Out of Africa

Finweek English Edition - - Privatebuy - And on to the JSE

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 shaunh@fin­week.co.za

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