African Investor Relations

We have just completed some pretty comprehensive online IR research into 10 of Africa’s stock markets comprising 427 primary listed companies. The markets analysed below are Ghana, Mauritius, Malawi, Nigeria, Namibia, Kenya, Uganda, Tanzania, Zambia and Zimbabwe. The chart below shows the number of listed companies within the following US$ market capitalisation ranges (determined at the beginning of 2010) US$2bn means US$2bn and above, US$1bn means US$1 – 2bn, US$900m means US$900m – US$1 bn and so on. The figures in the Y axis are the number of listed companies appearing within the market capitalisation range on the X axis. The same X axis description applies to all the charts below:-

Almost 60% of sub-Saharan listed companies (over 250 companies) are less than US$50m in market capitalisation: our narrow definition of ”small cap”.  These 250 companies comprise less than 6% of the market capitalisation of the companies under review as illustrated in the following chart. Here the Y axis is the percent aggregate market capitalisation of the companies within the market capitalisation ranges for the 427 companies under review:-

Whilst small caps account for almost 60% of the number of listed companies they account for less than 6% of the aggregate market capitalisation.

So what’s the split of companies with an online presence to those without an online presence for the ranges of companies above? We define online presence as the existence of a domestic focused website or url. Why domestic? In a high number of instances listed subsidiaries of listed holding companies (Barclays, Standard Chartered, BAT are a few examples of these holding companies) just do not have any meaningful online presence for their subsidiaries - they are treated as the poor relatives with a remote section on the holding company website. Illovo is an example where there is no section devoted to its listed subsidiaries. SAB is an example of a mediocre effort in subsidiary IR through its holding company website. Our statistics therefore ignore those “websites” that are effectively just minor sections of the listed holding company website. The table below illustrates the existence of websites for the 427 companies in the respective market capitalisation ranges below where the Y axis represents the % of companies in the market cap. range with websites:-

77% of the 427 companies analysed had websites.  Not bad. As expected those smaller market caps have a lower incidence of a presence online. So it’s a nice table. But it’s meaningless. That’s because whilst there may be a website, the quality of the information posted on thereon is generally poor. The only meaningful activity for these websites is the distribution of the annual report and possibly contact us information. Here’s the prevalence of annual report dissemination on the companies in our 427 sample with websites:-

On average less than 30% of listed companies in our sample, by number, displayed their annual reports online. This percentage for small caps (as defined) is 17%. An unexpectedly low figure if you ask me. Our portal Africanfinancials.com bears testimony to the overall statistics.

Lets now look at a simple interactivity measure: a contact us form or email address? The majority of companies in our study had a sure fire way to ensure that as few people as possible contacted them and if they did it was to as an impersonal address as possible “info”@company.com or generalenquiries@company.com. Do we have the table for this? Yes….

Lets explain the tables above in a few short bullet points:-

• Websites and management thereof are a pain on an ongoing basis. Most organisations do not have a single accountable person with the broad range of skills needed to keep a website up to date with comprehensive data. Websites should therefore be managed by committee. But the website is not seen as a strategic asset so no chance that time can be devoted to this.
• Directors and managements are generally unaware of the availability of technology or the benefits on online communication. Call this ignorance. Its not bad, it’s just a fact. Directors and managements are generally of greying hairlines, they have not participated in the growth of the Internet in the past 5 years.
• IT skills in the markets under review have yet to mature. Technology is changing so fast that when your head is buried the chaos of everyday existence its difficult to exchange technologies or indeed concentrate on long-term strategy for your clients. An opportunity is being missed by website management companies – they should migrate to the SaaS model and add value to their clients rather than selling passive websites.

Small caps in Africa generally do not give any attention to their retail shareholders, preferring rather to think like venture capital investee companies looking for the day when they are swallowed up by an expanding company wanting to build empires.  Having an online investment presence in this case is just as important as a scenario where directors care about minority / retail shareholders. Investors of any type need the same information. Providing the opportunity for strategic investors, or any investors, to find you on the radar.So it’s about visibility.

My view of these statistics is that the state of online IR in Africa is nascent. For those that can take a little bit of time out to pay attention to the basics and go a little further on the interactivity side (here the technologies are already available for FREE) I see returns greater than the costs. Our feedback shows this. What is going to the catalyst to change these statistics positively? We have an idea though. Yes, Africa dances to the beat of its own drum but we hope to get the drum to beat quicker in celebration of the practice called investor relations.

Related Posts

1. The poor state of IR in Nigeria: IR research
2. IR research: Listed subsidiaries of listed holding companies in Africa
3. Malawi Stock Exchange equities research
4. Angolan Stock Exchange equity research starts
5. Issuer paid research – we like the idea