Making the African Dream a Reality

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About opportunities in the African stock markets.

Good piece, but somehow also illustrative of how things should not be done.

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Making the African Dream a Reality

  1. 1. Making the African Dream a Reality By Roz Thomas, Corporate Communications Consultants SOUTH AFRICA | Tue Oct 12, 2010 With the growing international realisation about Africa’s prospects, now is the time to invest in the continent, says Sunil Benimadhu, newly appointed President of the African Stock Exchange Association (ASEA) and CEO of the Stock Exchange of Mauritius. “It has become clear that perceptions are changing,” says Benimadhu. “The African continent is now being seen as presenting opportunities.” In the first six months of 2010, African regional funds attracted inflows of $484 million, and total investment fund allocation to Africa was a record $1.39 billion according to investment research firm EPFR. ASEA, comprised of 20 exchanges in 27 African countries, aims to foster financial integration on the continent to mobilise capital to accelerate economic development of Africa. The organisation holds its 14th Conference in Zambia next month. “With 80 per cent of African exports consisting of oil, mineral and agricultural commodities, the resources of the continent have been Africa’s most attractive feature in bringing more investment to the continent from a number of countries,” says JSE director Geoff Rothschild, who has been elected ASEA’s Deputy President. “However as a continent, we should be asking ourselves how we can take charge of increasing interest on all fronts, not only from an acquisition perspective but also a portfolio investment perspective. Attracting foreign investment should take into account avenues that benefit Africa not just in the short but in the long term also. We would be undermining our potential for growth if we did not do this,” adds Rothschild. Benimahdu and Rothschild believe that the window for taking advantage of increased interest in Africa won’t last forever. “Several markets in developed economies are currently unattractive to global investors due to low returns. In contrast, financial markets in Africa are showing promise. However this is an opportunity for a limited period,” says Benimahdu. “The factors that catalyse such investment are what our financial and political leaders should be considering as being of paramount importance. The time has come to demonstrate through making the required changes rather than continue to talk about what needs to be done.” Though the continent needs capital inflows to develop, institutional investors will only invest in markets they are comfortable with and that are liquid. The JSE’s market capitalisation makes up over two thirds of the market capitalisation of the continent’s exchanges. The combined trade on all African exchanges excluding the JSE is valued at less than US$2,4bn monthly whereas trade on the JSE is valued at about $3,2bn a month according to Nedbank Capital’s Nerina Visser.
  2. 2. For obvious reasons, those countries that have supportive regulatory environments, strong financial markets and a zero tolerance for corruption will be popular choices amongst foreign investors. Several countries on the continent are tightening up regulation of the financial markets. The World Economic Forum recently announced that South Africa had the best regulated securities exchange in the world. And at the recent Africa Investor award ceremony in New York, the Financial Services Commission Mauritius was awarded the “Most Innovative Capital Market Regulator of the Year Award”. “These are positive steps to encouraging investment but unless each country does the same, these steps will only benefit a few on the continent,” says Rothschild. It’s in this context that the new leadership team of ASEA is focusing on seven defined areas that revolve around the betterment of Africa as a region, comments Benimadhu. The areas include ASEA’s interaction with other key organisations such as the World Federation of Exchanges and Nepad, areas of operational importance such as trading, clearing and settlement developments, data capturing, distribution and use, as well as the identification and exploitation of market opportunities. “Notably, the Mo Ibrahim Index released on Monday confirmed the need to focus on one of the areas we had identified, namely the paucity of information/data about Africa. How can we expect investors – whether local or international – to invest if they don’t have information with which to make decisions? The same is true for issuers,” adds Benimadhu. In the eyes of ASEA’s new leadership, the key to sustaining interest in the continent’s investment opportunities will be to commit to an African vision that involves continued growth. “There are 53 countries and 24 stock exchanges within the region. Every one has a role to play in making the African Dream a reality and a defined time in which to do it,” concludes Rothschild. Word Count: 696 Roz Thomas Corporate Communications Consultants Ground Floor, Firwood House Ballywoods Office Park, Ballyclare Drive Bryanston, Gauteng 2191 South Africa Tel: 011-463-2198 Fax: 011-463-2170 www.corpcom.co.za

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