Out of Africa
THE JSE IS GETTING quite gung-ho about attracting companies from other parts of Africa to list on South Africa’s stock exchange. Though its CEO Russell Loubser has a gung-ho management style, what he’s saying now seems to make a lot of sense.
JSE, the company, operates the largest exchange in Africa (and 12th largest equity derivatives exchange in the world, I was surprised to learn). That probably makes it the equities investment centre of Africa. But it’s very much a resources share controlled exchange. Listings from other emerging markets in Africa would bring welcome diversity.
I think there are still many misconceptions about emerging markets: they all tend to get lumped into one when they’re actually very different.
For example, it’s not hard to imagine emerging markets in South America might behave very differently to emerging mar- kets in Eastern Europe. But on a smaller scale the same is true about Africa.
Speaking for myself, I tend to know more about the large public companies in Britain, Europe and the United States than I do in other parts of Africa. It’s no doubt a symptom of my post-colonial education. But I’m trying to fill that gap.
However, just through the bit of travelling I’ve done I know how different Africa is. West Africa – in its people, culture and business/industry is vastly different to the countries in East Africa. Then you go up north to Egypt and it’s a whole different world. I’m sure the various markets, though all falling into the catch-all emerging markets, also behave very differently.
Investors can access those African markets through some funds. I think Investec runs two African funds, and Coronation (and I’m sure other funds) includes African markets in its emerging market funds. Now there’s a new private equity fund being launched by Sanlam concentrating on agribusiness in Africa (see separate report).
But it would be so much more convenient if investors on the JSE could also buy a selection of top African shares. Obviously, diversification needs some exposure to developed markets overseas – but much diversity could also be achieved through the careful selection of some top companies in different African markets.
Loubser says the JSE will continue to hold discussions with other African issuers on its proposed Africa board and will continue plans to develop a pan-African index. He even suggests the JSE might try and buy some smaller exchanges in Africa.
Apart from the potential benefit for investors, it also makes commercial sense for the JSE. The more listings the better the trade volumes, where the JSE makes the bulk of its money.
This might sound unrealistically romantic but I’d get a perverse pleasure selling shares of SA-based companies that have run off to London for a listing and filling the gap with shares from other parts of Africa. There would be a pleasant, Afro-optimism glow. And looking at the recent performance of some African stock exchanges compared with developed markets, returns would be much better. ¤
SHAUN HARRIS email@example.com