African Investor Relations

This week, the US Securities and Exchange Commission (SEC) published its draft strategic plan outlining its
strategic goals for fiscal years 2010 to 2015. The draft plan surveys the forces shaping the SEC’s environment and outlines over 70 initiatives designed to support its primary strategic goals. The SEC’s draft plan also invites the public to comment on the document for the next 40 days. The draft strategic plan is available here.

Africa has been touted as the last emerging market frontier, but ‑ where is our strategic plan for pan-African stock market development? Internal bickering, political motivations and national pride all stand in the way of national and regional securities
associations defining some long-term strategic objectives to strive for. These bodies really need to focus on the bigger picture of where African capital markets want to go, and map out a strategic plan how to get there. If the task is too big, then divide an overall plan into different stages that are relevant to the smaller, medium and larger markets.

Some markets like Mauritius and South Africa are progressive and shooting ahead, but the smaller markets are not following in their wake. The divide between the rest of the world and Africa grows bigger in those markets whose resources theoretically hold the future of our growth.

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Information is the life blood of markets: Managements speak directly to institutional investors, portals distribute company data, equities research is pushed directly to professional investors and stock exchanges disseminate corporate announcements.

From an IR perspective is this all that is required?

Not in Africa.

Prima facie it looks like the above is sufficient. At least from a disclosure and regulatory perspective but consider this:-

• the majority of stock exchanges in Africa are unable to ensure that printed regulatory releases appearing in the press appear simultaneously on the web. Read my top 10 suggestions to African stock exchanges.
• the majority of management disclosures to institutional investors probably are not released simultaneously on other fora.
• corporate, stock exchange and portals of information are generally incomplete with no formalized assurance of timely disclosure.

To investors unfamiliar with African markets offering comprehensive investment data in a timely fashion is by far the greatest challenge. No-one has achieved this successfully. It’s up to the listed companies. They are the prime source of information. Bringing this information to market is what AIC is about but our services can be mistakenly be seen to address only the retail investor sectors given the processes I outlined at the beginning of this blog.

Yes we are proponents of broad shareholder engagement but the core of what we do is assist Boards satisfy their basic investor relations obligations at high impact for low cost. This is our African IR solution. It’s comprehensive and well balanced.

Yes our automated communication module of InvestorPass™ acts perfectly as a retail shareholder tool: low cost, automation and low investment in management time. But for us the key offering is the ability to consolidate all of the disclosure practices into a single well rounded tool that ensures that management do not have anything to worry about. Oh, and that it pays for itself.

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On 5 October 2099, the US Securities and Exchange Commission (SEC) announced that Lori Schock has been named Director of the agency’s Office of Investor Education and Advocacy (OIEA). You thought all American investors were educated?

“As more than half of American households are invested in the markets for their retirement, children’s education, health care
or other goals, it’s imperative that the SEC have a world class program to provide investor education and promote financial literacy for Americans of all ages,” said SEC Chairman Mary L. Schapiro.

OIEA each year has direct contact with tens of thousands of individual investors–reaching out to hear their needs, answering their questions and helping solve their problems. The office also leads the SEC’s investor education and financial literacy efforts and other key initiatives.

Each listed company in Africa has its own investment community with which it communicates and from which it receives feedback. If the African stock exchanges used the power of the Internet and their significant resources (with nominal contributions from the smaller stock exchanges), a similar initiative to the OIEA’s could be implemented. The rules would be that the stock exchanges jointly fund the initiative whose content may only be disseminated through any listed company website in Africa. This would ensure buy-in from listed companies and create a natural distribution channel.

The other half of a successful retail shareholder strategy is automating shareholder communication.

More here…

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Nigeria’s money and capital markets still lack the depth of lift the economy out of the doldrums, the International Monetary Fund (IMF) has said.

Also in the league of markets with shallow profile, according to IMF, are most of the other sub-Saharan African countries, despite reports of reforms in the respective economies. IMF, in a recently released report, noted that the domestic money and capital markets in Nigeria and most sub-Saharan African countries remain underdeveloped and shallow-offering mostly short term instruments.

Accordingly, stock market capitalisation remains low, while private securities markets are largely underdeveloped. The IMF stated that the shallowness and lack of versatility of hedging instruments in African financial markets likely accentuated short-term exchange rate movements.

Therefore, foreign exchange markets offers a limited array of forward hedging instruments, reflecting in part the concentration of foreign exchange receipts in the hands of the public sector, through aid or commodity exports.

Nabil Ben Ltaifa, Stella Kaendera and Shiv Dixit of the African Department, IMF, in their submission “Impact of the Global Financial Crisis on Exchange Rates and Policies in sub-Saharan Africa’ observed that the currencies of many sub-Saharan African countries, like those of many emerging and developing economies, offered large depreciations with the onset of the global financial crisis.

Nigeria’s currency, as one of the countries under study, was said to depreciate by at least 20 per cent between June and March 2009. After April 2009, while some currencies reversed their depreciating trend with respect to the United States dollar, the Nigerian naira continued almost unchanged.

Although, while in most countries, above-trend inflation mitigated the real effect of nominal depreciation, Nigeria registered a significant (over five per cent) real depreciation in its currency over the whole period. The trio observed that exchange rate volatility increased significantly compared to the pre-crisis period.

Volatility was generally higher with respect to the United States dollar but broadly less vis-a-vis the euro. The naira experienced significant increases in the volatility with respect to the three major currencies. In contrast, the Rwandan and Tanzanian currencies displayed similar or lesser volatility before the crisis with respect to the U.S. dollar.

Talking about the factors that affected the value of exchange rates, the experts noted that the first factors were external, reflecting the transmission of the global crisis through the trade and financial channels as well as the volatility of the US, the main international reserve currency.

“The impact was commensurate with the extent and nature of each country’s exposure to trade and global financial markets. At the same time, domestic policies played a role in shaping the nature and magnitude of the impact,” they said.

Concerning the external environment, the IMF officials observed that trade had, as expected, an adverse impact on the region’s currencies, but that the magnitude of this impact seems to have varied significantly across countries.

According to them, terms-of-trade movements were likely the main factor underlying movements in the exchange rates of Nigeria and Zambia, the two large commodity exporters in the sample. Conversely, the rebound in copper and oil prices in the latter part of the period supported the recovery of the Zambian Kwacha and a stabilisation of the naira.

The IMF officials also attributed policy choices of countries to the depreciation of their currencies. Nigeria operated a managed floating system, which tended to depreciate more, the economy consequently, registered large depreciation, reflecting the limit of currency management in the face of large changes in the external environment.

It was also observed that the domestic policy mix adopted in response to the external crisis also played a role in explaining exchange rate dynamics. According to them, most countries in the sample intervened in their foreign exchange markets in an effort to stem the shock to their currencies.

However, they said, managed floating regime like Nigeria intervened in a more regular and extensive manner to halt the depreciation. “As a result, nominal exchange rates in these countries have tended to be more stable. But intervention by the Nigeria’s Central Bank was however, unsuccessful in preventing a large step depreciation of the currency by the end of 2008, in the large turnaround in trade and capital flows.

Source: Proshare

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Having swept America and conquered Europe, social networking site Facebook is now spreading rapidly through Africa.

From the deserts of Libya to the plains of Tanzania, Facebook is fast becoming the continent’s most visited mobile site as Africans use their phones to access the internet, according to a new report.

Even micro-blogging phenomenon Twitter is making an impact, appearing as the ninth most visited mobile internet site in South Africa and Kenya, according to a study by Oslo-based mobile software developer Opera of the top ten “mobile web” countries in Africa.

The most popular African destination on the mobile web, is Facebook. The social networking site is visited by users of Opera’s mobile web browser in six out of the 10 countries surveyed by the company.

Google is either number one or two in every African state except Kenya where Yahoo! dominates.

Email services such as Hotmail and Gmail are also popular as is YouTube. The online video site has its highest rankings in Egypt, at number three, and Libya, at number four.

Among news sources, the BBC figures strongly in the top ten most visited sites in Nigeria, Kenya, Ghana, Tanzania, Namibia and Zambia. CNN features prominently in the top ten in Nigeria, Ghana and Zambia. They are the only two western news sources among the most popular mobile internet destinations across the ten African countries analysed by the Opera survey.

Sport features strongly with French sports newspaper L’Équipe the sixth most visited mobile web site in Côte d’Ivoire. Egyptian mobile phone users flock to Arabic language sports portal Filgoal.com and Libyans prefer rival Koora.com.

Mobile usage is ballooning across the continent and the African mobile phone market — at more than 400-million subscribers — is now larger than in North America. Some countries, such as South Africa, have ‘mobile penetration levels’ — the number of handsets compared with size of population — close to those of Western Europe.

For many people in Africa, cellphones are the only way that they will ever get access to the internet because of the poor quality, and often complete lack, of fixed-line networks. Fierce competition has pushed mobile prices down for consumers while many of the latest crop of handsets available in Africa allow easy access to the mobile internet. Web browsers can also be installed on older cellphones.

The mobile web browser developed by Opera is the most popular in Africa, accounting for more than half the market, and in its latest State of the Mobile Web report, Opera estimates that the number of handsets using its browser across the top ten African states has leapt 177% in the past year. The report looks at South Africa, Nigeria, Kenya, Egypt, Ghana, Libya, Côte d’Ivoire, Zambia, Tanzania and Namibia. Opera refuses to give overall customer numbers for Africa, but in its largest market — South Africa — it had 1,5-million unique users in October.

Internet-enabled handsets are being used to access ever more mobile web sites, with page views shooting up 374% between November 2008 and last month. In some countries such as Kenya and Zambia, hundreds of pages are being accessed each month as handsets are often used by more than one person to get online. Across the continent roadside kiosks proliferate where people ‘rent out’ mobile phones. At first the devices were little more than a replacement for public phone boxes, allowing people to call friends and family, but increasingly they are being hired out as computers, allowing those who cannot afford a device of their own, to access the internet on a regular basis.

Opera’s mobile phone internet browser is the most popular worldwide, used by almost 27% of all mobile internet users. The iPhone is in second place with Nokia’s web browser in third, between them the top three account for nearly 70% of the market, according to data from StatCounter. Opera estimates that it has more than 41,7-million users worldwide, up from about 16,4-million in November last year, helped in part by the pre-installed browser in many recent models of smartphones

Source: Mail & Guardian

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We offer an interactive online investor relations service for listed companies in Africa. How interactive is interactive?

The pie chart below is the annual summary of the categories of feedback we have received through our clients’ investor relations website. It’s notable that the investor relations function encompasses all aspects of business. I reiterate the definition of investor relations below:-

“Investor relations is a strategic management responsibility that integrates finance, communication, marketing and securities law compliance to enable the most effective two-way communication between a company, the financial community, and other constituencies, which ultimately contributes to a company’s securities achieving fair valuation.”

(Adopted by the NIRI Board of Directors, March 2003.)

What also stands out is the ease at which this feedback is accumulated through our InvestorPass™ software. Bill Picken, my mentor for many years, always had two sayings that to this day have influenced me in my professional life. The first: “remember we are always in a circus, you just have to chose your role. Do you want to be the clown, a spectator or the lion tamer? But always remember you are in a circus”. The second, which relates to this blog, is “never invest in anything that eats whilst you sleep”. Good investment advice indeed.

The beauty of our business model is that our investor contact lists grow whilst we sleep. Investors from around the World visit our clients’ websites, register to receive information, automatically receive company news and EVERY time they do, they get the opportunity to tell us what they think. The result: the chart above. So merging investor relations into corporate strategy provides significant commercial value. That’s what we are about.

Which brings me to my key points in this annual client feedback review:

• Shareholder administrative issues take up a much higher proportion than expected. We suspect (we know) that transfer agents are not doing their jobs properly or at least do not have effective communications channels in the markets in which our clients are resident.
• The business development category accounting for 8% of total feedback probably accounts for the 90% of the value of feedback. The deal flow that comes through our websites, for certain of our clients is significant and tangible. I wonder whether those companies with the traditional info@contactus.com addresses get the same level of feedback.

For the rest, it’s the usual opportunities that present themselves: hiring better staff, procuring goods at lower costs etc. It’s all good. Or is it? How much feedback is irresponsible or spam? Basically none. Even if there was we have “vays and means” of finding out who it is and blocking it.

There’s another element of advantage from having a decent online investor relations presence. That’s investor outreach. Here’s our top 4 clients stats for the number of country visitors to their respective online IR websites:-

This diversity of investor and stakeholder interest adds just another element of comfort and pride about the value we add to clients.

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