You may be surprised to learn that Africa’s stock exchanges have outperformed most other emerging markets in the year to date in dollar terms – and that’s despite war in the Congo, bombs in Kenya and Tanzania and the general perception of the continent as a haven for corruption and chaos.
You may be further surprised to learn there are more than 16 stock exchanges up and running throughout the continent and that most are growing in terms of the shares they’re offering local and international investors.
The best way of looking at the African exchanges and their activities, says Standard Bank London African equity analyst Karin Schoeman, is by a focus on regions – North Africa, East Africa, West Africa and southern Africa (for our purposes we will exclude South Africa).
Starting with North Africa, where the investor can access stock exchanges in Egypt, Morocco and Tunisia, the general outlook is good, says Schoeman.
While foreign investors have to limit their investments in a listed company to 49% in Tunisia – a small market dominated by banks – the Casablanca and Cairo stock exchanges are completely open to investors, who have the option of dabbling in the growing economies of the north.
Turning to East Africa, Schoeman says the markets to look at are in Tanzania and Kenya, where, surprisingly, the latest terrorist bombings have had no effect on the market or currency.
Interim results for Kenyan companies are now being released – Firestone posted a 27% earnings increase, with Barclays, Standard Chartered and Housing Finance Company reporting improvements of between 9% and 17% – which appear to be positive and have all helped market sentiment. Kenyan interest rates are trending down, falling about 1% a month, inflation is under control and this too is lending support to the market.
“Tanzania looks finally to be making it with Tanzanian Breweries’ privatisation 80% subscribed and bringing some critical mass to the fledgling Dar es Salaam market,” says Schoeman.
The Mauritian market, which for the purpose of geography we will include in the East African region, has proved the star performer rising about 23% in the year to date, based on its strong financial and hotel stocks.
Crossing the continent to the West one may be surprised at the performance of the stock exchange in Ghana, which is up in excess of 100% in dollar terms in the year to date – unfortunately there are restrictions on foreign investors. There’s also a lot of optimism for Nigeria, which Schoeman says is now moving to centre stage.
“The Nigerian stock market has a market capitalisation of $2,8-billion and the top companies are all subsidiaries of first-rate multinationals who have been in Nigeria for decades, know their markets, have good corporate governance and pay their staff properly.
“Over the past two years the stock market has fallen 30% since its March 1997 high as a result of chronic petrol/gas shortages, jitters concerning elections … Our view is that, given a modicum of good government, economic growth could reach 5% to 8% for several years, which would do wonders for the stock market.”
On the other hand the stock market in Cote d’Ivoire is pretty much in limbo, with the market in Uganda offering only one bond to potential investors and junior bourse Zambia rising in July to erase losses incurred earlier in the year.
OK, so now we head back into familiar territory with the markets of Namibia, Malawi, Botswana and Swaziland where there are five stocks listed.
It will probably come as no surprise that the exchange in Zimbabwe has taken a knock from recent government actions and policies, as well as from the decline in the rand. The decline has been dramatic with just over 12 months ago the market capitalisation more than US$5bn compared with less than US$2bn.
The Namibian front remains quiet with rises in the offshore diamond mining sector being offset by declines in the fishing sector and First National Bank. Malawi has seen modest rises in the share prices of the Sugar Corporation of Malawi and Commercial Bank of Malawi, which has helped the market gain some ground.
Botswana fell 5,5% last month as a result of currency weakness following the rand’s earlier depreciation, with the most significant recent events the goverment’s announcement of a civil service pay award.
Schoeman says this should boost spending power, with companies like Sechaba Brewery and PEP Botswana likely to benefit.
Bottom line, the fledgling bourses of many African countries and more mature exchanges like Cairo appear to offer some interesting morsels to would-be investors. If countries like Zambia and Tanzania are able to continue on their roads to privatisation, these morsels might even provide hearty meals.