenyan capital and Reuters quoted a analyst from Nairobi-based Standard Investment Bank in a note to clients: “The advantage for Ethiopia for this arrangement would be the ability to provide companies with an inflow of capital without necessarily running the risks of an open capital account economy which Kenya is already accustomed to.”
    The Nairobi bourse is the powerhouse of Eastern Africa and there are already many dual-listings in the region and plans to create further links and harmonization with Dar Es Salaam, Uganda and Rwanda securities exchanges.
    One Ethiopian lawyer told African Capital Markets News: “There is no law that prohibits Ethiopian companies to trade on another stock market. The President of Kenya has made his intention clear on the subject and there is no clear rejection or acceptance from its Ethiopian counterparty. The Ethiopian companies could benefit much. Principally they will be able to implement corporate governance policies and procedures that are lacking today and also be competitive over the world market.”
    According to Million Kibret, managing partner of BDO Consulting Ethiopia, confirmed to African Capital Markets News that lawyers agreed “there is no law or directive or regulation that forbids interested Ethiopian companies to register at the Nairobi Securities Market. If their enrollment requires investment it will be up to the National Bank of Ethiopia to allow same.”
    Kenyatta said that Kenya exported goods worth $53.2m to Ethiopia in 2012 and imported goods worth $4.1m in the same year.