Archive for the 'Investor education' Category

East African securities exchange integration – what’s on in 2015

Securities exchanges in East Africa are working together on the infrastructure for tighter cooperation and links between the capital markets of Rwanda, Kenya, Uganda and Tanzania and potentially Burundi. The body for cooperation is the East African Securities Exchanges Association (EASEA). The key integration driver is the Technical Working Group (TWG), which has a member from each State. It was established by the East African Community (EAC) to review the best infrastructure and legal framework to facilitate seamless cross-border movement of capital.

Training and qualifications
Also important is the Securities Industry Training Institute (SITI) East Africa, which is improving skills and technical capacity to international standards and creating regional qualifications to enable skilled candidates to work across the region. For 2015 SITI East Africa aims to help more market players and regulators have SITI certification and examinations and is driving training to meet the growing demand for expertise. SITI was set up in 2009 to establish a common curriculum. See this post about the launch of SITI.

A regional inter-depository transfer mechanism is in place to support movement of cross-listed securities and provide possibilities for investors seeking cross-border trading and investment opportunities. It is part of a capital market infrastructure project progressing under the EAC Financial Sector Development Regional Project (FSDRP I). Each country is leading publicity and workshops to raise awareness and boost cross-border trading.

Backbone – new directives
The TWG is developing Council Directives “which will be the backbone of the proposed integration of the regional capital markets”, according to the communiqué (“EASEA Press Release”) of the last EASEA meeting. The directives under public discussion are:
1. Council Directive of the EAC on Central Securities Depository
2. Council Directive of the EAC on Securities Exchanges
3. Council Directive of the EAC on Self-Regulatory Organizations
4. Council Directive of the EAC on Conduct of Business for Market Intermediaries
5. Council Directive of the EAC on Corporate Governance for Listing Companies.

The TWG has also drafted and completed directives on
1. Council Directive of the EAC on Investor Compensation Schemes
2. Council Directive of the EAC on Financial Education and Consumer Protection
3. Council Directive of the EAC on Disaster Recovery for Capital Market Infrastructure
4. Council Directive of the EAC on Regulated Activities
5. Council Directive of the EAC on Credit-Rating Agencies
6. Council Directive of the EAC on Regulatory Authorities
7. Council Directive of the EAC on Anti-Money Laundering and Combating of Financial Terrorism

The last meeting of EASEA was 26-27 November and Tanzania did not attend. The next is due in Uganda in the Q2 of 2015. EASEA is a member of the Capital Markets Development Committee (CMDC) of the East African Community (EAC) – a committee of the East African Community Secretariat, according to the Uganda Securities Exchange website. The CMDC objectives include

  • Establish cross-listing of stocks, a rating system of listed companies and an index of trading performance to facilitate the negotiation and sale of shares within and external to the Community
  • Ensure unimpeded flow of capital within the Community by facilitating the removal of controls on the transfer of capital among the Partner States
  • Prevent money-laundering activities through the capital markets
  • Ensure that the citizens of and persons resident in a Partner State are allowed to acquire stocks, shares and other securities or to invest in enterprises in the other Partner States

Encourage cross-border trade in financial instruments.

African Venture Capital Association (AVCA) to provide PE data

** Save the date: AVCA’s 9th conference will be in Accra, Ghana, from 22-24 April, with extra days for GP and LP training (announced today 2 Nov). More details will be available soon **

The African Venture Capital Association ( and Cambridge Associates (, a global provider of independent research and investment advice, have agreed to work together to provide extensive, independent aggregate African private equity and venture capital benchmark data and statistics to AVCA members and other industry participants.
The 2 organizations will issue quarterly performance data which will include African PE and VC industry returns, compared to other market indices. Returns data will be aggregated to protect the confidentiality of individual funds and their underlying portfolio investments. Vintage year returns and aggregate portfolio returns by industry will be reported where the sample size is sufficiently robust to allow disclosure without compromising confidentiality. Cambridge Associates has been advising institutional and private clients on alternative assets since the 1970s and derives its PE and VC benchmarks from financial information in its proprietary database of institutional-quality PE and VC funds, one of the largest such data repositories in the world.
Michelle Kathryn Essomé, AVCA CEO (see below), commented in a press release: “AVCA is absolutely committed to promoting the dissemination of robust, reliable data on private equity and venture capital in Africa. We are thrilled to collaborate with Cambridge Associates, as they have demonstrated the necessary technical expertise, knowledge of the continent, and global track record to meet this objective. I am confident that this will help promote additional transparency and independent benchmarking to the benefit of all industry stakeholders.”
Cambridge Associates will provide the data to AVCA as a service to its members and the global PE and VC industry overall. Cambridge Associates works closely to grow its coverage of the emerging markets PE and VC industries with the international development institutions that are major limited partners in these markets, and also partners with the Emerging Markets Private Equity Association (EMPEA).

More awareness
Ralph Jaeger, senior research consultant and co-head of international private equity and venture capital research at Cambridge Associates said: “We are delighted at the opportunity to work with AVCA to broaden and deepen the industry’s awareness of private equity and venture capital in Africa. Cambridge Associates continuously seeks to expand our manager research coverage to create benchmarks that can serve as valuable tools for the industry. Assessing the attractiveness of private equity and venture capital in Africa will allow investors to better identify local and regional investment opportunities.”

AVCA and Cambridge Associates
AVCA is a non-profit association whose aim is to promote, develop and stimulate private equity and venture capital in Africa through research, advocacy, training, networking and the dissemination of industry best practices. It was established in 2002 and today represents African private equity and venture capital firms, institutional investors, foundations, international development institutions and global professional service firms, amongst others. AVCA.
Cambridge Associates was founded in 1973 and gives investment consulting, independent research and benchmarks, performance-reporting and outsourced portfolio solutions, across all asset classes, to over 900 institutional investors and private clients worldwide. It has more than 200 professionals dedicated to consulting, research, and performance reporting on alternative assets and compiles performance results for more than 4,400 private partnerships and more than 60,000 portfolio company investments to publish its proprietary private investments benchmarks.

AVCA’s new CEO
The African Venture Capital Association (AVCA) announced the appointment of Michelle Kathryn Essomé as its CEO in September, in a press release. She has nearly 20 years of investment-banking experience and has held a range of marketing and origination roles in equities, fixed income, corporate finance and investment management with Merrill Lynch, Goldman Sachs, JPMorgan, Lehman Brothers and Nomura. Michelle holds an MBA in Finance from Columbia Business School, where she was a Robert F. Toigo fellow, and a BBA in Finance from Howard University. She has worked in the US, UK and France and is fluent in French. She commented: “This is an incredibly important time in the development of the African private equity industry and AVCA has a crucial role to play in supporting GPs and promoting the asset class. I am absolutely delighted to be able to harness the support of the African GP community, our DFI partners and peer associations to build a strong, member-centric association.”
“As CEO, my commitment is to ensure AVCA provides consistent, high value services to our members and acts as a catalyst for the development of private equity in Africa.”
AVCA, which is co-chaired by Tshepidi Moremong, also welcomes 2 new prominent members to its board. Runa Alam has joined the board as a co-Chair. She is a co-founding partner and CEO of Development Partners International LLP. Simon Walker has been appointed a Special Advisor to the board. Simon was CEO of the British Private Equity & Venture Capital Association (BVCA) from 2007 to 2011 and was recently appointed as the Director General of the Institute of Directors. For more details of their backgrounds, see the press release.

Working with BVCA
In August, AVCA entered into a memorandum of understanding (MoU) with BVCA to boost the implementation of its re-launched strategy across Africa, according to a report on AVCA is to get technical support from the BVCA including expertise in training African private equity fund managers and other professionals. AVCA will also be able to increase training to pension funds and other institutional investors and to encourage local institutional participation, an initiative supported by the Commonwealth Secretariat.

Private equity in Africa
According to AVCA: “Private equity in Africa has a very important role to play in building better, more sustainable companies, creating jobs and delivering genuine economic growth. The continent’s burgeoning middle-class combined with a growing consumer base and greater political stability is making Africa an attractive investment destination.
“Average economic growth in the region reached 5.8% between 2000 and 2008, more than the global average of 4%, driving interest from global private equity houses. In the first half of this year, US$1.1bn was raised by Sub-Saharan African funds.”

Regulators seek to build capacity in African markets

African capital markets require more capacity-building. The recent conference of the International Organisation of Securities Commissions (IOSCO) resolved to give support to help markets develop strong infrastructure, more investor education, good corporate governance and the capacity to enforce market rules and regulations.
Nigeria’s THISDAY newspaper ( has reported from the 36th annual IOSCO conference (17-20 April, Cape Town) that Secretary-General Greg Tanzer said African markets needed to have very robust trading platforms in place to accommodate expected huge inflows of foreign investments, to encourage more local investments, and to support the rules and regulations that are in place: “You have to ensure that you have strong market infrastructure. The trading platform, the clearing and settlement system, the dealing with counterparty risk to provide a secure environment must be well in place.
“When you (have a) secure environment for investments, the business opportunities that exist in Africa would become more attractive to investors. If investors have confidence in the market, they invest in the market. If they do not have confidence, they would not invest.”
The African and Middle East Region Committee (AMERC) of IOSCO will also support capacity-building. Ms. Arunmah Oteh, AMERC Chairperson and Director-General of Nigeria’s Securities and Exchange Commission, is reported as saying that markets are becoming more sophisticated in operations and content as a result of restructuring and reforms in response to the global financial crisis. She said regulators in AMERC must sharpen their skills to meet challenges: “Regulatory capacity must constantly be developed through training and re-training. We should however not be discouraged by the huge financial cost that is usually required for capacity-building, as investing in our human capital development yields a high return on investment.”
Specifically, the capacity building efforts would be in the area of new products, including Islamic finance, derivatives, options and risk-based supervision.
IOSCO is providing technical assistance and facilitators would come from IOSCO, International Monetary Fund (IMF) and other leading financial institutions training bodies for capacity-building programmes hosted in Kenya in July 2011 and Dubai in September.
The paper reports Dr. Fratern Mboya, CEO of the Capital Markets and Securities Authority (CMSA) of Tanzania, that introducing more products markets and giving incentives to investors and companies would also help to deepen the market further: “In Tanzania for instance, the withholding tax on dividend is 5% instead of 10%. For companies coming to list more than 35%, corporate tax is 25% instead of 30%. There is no capital gain tax. For long-term debts for 3 years and above, you do not pay taxes on the profit.”
It also cites Japhet Katto, CEO of Capital Markets Authority of Uganda, saying that investor education would significantly deepen markets: “In some jurisdictions.. regulators are not sure if investor education is part of their roles in the development of our markets. In countries where regulators have not been taking investor education as their function, they should do that now and incorporate in their laws that investor education is a critical factor in the deepening of our markets.”
According to the official news release, IOSCO has resolved to ask all ordinary members and associate members, which are primarily responsible for securities regulation in their jurisdictions, to apply to become full signatories to the IOSCO Multilateral Memorandum of Understanding by 1 January 2013. This is the international benchmark for enforcement cooperation and exchange of information among regulators. So far, 80 of IOSCO’s 122 eligible member regulators meet the requirements needed to become signatories with a further 36 having committed themselves to legislative changes that will allow them to do so. IOSCO’s Regional Committees, assisted by the General Secretariat, have worked alongside jurisdictions in their regions to encourage the necessary actions to join the IOSCO MMoU and will give technical assistance and advice to all members to make the changes necessary to become signatories.
Tanzania’s CMSA was admitted into the Appendix ‘A’ category of IOSCO principles, bringing to 13 the number of AMERC countries that are in Appendix ‘A’ signatory. Nigeria and South Africa were the first to achieve this.