Africa’s bourses long way behind

Shares worth more than US$832 million were traded across the stock exchanges of Zimbabwe, Zambia, Malawi and Botswana last year, 29% higher than the previous year.

BD Live

While the number pales in comparison to those traded on the Johannesburg Stock Exchange (JSE), Africa’s biggest stock market, it does show that outside the borders of South Africa there’s a burgeoning market.

The four markets covered by an annual exchange handbook — the Central African Stock Exchanges (CASE) Handbook — are very small in comparison with the JSE, — with a combined market cap of US$15,5 billion at the end of 2013 — they make up only about 0,2% of the JSE’s combined 2013 market cap.

Finding any information on markets in Africa is a difficult undertaking given the lack of transparency and development in many of these markets. The handbook is a bid to collate and compare the 130 companies listed in these countries, in an attempt to demystify them.

“In all four markets, there is a dearth of independent information. This is the first time all four appear together in a readable format … we have used US dollars throughout for easy comparison purposes for international investors,” Jonathan Waters, its Zimbabwe-based publisher, said in an interview.

The handbook provides detailed profiles of all the companies listed on the markets, with each profile providing a snapshot of the company’s performance, including financial results, share price performance and volumes traded (and liquidity) in 2013, and a listing of its key executives. It takes a look at prospects in the year ahead and lists the top 20 shareholders.

The largest company across the markets of Zimbabwe, Zambia, Malawi and Botswana is Delta, the Harare-based brewing and bottling giant founded in 1898 with a market cap of US$1,728 billion.

It’s not only the most valuable company in the countries, but also trades in the most active market among the four with about US$486 million in trades in its home country.

There are just under 400 companies listed across the Johannesburg’s main and feeder board, the AltX, making it one of the world’s top 20 exchanges. While the number of listings of other exchanges on the continent are small, the returns aren’t.

Malawi’s market more than doubled in value in the year, albeit off a very low base, to US$1,2 billion in 2013. There was US$35 million of trades in its 14 most active counters. The next best performer was Zambia’s LuSE, which rose 42% to US$4 billion after investors made US$39 million worth of trades in its 22 active shares.

Zimbabwe’s industrial index was up 33% while its mining index fell 30% in the year. The country has 62 active shares, with the market valued at over US$5 billion in December.

Botswana, with a year-end market cap of US$5 billion, had the most pedestrian returns of the bunch, posting gains of 21% off US$272 million of trade in its 35 active shares.

While 2013 was a good year, it is unlikely that those types of returns will be seen again this year as liquidity dries up in global markets as the US Federal Reserve cuts back on its monthly bond purchases.

The pullback has seen foreign inflows into countries such as Malawi slow, while weaker commodity prices such as copper have resulted in the depreciation of the Zambian kwacha.

The world’s biggest diamond producer, Botswana, has experienced a sluggish gem market and is currently dealing with falling levels of bank deposits as investors chase returns elsewhere. Zimbabwe’s question around resource nationalism through its indigenisation policy has also served to dampen the prospects of these markets.

“Winning an election based on promises of indigenisation and creating jobs — concepts the leadership do not believe are in apparent contradiction to each other — will keep growth in check,” Waters said. Softer statements around the policy and that it is flexible is “policy inconsistent”.

In March, Zimbabwe’s Indigenisation minister, Francis Nhema, was at pains to say that there would be no moderation of the indigenisation drive under his watch. His appointment had been seen as indicating there would be some moderation.

However, he later said that the government could be more flexible with banks if they agreed to lend more to local businesses, leading to confusion.

“At least when you are told ‘it is 51%’, you know exactly where you stand,” Waters said.

Zimbabwe had a record 12 companies delisting from the bourse, with Waters expecting more companies to leave this year.

Zambia, the only market to record a listing in 2013, will again be the only bourse to grow its number of companies in 2014 with state insurer, ZSIC, and Focus Group looking to list.

There are questions about some of the shares remaining on the Botswana bourse, with some potentially large delistings which may be offset by the launch of a platinum exchange traded fund, while investors in Malawi will be hoping that pro-market and not populist policies are followed in that country with the expected change of government.

The handbook predicts 2014 is looking to be “an unmemorable year for markets in the region”.

Asked if he will be taking the handbook into new jurisdictions, Waters is non-committal. He says he considered Mozambique and Namibia but neither, at this stage, warranted the coverage.

The limited number of companies and lack of potential advertisers means that their inclusion in the handbook would cost more than including them would bring in.

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