Category Archives: South Africa

Absa AFM Index shows African countries improve in investor readiness

The 2019 Africa Financial Markets Index report that was released in October, found that several countries had closed gaps to perennial leader South Africa, improving on several measures such as financial transparency, local investor capacity, legal protection and macroeconomic opportunity.

Showing just how much African countries have made progress, while only six had scored better than 50 (out of the maximum 100) in the first index in 2017, last year ten countries did that, and in 2019, thirteen countries scored better than 50 points.

The ranking of countries in the Absa 2019 Africa Financial Markets Index and some of the market/investor activities highlighted in the report include:

South Africa (and also number 1 in the last index): Is the top country in 5 pillars after it regained the lead from Kenya on the foreign exchange one. The JSE also launched a Nasdaq clearing platform.

2 (4) Mauritius: Has diversified its economy from sugar and textiles to tourism and financial services. It leads the continent in pension assets under management of $4,331 per capita. It has also established a derivatives trading platform.

3 (3)Kenya: More detail on Kenya’s ranking and investor initiatives here.

4 (6) Namibia: Bank Windhoek issued a green bond in the year. One concern is that the country lacks sufficient financial markets experts.

5 (2) Botswana: The country’s exchange has large market capitalization, but this is mostly due to dual-listed mining companies that have low trading volumes. They also formed a financial stability council to coordinate different regulators and plan to launch a mobile phone bond product like Kenya’s M-Akiba.

6 (5) Nigeria: Showed big improvement as they have liberalized their exchange rate and built up reserves. Pension funds were freed up to invest in infrastructure, bond, and Sukuk funds.

7 (15) Tanzania: Created a tax ombudsman and also repealed an amendment that had made it illegal to publish statistics that were not approved by the Government.

8 (8) Zambia: Improved budget reporting. But reserves dropped due to high interest payments on external debt as mining production has declined.

9 (11) Rwanda: Share of exports grew, and an agreement was reached with the IMF to accelerate urbanization and financial markets.

10 (10) Uganda: Market trading activity dropped from $25 million to  $11 million and one of the largest stockbrokers opted not to renew their operating license.

Others were:

11 (16) Egypt: Topped the pillar of macro-economic opportunity due to export gains and declines in non-performing loans. Moody’s also upgraded their banking system ratings.

12 (9) Morocco: Now publishes monetary policy announcements and data releases. Has an active financial market but limited availability of financial products. It plans to launch an agricultural commodities exchange.

13 (7) Ghana: Is seeking to cap foreign holdings of government debt. The Bank of Ghana merged small banks and revoked licenses of others that did not meet minimum capital requirements.

16 (13) Ivory Coast: Enabled more-accessible budget reporting and plans to launch an agricultural commodities exchange for 2020.

20 (20) Ethiopia: Announced plans to launch a stock exchange for 2020, with aims to have significant privatization events including the listing of telecommunication companies. Local banks are also adopting international financial reporting standards. But the requirement that their pension funds can only invest in government securities is considered an impediment.

Also on the index are Seychelles (ranked 14), Mozambique (15), Angola (17), Senegal (18) and Cameroon (19). The 2019 AFM Index report was produced by the Absa Bank Group and the Official Monetary and Financial Institutions Forum (OMFIF) and it can be downloaded here.

Multichoice Group Spinoff and Listing

On February 27 Multichoice listed on the Johannesburg Stock Exchange, in a spinoff move by its parent company Naspers. The listing is expected to unlock value for Naspers shareholders and create an empowered African entertainment pay-TV business with strong financials and no debt to deliver returns for its shareholders.

The new company called Multichoice Group includes MultiChoice South Africa, MultiChoice Africa, Showmax and Irdeto a digital security company. It serves 13.5 million households around Africa and had a trading profit of R6.1 billion last year. Naspers itself has $20 billion revenue, and owns 31.2% of Chinese giant Tencent and large stakes in other e-commerce firms in Russia (Mail.Ru) and India (MakeMyTrip).

In 2006 Naspers facilitated the sale of a 20% stake in Multichoice South Africa to investors in a black economic empowerment program initiative and about 90,000 individual and companies bought the shares through a vehicle called Phuthuma Nathi (PN) that now owns 25% of Multichoice South Africa.  Over the years, PN’s shareholders are estimated to have got 17 times return on their investment through capital growth (from R10 per share to R130) and dividend payments.

In the listing, an additional 5% of Multichoice South Africa will go to Phuthuma Nathi at no cost and thereafter, Naspers will facilitate the exchange of a quarter of PN’s shareholding in Multichoice SA for shares in Multichoice Group.
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Similarly, in Kenya, the Group has implemented a transfer of 30% of the shares held by the Group in GOtv Kenya to a qualifying local nominee (whilst maintaining the beneficial interest in the stake) in order to comply with local ownership requirements.

Ten years ago, Multichoice’s Dstv regained the English premier league soccer rights they had briefly lost to GTV.

Societe Generale and Absa partner to grow across Africa

Societe Generale (SocGen) of France and Absa have entered two deals; one for a Pan-African wholesale banking partnership and another for the sale of selected SocGen’s businesses in South Africa to Absa. 

SocGen bills itself as the number one bank in French-speaking Sub-Saharan Africa with a presence in 19 countries, mainly in Western and Northern Africa, while Absa is in 12 countries mainly in Southern and Eastern Africa, as a rebrand of Barclays across Africa.

The partnership will be a non-exclusive one that will allow the banks to sell each other’s products and services. It will also extend to providing dedicated services to Chinese multinational businesses, leveraging on SocGen’s presence in China.

The second agreement relates to the sale by SocGen of its custody, trustee and derivatives clearing services in South Africa to Absa and will result in the transfer of clients, employees, and IT services. The deal enables Absa to re-enter the custody and trustee business. It does not include SocGen’s securities lending services which will end in March 2019 leaving SocGen in South Africa to operate corporate and investment banking.

Barclays is the fourth largest bank in Kenya while Societe General has a Kenya Representative Office in Nairobi. SocGen’s digital banking journey includes ventures in mortgages, insurance technology, and auto leasing. Another is  YUP, a mobile money wallet launched in 2017 after acquiring a stake in TagPay, that is now in four African countries and has 300,000 clients.

Kenya’s Money in the Past: Diplomatic Engagement

This week saw the publication of “Kenya’s 50 years of Diplomatic Engagement, from Kenyatta to Kenyatta,” a book on the history of the diplomatic services and foreign policy in Kenya.

Edited by Dr. Kipyego Cheluget, Kenya’s Assistant Secretary General at COMESA, it is a collection of writings by different authors including foreign ambassadors. It is the result of a nine-year journey that came from an idea that came when he was Director of the Foreign Service Institute – to document the history of the diplomacy in Kenya. And he then set out to travel around the county, interviewing and recording former ambassadors and diplomats such Munyua Waiyaki, Njoroge Mungai and even unofficial ones like politician Mark Too. Some of them have since passed away like Bethuel Kiplagat and Phillip Mwanzia, and whose widows were present at the book launch.

The Chief Guest was Former Vice President, Stephen Kalonzo Musyoka who has also served as a Minister for Foreign Affairs and Minister for Education and he said that to upgrade Kenya’s  diplomatic performance, the country should reward career diplomats and have them, not election losers, as Ambassadors, and legislate a 70:30 ratio of professionals over politicians in such posts, a reverse of the current imbalance. The event had panel talks with former ambassadors on topics like peace-building in Ethiopia, Somalia and the East African region, using sports as a tool of diplomacy, combating apartheid, the lost years of engagement with Russia shaped by the Cold War and how the pioneering diplomats worked through trial and error for decades without an official foreign policy.

The MC for the event at Taifa Hall of the University of Nairobi, Nancy Abisai said the only good books is a finished book, and Kenya’s Cabinet Secretary for Education Dr. Amina Mohamed, added that, following a challenge by President Kenyatta, her Ministry was in the process of setting up a unit for the publication of Kenyan memoirs and which would be operational by January 2019. Former Vice President Moody Awori, who at 91 is still an active Chairman of Moran, the publishers of the book, said they were looking for more scripts to turn our more such books.

Excerpts from early sections of the book and launch

  • It has never been right to say that Kenya’s foreign policy is a “wait and see” one. Diplomats were able to negotiate to host a combined World Bank/IMF meeting in 1973 and for UNEP to have its headquarters in a newly independent African country – Ambassador Francis. Muthaura.
  • Njoroge Mungai initiated steps for President (Mzee) Kenyatta to be nominated for the Nobel Peace Prize in 1972 and Singh Bhoi drafted the dossier.
  • Dennis Afande opened the Kenya Embassy in Jeddah, Saudi Arabia in February 1977. He was the only employee there for four months and the only signatory to the Embassy bank account for the period.
  • When Paul Kurgat went to apply for his scholarship visa at the Nairobi Russian embassy, in 1984. he was arrested and questioned about links to Oginga Odinga. He was later to return to Russia as Kenya’s Ambassador in 2010.

The book is available in local bookshops, such as the University of Nairobi one, at a cost of Kshs 1,395 (1,200 + VAT) and a digital version is also available on Amazon for $8 (~Kshs 800).

Barclays Kenya unveils AFMI 2018 – the Absa Africa Financial Markets Index

Barclays Kenya launched the second edition of AFMI 2018 – the Absa Africa Financial Markets Index, revealing performance improvements at a time of economic turmoil on the continent and also the addition of new countries to the index that now tracks twenty African economies.

In the time since Barclays launched the initial Africa Financial Markets Index in 2017, they have seen good engagement from policymakers striving to improve their appeal to investors through the AFMI 2018 index which measures countries across six pillars of market depth, access to foreign exchange, market transparency/regulations, capacity of local investors, macroeconomic opportunity, and enforceability of legal agreements. This year, three new countries – Angola, Cameroon and Senegal joined the index bringing the countries tracked to 20 and the country measures were also tweaked to include elements of financial inclusions and levels of investor education

The AFMI 2018 was again topped by South Africa, the most advanced financial market in Africa, followed by Botswana, Kenya, Mauritius and Nigeria. Kenya, Morocco and Seychelles all improved in the rankings while Mauritius and Namibia slipped slightly. Nigeria was credited for improving in its administrative efficiency and tax reforms. 

Jeremy Awori, Managing Director of Barclays Kenya said that emerging markets were under great pressure with currencies dropping, interest rates rising, political instability, falling commodities etc. and these highlighted how strong domestic financial markets could be used to cushion African economies from headwinds. He said that while  Kenya topped the access to foreign exchange pillar of the index, and had improved in the enforcement of  legal agreements, showing it was on a path to be a regional financial hub, there was still need to need to improve capacity of local investors, and grow the diversity of investor products. He added that Barclays Kenya was the first institution to list an ETF – an exchange-traded fund at the Nairobi Securities Exchange (NSE) and was also providing thought leadership on international swops and global master repurchase agreements.

Guests at the launch included Geoffrey Odundo, CEO of the NSE, and Paul Muthaura, CEO of Kenya’s Capital Markets Authority (CMA). Odundo said that while the 2006-08 IPO era unlocked retail investor capital, there was much more opportunity for investors to get good returns in the secondary markets including through REIT’s and that the NSE was currently piloting on offering derivatives. Muthaura spoke of initiatives to connect investors across African investors including a pilot exchange partnership between Kenya and Nigeria, and the African Securities Exchanges Association which was looking to enable trading links between the six largest exchanges on the continent.

Anthony Kirui, Head of Markets at Barclays Kenya said the country had an array of fixed income securities, but attention needed to shift to re-opening bonds as opposed to issuing new paper. He added that there was a need to create a primary dealership and a true OTC market and to also address the reluctance from local owners to list on stock markets. Muthaura said that one factor in the lack of new listings at the NSE was due to companies, who may have been candidates for listing to get new capital, now opting for the abundant and cheap funding from banks that were flush with cash in the era of interest rate caps

In East Africa, Uganda was stable (at No. 10) on the index while Rwanda and Tanzania dropped slightly, the former due to discrepancies in the implementation of rules and the latter due to lack of capacity of local investors. Ethiopia was at the tail end of the Index due to not having a security exchange and corporate bond markets, but that is likely to change as the country pursues reforms such as freeing the foreign currency exchange rate and planning for privatization of Ethiopian enterprises.

The AFMI 2018 report was done with the Official Monetary and Financial Institutions Forum (OMFIF) and can be downloaded from the Absa site.