African Investor Relations

www.africancapitalmarketsnews.com run by Tom Minney is a good source of information when it comes to some of the inside news in African capitalmarkets, I recommend you sign up for his blogs. His latest one on the Rwandan Stock Exchange is shown below. The Rwandan Stock Exchange is in a unique position to ensure that their information dissemination practices are World class on day one. I look forward to it.

Tom’s blog:

“Preparations continue in Rwanda for the listing of BRALIRWA, originally said earlier this year to be coming “very soon”. It will be the first Initial Public Offer on the Rwanda Over-The-Counter stock market. Recently Government officials announced the advisers, according to a report in New Times (www.newtimes.co.rw) newspaper.
Brasseries et Limonaderies du Rwanda (www.bralirwa.com) is the only brewer and estimated to have 95% market share, as well as the Coca Cola franchise. It is owned 70% by international Heineken Group and 30% by the Rwandan Government. According to previous reports, the Government wants to sell 25% to the public and 5% to Heineken, but was examining applications to be the transaction adviser and sponsoring broker.
Government has said that advisors will be a consortium of MBEA Kampala, MBEA Security Services Kigali and Renaissance Capital of Nairobi as the lead transaction advisor. Lead sponsoring broker is Dyer & Blair Investment of Kenya and African Alliance, also Kenyan, is co-sponsoring broker.
Sanjeev Anand, the Managing Director of Commercial Bank of Rwanda (BCR) said last week that BCR will join Kenya Commercial Bank as receiving bank, although KCB is the lead receiving bank, according to the report: “Applications will be presented to BCR which will reconcile them with the funds.” He said they had won the role through bidding and on the basis of expertise: “We have the capability to do it, given our experience in preparing IPOs in other countries like Uganda and elsewhere, and we are proud to be involved in the first IPO in the country.”
So far trading on the Rwanda OTC has been mainly treasury and other bonds, with limited trading in the dual-listed shares of KCB. The Rwanda OTC is operated, developed and regulated by the Capital Markets Advisory Council (www.cmac.org.rw).”

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I have been highlighting the need for listed companies in Kenya to sit down and think about the implications of the proposed Companies Bill 2008. Here is an example of why:-

“Quoted companies and the companies of public interest nature that handle public funds, must establish and maintain a Board Nomination Committee where at least two thirds of its members are shareholders in the company and together represents two third of the share capital in the company.  The Board of Nomination Committee shall propose candidates for the Board of Management.  Anybody employed by the quoted company can not serve as members of its Board Nomination Committee.”

A few questions:-

1. Does the Board appoint the members from the shareholders?
2. What is the criteria for appointment?
3. Will some shareholders protest that their representatives are not appointed?
4. Is there enough being done in Kenya and amongst the investment community to educate investment managers and prospective directors of their true role as a director?
5. If a company has no dominant shareholders (say less than 10%) how are the representatives of the nominations committee to be appointed? Will a nomination committee of + 6 members be practical?
6. What is the minimum number of nomination committee members? What if one shareholder owns more than two thirds threshold? Is there a single member of the nomination committee?
7. Where significant shareholdings are held by nominees or pension funds and other institutions, holding shares in a fiduciary capacity, how are representatives to be appointed?
8. So ordinary minority shareholders are unable to propose directors?

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Our client Zambeef plc, a dynamic Zambian listed agricultural concern, is about to announce that a conference call will be held this week and will be accessible LIVE by webcast through its interactive investor relations website. Zambeef posted a presentation on its website today providing an overview of its latest set of results. For news of the conference call sign up for alerts here.

Zambeef is one of 18 listed company clients of African Is Cool.

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The annual reports of African telcos, most of which appear here, provide interesting insights into African telco markets and the growth drivers within them. Zain has just released its annual report viewable here.  A good read and insight into African telco markets.

African Is Cool has two mobile telco clients: Econet Wireless and TNM Malawi. Online investor relations solutions are particularly powerful for telcos because they typically have a broad range of shareholders through which integrated communications enhances brand and corporate reputation.

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Our client Econet Wireless recently embarked on an additional 91 base station and National optic fibre network  roll (US$66m investment) out project to further increase their national mobile coverage. This is going to change Internet access in Zimbabwe forever.

This generic marketing video now posted on Econet’s investor relations website here provides an oversight into what’s involved in this expansion programme and Econet’s vision to bring telecoms services to everyone in Zimbabwe.

View online charting here

Sign up for alerts here

Read the latest expansion drive news here

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Well run banks are profitable and may enjoy a very strong investment story given their critical role in the economy. Banks are a favourite amongst investors of all types: they are easy to understand (theoretically) brand awareness is high and they are profitable. They are also highly regulated which adds confidence to the general investing populous.

Conversely commercial banks are in a particularly strong position to benefit from an online investor and stakeholder relations function for a number of reasons:-

• Brand outreach is key because of the competitive nature of the banking industry
• Customer / stakeholder communities are large and widely spread around the World
• Communications corporate governance and reporting complements prudential governance compliance
• Market confidence is critical – a good website adds to corporate reputation. For banks “Online Corporate Reputation” or OCR is a growth area enabling differentiation from peers
• The diverse nature of banking operations provides opportunity to cross sell products and services

View BancABC’s new investor relations website here

View African banking sector annual reports here

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African is Cool is pleased to announce the launch of BancABC’s interactive investor relations website on BancABC.com, an online disclosure platform designed to encourage and promote direct two-way online communication with its broad base of investors and stakeholders on a real time basis.

Designed to complement BancABC’s traditional dissemination channels their online investor relations initiative is founded on the recognition that efficient dissemination of investment and operating information is central to the corporate governance principles of promoting transparency, liquidity and efficiency.

BancABC welcomes feedback from its investment community and invites you to view its new website and register for a diverse range of email alerts here.

View the latest presentation here dated 21 March 2010

Sign up for alerts here

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“We [recognize] the vital role of the Internet and electronic communications in modernizing the disclosure system under the federal securities laws and in promoting transparency, liquidity and efficiency in our trading markets. Central to the effective operation of our trading markets is the ongoing dissemination of information by companies about themselves and their securities.” - SEC Release No. 34-58288, August 2008

The quote above is just as applicable in African markets as it is in international markets. It applies to business too. Many African executives express frustration at their existing websites: they are out of date, fee structures not transparent and they do not “look good”. Many websites are done part time.In short websites are not delivering what they should be. “Push technology” is what is required. The pre-requisite: an online audience and a good service provider that understands these issues.

Companies have not traditionally had a means to communicate directly with investors or prospective customers on a frequent and real-time basis so they have had to rely on information intermediaries, such as newspapers and the media / press, to disseminate their information. Unfortunately, constraints on skills, money, time, and media space can limit the amount of news that intermediaries can distribute to investors.

In recent years, many technologies have emerged that allow companies to access customers and investors on a frequent and real-time basis.  They include Twitter, Really Simple Syndication (RSS) feeds and corporate email alerts. Social media sites, such as Facebook, are also relevant in many respects (more commercial than IR) but in Africa corporate email alerts are widely viewed as the appropriate method to use for dissemination as Twitter and other tools are still growing.

This is “push technology”.

‘Push’ technology means electronic communication in which the sender (e.g. a company) sends information to the user (e.g., investor or customer) rather than waiting for the user to specifically request the information from the sender (i.e., pull technology). A website is a ‘pull’ technology, since investors / customers must visit websites to obtain information. In contrast, push technology send the website posting, or hyperlink to the customer / investor directly when the information is posted.

Since obtaining data on corporate websites is difficult, especially up to date data,  a unique opportunity for listed companies to identify their stakeholders / investors online arises. The other side of the equation is to use “push technology” to turn this contact into a sustainable and mutually beneficial relationship.

This is the communications model we employ for corporate websites and investor relations websites.

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I have noticed that from September last year mobile phone access (with iPhones the leader and Blackberrys second) to our investor relations websites has suddenly commenced. I would have expected this to have started before September but it has got me thinking. Is the chart below just the start of something big? Is it the start of phenomenal growth and maturing of retail shareholders in Africa. Of a new era of transparency, disclosure, openness and financial freedom? Of empowerment of the ignorant, uneducated African investor? Etc. Etc.

Definitely not. This is Africa. Africa dances to the beat of its own drum, not to the expectation of others.

The chart below shows the growth in mobile internet access to a few of our clients OK its not a lot but its a start.

Much has been made of the growth of mobile platforms in Africa, particularly in Kenya and Nigeria and despite my cynicism above one can’t help wonder whether those companies that do decide to get in early on the mobile platforms can “reap the dividends” as the saying goes.

If I were a director of a listed company in Kenya, South Africa or Nigeria I would look into the commercial aspects of mobile platforms firstly, to get a good understanding and then decide on the IR side of things, always having in the back of my mind the ability to sell products to shareholders and shares to customers.

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Here is an extract of the new Kenyan Companies Bill governing deemed delivery of communications in various media. If directors disclose information online through their website it is deemed to have been delivered as soon as its posted online. Great news for listed company directors!

630 Deemed delivery of documents and information
(1) This section applies in relation to documents and information sent or supplied by a company.

(2) Where—
(a) the document or information is sent by post (whether in hard copy or electronic form) to an address in Kenya, and
(b) the company is able to show that it was properly addressed, prepaid and posted, it is deemed to have been received by the intended recipient 48 hours after it was posted.

(3) Where—
(a) the document or information is sent or supplied by electronic means, and
(b) the company is able to show that it was properly addressed, it is deemed to have been received by the intended recipient 48 hours after it was sent.

(4) Where the document or information is sent or supplied by means of a website, it is deemed to have been received by the intended recipient—
(a) when the material was first made available on the website, or
(b) if later, when the recipient received (or is deemed to have received) notice of the fact that the material was available on the website.

Seems to me that the easiest way out is to just post information on your website as there is no obligation to confirm the addressees contact details at all and your obligation to deliver shareholder communications is immediately met as soon as it is posted online. In the absence of other methods to communication with shareholders is this good corporate governance?

I wonder where the corporate governance code in Kenya and the new Companies Bill meet with respect to obligations to deliver communications directly. That’s in another post. This quote from Standard Boardroom Practice, prepared by the Institute of Directors, London, revised 1971 is still appropriate (or perhaps more appropriate) in modern times:

“Although the process of encouraging shareholders to take an interest in the affairs of the company may be a rather slow one, directors should not be discouraged. It is their duty to make the maximum use of the methods open to them of keeping the shareholders informed.”

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Kenyan legislators, in their bold quest to demand accountability from listed company directors, wish to punish directors with a jail term of up to 6 months and or a fine should the annual report not be published online in accordance with the requirements of section 387 of the new Companies Bill. One legislator though, nervous at this particularly draconian move, quickly slipped in section 389 below.

A failure to make information available on a website throughout the period referred to in subsection (4)(b) is disregarded if—
(a) the information is made available on the website for part of that period, and
(b) the failure is wholly attributable to circumstances that it would not be reasonable to have expected the company to prevent or avoid.

So that makes sense: if a listed company is unable to post the annual report online because of circumstances beyond its control then the directors have a “get out of jail free card”. The following general implications arise from Kenya’s news legislation:-

- all listed companies in Kenya should have a website (Kenya has the highest incidence of listed company corporate websites) up and running all the time
- the publication of information on their website requires discipline in the financial reporting process – the obligation to post information online as soon as it is practically available creates an obligation on someone to think about what they are doing
- control over the availability of information online will have to be increased to ensure that reporting requirements are not inadvertently contradicted

I have spoken to numerous listed company executives in Kenya and the level of awareness of the issues contained in the new Companies Bill is very low, if not non-existent.

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The extract below is from the new Kenyan Companies Bill that makes interesting reading from in investor relations perspective. We will be covering more of this in later posts but here’s one issue that’s bound to get the attention of executives of Kenyan listed companies: jail sentences and or a fine for not publishing an annual report on the corporate website:-

387 Quoted companies: annual financial statements to be made available on
website
(1) A quoted company must ensure that its annual financial statements and reports—
(a) are made available on a website, and
(b) remain so available until the annual financial statements for the company’s next financial year are made available in accordance with this section.

(2) The provisions of section 389 (requirements as to website availability) apply.

(3) In the event of default in complying with this section (or with the requirements of section 389 as it applies for the purposes of this section), an offence is committed by every officer of the company who is in default.

(4) A person guilty of an offence under subsection (3) is liable on conviction to a fine not exceeding 50,000 shilling or to imprisonment for a term not exceeding six months or both.

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