African Investor Relations

Investor relations practices in Zimbabwe are subject to stresses and strains not seen in other markets anywhere else in the World. It was only a few years ago that Directors were being jailed for communicating their strategies to “protect shareholder value” in a hyper-inflationary environment. For example just putting up prices was a criminal offence. I am not joking.

In order to survive companies had to break the law and not communicate this to the market. This was to “protect shareholder value”. Many executives could not handle it and left. Post-dollarisation (post the chaos of hyperinflation) the Zimbabwean economy is now strewn with under-capitalised businesses that now have to deal with the Government’s objective to “empower the people”.

It’s complex, its political. It is again challenging executives. Get it out of the way and opportunity awaits you.

One company that has overcome this threshold before others is Meikles – check out an extract of their latest interim statement below.

Access full information on this dual-listed company on www.meiklesinvestor.com and their latest statement here.

MEIKLES releases 2011 interim results

The Meikles Limited Board of Directors is pleased to announce the release of the 2011 interim results for the six months ended 30 September 2011. Below are a few extracts from the Chairman’s review.

Group review

Indigenisation
After meeting the various requirements set by the Ministry of Youth Development, Indigenisation and Empowerment, the Company was accorded its indigenous status and is now in compliance with the Empowerment Act…

Pick n Pay investment into TM Supermarkets
Save for the Competition and Tariff Commission, the regulatory authorities have now approved the Pick n Pay investment into TM Supermarkets…

Disposal of the Cape Grace
The disposal of the Cape Grace Group is expected to be completed in the second half of our financial year.

Employee Share Trust (“Trust”)
As stakeholders will remember, on 18 August 2011 the shareholders approved the allocation of 24 million Meikles shares into the Meikles Limited Employee Share Trust…

Executive share scheme
The Group executives together with an indigenous consortium have set up a special purpose vehicle to acquire shares in the Company through the Zimbabwe Stock Exchange…

Ex-Cotton Printers equipment
Following the conclusion of the liquidation of Cotton Printers, the spinning and weaving equipment remained unsold. The Company subsequently entered into an agreement to dispose of this equipment to the former workers of Cotton Printers…

Funds held at the Reserve Bank of Zimbabwe
Negotiations with the RBZ for the repayment of our deposit of US$37 million are still continuing. We remain confident that the deposit, that is accruing interest, will be repaid. Shareholders are advised that there are no further outstanding issues with the RBZ.

Group results
The Group has continued to make progress under very difficult conditions, with high borrowing costs and inadequate capitalisation. Revenues from continuing operations increased by 39% compared to the same period in 2010…

TM Supermarkets (“TM”)
Revenues increased by 36.4% to $136.6 million (2010: $100.2 million). The EBIDTA for the 6 months ended 30 September 2011 was $3.5 million (2010: $2.1 million)…

Thomas Meikle Stores
The revenues increased by 114.9% to $12.2 million (2010: $5.7 million). The gross margin was 32% (2010: 33%). The EBIDTA for the 6 months ended 30 September 2011 was $234,000 (2010: loss of $579,000)…

Tanganda Tea Company
The peak season for tea remains November to March in any given year and is heavily influenced by the rainy season. Therefore, in the 6 months ended 30 September 2011, the company’s main focus was plantation development and diversification into other crops…

Meikles Hospitality
The tourism sector in Zimbabwe continues to recover due to the relative political and economic stability. The tourist arrivals have increased by around 16% this year according to the Zimbabwe Tourism Authority…

Directorships
The Company announced the resignation of the then Group CEO Mr. B Beaumont with effect from 30 September 2011. The Group has reorganised its management structures to cover the gap left by Mr. Beaumont who will not be replaced in the short to medium term. The Meikles Limited board which is made up of 4 indigenous and 2 non indigenous members is in compliance with the empowerment laws of the country.

Outlook
The success achieved in obtaining most of the requisite approvals for the PnP investment into TM Supermarkets and of the company being accorded its indigenous recognition all augur well for the future. These recently acquired approvals have had no impact on the results for the first half of the financial year…

For and on behalf of the Board

J R T Moxon
Executive Chairman
24 November 2011

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We like to celebrate excellence, even though its not our own. Why? Because we understand the value of a decent website and we appreciate good work.

African website vendors are probably unable to replicate the quality of the Q4 products (perhaps they (we) can!) but for most African listed companies the 80: 20 rule applies. 80% of the benefits of going online are enjoyed from 20% of the effort. Examples? Timely info. Comprehensive info, push technology, alerts – get the basics sorted and then sit back and watch the benefits. Q4 is at the forefront of world class communications solutions and their best practice is there for us to learn from and to aspire to.

So the message to listed companies and regulators of African capital markets is: LOOK and see and digest what is happening elsewhere in the World! Lets take those best practices, apply them in our markets and actually put into place tools for enabling efficient and informed investor relationships and decisions instead of harping on with rhetorical cliches about Africa being the “last frontier” and full of potential. We’ve heard this for the past 25 years and to be honest its boring.

Lets hear about the African awards for best online websites! Not awards that are self serving but awards that are independently determined. Perhaps the African Stock Exchanges Association can pick this up……..

I suspect not.

This article below was released by Q4, a leading provider of online investor relations solutions including newsrooms, corporate and investor websites and strategic consulting. I have no financial interest in Q4, but what they highlight in their Q4blog triggers an awareness to investors and listed companies across the globe of the power of the Internet.

We’re pleased to announce that our long-term client, Agnico-Eagle Mines, has been awarded first prize in the electronic disclosure category of the 2011 Canadian Institute of Chartered Accountants (CICA) Corporate Reporting Awards (CRA) for their investor website: agnico-eagle.com.

This is the second year in a row, that Agnico-Eagle has been recognized at the CRA for their best practice IR website, securing an Honorable Mention in the electronic disclosure category in 2010 – with first place awarded to Potash Corp., a winner in the electronic disclosure category multiple times.

Companies eligible for the electronic disclosure award were judged on specific content relevant to investors, navigation and usability, innovation, overall effectiveness and IR website best practices. This year, companies were also evaluated on how well they integrated social media into their sites.

Agnico’s long-standing commitment to continually improve the investor experience on their IR website is focused on achieving a global standard in best practices. An additional goal is to limit the effort required to update site content.

The strategy for the site evolved from a comprehensive IR website best practice audit of the Agnico site conducted by Q4 and provided to both the client and their design firm, The Works. This document detailed key recommendations, which were adapted in the redesign. A strong collaboration between Q4, The Works and Agnico-Eagle throughout the design and development of the site helped ensure that all key communications objectives were met.

What follows are some of the features that make Agnico’s site exemplar of best practices:

The Design

The talented team at The Works created a clean, progressive design that provides numerous ways for investors to easily navigate the site to not only find the information they are looking for, but to also ensure that they encounter the information Agnico wants them to see. For example, right from the home page the rotating images in the masthead highlight key content and events, and the drop-down main navigation prominently singles out one specific piece of content in addition to providing links to all sub-section information. The navigation also makes it easy for users to see where they are, where they want to go and how to make their way back. The site also brings key content forward by prominently displaying frequently sought information such as news releases and presentations, as well as providing lots of quick links:

Integrated Social Media Galleries

Agnico was interested in making their information more interactive and easily accessible – not just on their site, but in alternate channels as well. The multimedia galleries offer an extensive collection of Vimeo videos and Flickr photos, which Q4’s platform automatically pulls in from the social channels and integrates into their site. Some of these assets are also displayed elsewhere on the site in context with specific information:

Follow Us Page

The ‘Follow Us’ page on the site provides a number of ways to stay connected to the company such as email alerts, RSS feeds, Facebook, Twitter and Vimeo. In today’s multi-channel world, public companies must ’be where their investors are’ to stay connected. Prominently featuring ‘Follow Us’ as a universal link in the site header makes it easy for investors to find this information:

Quarterly Report Summary Page

Agnico’s quarterly summary page provides an aggregate view of all quarterly related materials in a single page. It includes the press release, conference call, webcast, report and financials. Agnico also provides a brief video of their CEO, Sean Boyd who provides commentary on the quarter. (Much of the information in this video is scripted in advance of the earnings call and Agnico’s video production company Silverpoint is able to shoot and produce the video to ensure that this information is on the site on the day of their earnings call.) The right rail in this section is entirely driven by tags. So each time the company reports their quarterly results, the tag on this page (for example Q22011) is updated to the next quarter i.e. Q32011. To address Agnico’s goal of minimizing manual updates, Agnico touches the content once and the information automatically aggregates on the quarterly page (and other pages, such as the Investor Briefcase, Presentations etc.).

Interactive Financial Data

The interactive financial data also called the ‘operational database’ on the Agnico site, is an innovative investor service that gives analysts a full set of interactive quarterly financials and fundamentals. Provided by our partner, Virtua Research the financial database permits customized charts, excel downloads and the ability to share content from the model through email and social networks:

This award underscores the commitment and effort Agnico puts into continually making their IR website an integral part of communicating their story to investors. Congratulations from the team at Q4 to everyone involved!

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I follow Q4 closely because they are world leaders in what they do. I have no financial interest in Q4. Unfortunately. But what they say rings so true with my mission in life. There are good reasons for this.

With regulators, directors and investors in Africa lagging their first world peers, but with listed companies seeking capital and investment in the “last frontier”, the prospect of enabling African listed companies to empower themselves (rather than relying on brokers and regulators) in reaching out to investors is very compelling. For me at least – because the absence of progressive capital markets regulators (in the adoption of the internet as a communications and investment promotion tool) means that listed companies should be given the reins to determine their own future. The reasons are : there’s an absence of information, its good corporate governance, it builds brand and corporate reputation and the upside is great.

Anyway I take the liberty of replicating Q4′s blog below because I want to send their message to listed companies in Africa. Bizarrely, what Q4 is saying in first world markets has even more relevance in African markets. For me at least.

A few notes about IR in African markets:-

- newswires are not used (with a few exceptions)

- conference calls are not used (with a few exceptions)

- podcasts are not used (with a few exceptions)

Here goes the message from Q4

“Late last week the SEC issued guidance on how companies can use corporate web sites and blogs for the release of material information under regulation Fair Disclosure. This timely announcement has the potential to dramatically impact the corporate disclosure industry.

Rather than outlining the content of the guidance I thought I would provide some initial thoughts on what I see as being the key messages of the interpretive release. If you are not familar with the guidance please see the following links for more information.

SEC Docs

• The full SEC interpretive release (47 page PDF)
• SEC Press Release

Some Initial Blog Posts

• SEC OKs websites and blogs for Reg. FD
• SEC To Recognize Corporate Blogs as Public Disclosure, What This Means for Wires and Press Releases
• SEC To Recognize Corporate Blogs as Public Disclosure. Can We Now Kill the Press Release?
• The emerging self-distribution news model

Here are a few initial take aways from the announcement:

The playing field of disclosure has been leveled. Newswires no longer have the built in demand for their services that they did before. (NYSE still mandates the use of wires but the assumption is that they will follow suit). This does not mean that the Newswire’s are going out of business, but it certainly means they are going to have to compete with more than just each other moving forward. Newswires will need to look closely at their business model and determine how they are going to compete in a world where the distribution of information is free (welcome to the Internet).

The press release is not dead. There is nothing in any of the SEC announcement that speaks to companies not using a press release. The press release is a document type, not a distribution method. It can be posted to a corporate web site, company blog or sent out over a newswire. IROs and public companies have well defined controls and procedures around the creation of press releases and other disclosure documents. This recent announcement does not impact the importance of using a press release to disclose information to the market, just how the press release gets from the company to the investor.

In order for information to be “Public” (and applicable to RegFD) the corporate web site needs to meet 3 criteria.

1. a company web site is a recognized channel of distribution
2. posting of information on a company web site disseminates the information in a manner making it available to the securities marketplace in general, and
3. there has been a reasonable waiting period for investors and the market to react to the posted information.

As you can see, these are quite general and not prescriptive, this means that companies will need to be committed to meeting these guidelines and likely it also means that new vendors will step up to help. This criteria warrants a post on its own, so I won’t go into detail on each aspect here.

The guidance is principle based and future proof. If the SEC had come out and said “you must use RSS and email alerts” it would be creating the same problem it is now getting out of. By using a principle based approach it allows the market to determine what is acceptable and ensures that certain technologies and/or companies are not able to create protected industries (like the newswires did). Having said that, a principle based approach also creates a grey zone that lawyers do not like, which means that the mass market of issuers will likely not change anything, until the market adopts a new standard. This will require forward-thinking issuers and vendors to innovate and create this new standard.

The corporate web site is the podium for all disclosure. We’ve been saying this for some time (as have many others) but it is now official. The corporate web site is the hub of corporate disclosure. With this new guidance and the combined innovated efforts of issuers and vendors, we will continue to see the corporate site dominate the world of disclosure for the foreseeable future.

I would certainly advise all those in the corporate disclosure space to read the full 47 page report. It’s long but there are some great comments in there.”

NOTE: This blog entry is sourced from the company blog for Q4 Web Systems a leading provider of on-demand software for corporate and investor websites. The text above is a direct extract from Q4 Web Systems Blog, an excellent resource for IR best practices.

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There are a few grey haired individuals in the Imara Group that have been trudging around African markets for many many years. So many years in fact that they have been responsible for the establishment of many of them. It’s no wonder then that Imara excels on a number of fronts not least of which is their asset management.

Imara’s asset management side, headed by John Legat, excelled recently at the inaugural asset managers awards. To celebrate their success, which is long overdue I replicate their press release below:-

Imara, the pan-Africa financial services group, has taken two of the top investment accolades in the first annual Africa Fund Manager Performance Awards.

Its Imara African Opportunities Fund won recognition as the year’s best Africa equity fund with a fund size of more than USD50 million while the Imara African Resources Fund claimed honours as the top Africa Equity Fund with a fund value of less than USD50 million. The Imara Zimbabwe Fund was also nominated for the same award.

The awards were presented at a gala dinner on October 11 in Cape Town.

Imara Group CEO Mark Tunmer commented: “It is an honour to feature so prominently in this inaugural awards programme for Africa fund managers.

“We’re delighted a well-established favourite like our African Opportunities Fund, with positions across numerous sub-Saharan jurisdictions, and a more focused specialist Resources Fund, a relative newcomer to our range, have done so well. We were also delighted that our popular Zimbabwe Fund made the short list for an award.

“Awards recognition has a wider significance for our continent and industry. By spotlighting superior investment returns out of Africa, awards such as this contribute to the global re-rating of sub-Saharan Africa as an investment destination.

“Strong performance by managers and markets will accelerate capital market development and help drive sustained progress by our continent.”

Harare-based John Legat, head of Imara’s asset management division, is manager of the Imara African Opportunities Fund while Bruce Williamson manages the Imara Africa Resources Fund.

John Legat noted: “We view awards recognition such as this as an endorsement of the Imara approach to equity investment in sub-Saharan markets. We have extensive on-the-ground representation across Africa and conduct in-depth research and face-to-face interviews to ensure portfolio construction is backed by thorough understanding of challenges and opportunities in all jurisdictions.”

• Imara is an independent, Botswana-listed investment banking group that prides itself on objective decision making in the service of its clients. The company is mid-sized and has offices in Angola, Botswana, South Africa and the UK and associate offices in Malawi, Mauritius, Zambia and Zimbabwe. Imara has also partnered with Chapel Hill Denham in Nigeria, NIC Capital in Kenya, Namibia Equity Brokers and Mac Capital in Dubai.The Group is an active participant in Africa’s financial markets and maintains an extensive research coverage of regional equities. Funds under management exceed US$450m and assets under administration exceed US$1.77 billion.Imara provides a range of specialised financial products and services that can be broadly categorised as:
  • Asset management (institutional and private client)
  • Corporate finance and advisory services
  • Securities
  • Trust and administration services

  Imara Group subsidiaries are regulated by: NBFIRA in Botswana, the FSA (UK), the FSB, JSE, SAFEX (South Africa), SEC, ZSE and Reserve Bank of Zimbabwe, the FSC (Mauritius) and the Reserve Bank of Malawi.

Africa Equity Fund of the Year over $50m – Imara African Opportunities Fund Limited – “The Imara fund’s strong 12 month return of 25.87% with average volatility versus its peers made it the clear winner in this category, with the next best fund returning 12.23%”

Africa Equity Fund of the Year under $50m – Imara African Resources Fund – “Imara’s African Resources Fund achieved a 41.94% return to make it the stand-out pan-African strategy in this category”

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Rwanda’s ambitions to become a “cyber-island” in the middle of East Africa are well known. I downloaded the Bank of Kigali’s prospectus and quickly searched for the following words:-

“Internet” “Website” “Investor relations”

“Internet” comes up in reference to their internet banking services. “Website” and “investor relations” do not appear at all. I visited the corporate website and was pleased to discover an “investor relations” section which consists of some downloads. No email alerts.

There’s something special about an IPO. And that’s the ability to identify all the investors interested in the company at IPO (investor interest is at its highest) and to strike a secure two way relationship with them. Forever, thereafter. Each new investor that comes onto the shareholder register thereafter is known – through the company secretaries or share registrars.

So on the one hand you have listed companies paying thousands of dollars in generic advertising (billboards etc) to try to identify prospective customers and on the other hand, you have thousands of pre-qualified customers (they have invested in your company – they must be educated, have savings and are middle class) being ignored. The funny thing is you have their contacts details, in full. The only effort that is put into engaging these shareholders as prospective customers is through a few pictures in the annual report every year.

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The US’s regulatory regime for listed companies is very transparent and easy to understand and I regularly point to it in highlighting the extent to which our African capital market regulators have under achieved. Edgar has not been to Africa. Edgar would like Africa as he would be kept busy by investors assessing investment opportunities and risk in Africa.

Many of my articles attributed to the SEC refer to the Form 8 – K whose content for every listed company is available on Edgar. I have provided a brief overview of that the Form 8 K is used for below thanks to the SEC’s recent news digest, which by the way, are published from 1956 onwards. Who said that historical information was irrelevant?

Form 8-K is used by companies to file current reports on the following events:

• 1.01 – Entry into a Material Definitive Agreement.
• 1.02 – Termination of a Material Definitive Agreement.
• 1.03 – Bankruptcy or Receivership.
• 2.01 – Completion of Acquisition or Disposition of Assets.
• 2.02 – Results of Operations and Financial Condition.
• 2.03 – Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
• 2.04 – Triggering Events That Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement.
• 2.05 – Cost Associated with Exit or Disposal Activities.
• 2.06 – Material Impairments.
• 3.01 – Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing.
• 3.02 – Unregistered Sales of Equity Securities.
• 3.03 – Material Modifications to Rights of Security Holders.
• 4.01 – Changes in Registrant’s Certifying Accountant.
• 4.02 – Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.
• 5.01 – Changes in Control of Registrant.
• 5.02 – Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officer.
• 5.03 – Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
• 5.04 – Temporary Suspension of Trading Under Registrant’s Employee Benefit Plans.
• 5.05 – Amendments to the Registrant’s Code of Ethics, or Waiver of a Provision of the Code of Ethics.
• 5.06 – Change in Shell Company Status.
• 6.01 – ABS Informational and Computational Material.
• 6.02 – Change of Servicer or Trustee.
• 6.03 – Change in Credit Enhancement or Other External Support.
• 6.04 – Failure to Make a Required Distribution.
• 6.05 – Securities Act Updating Disclosure.
• 7.01 – Regulation FD Disclosure.
• 8.01 – Other Events.
• 9.01 – Financial Statements and Exhibits.

8-K reports may be viewed in person in the Commission’s Public Reference Branch at 100 F Street, N.E., Washington, D.C. To obtain paper copies, please refer to information on the Commission’s Website at http://www.sec.gov/answers/publicdocs.htm. In most cases, you can view and download this information by using the search function located at http://www.sec.gov/edgar/searchedgar/companysearch.html.

The thing that stands out about this is the ready accessibility of any or all regulatory filings to the investment public through the regulator in the USA – a key investor protection tool. An informed investor is an educated investor as the Americans say.

Not in Africa.

Just try looking for Egyptian annual reports online. Isn’t it amazing that the Egyptians could record and celebrate their existence for thousands and thousands of years accurately and for free, but in the modern day environment you can’t locate up to date Egyptian annual reports online for free.

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They are setting a trend. AICO Africa;, the Zimbabwe Stock Exchange listed seed, cotton and FMCG group podcast its analyst presentation for the half year results to 30 September 2011. The is the second time AICO has podcast its full investor presentation and the company is setting the lead in Zimbabwe in consistently applying investor outreach initiatives.

The company is under-capitalised and has significant operational challenges, but their investment story is positive in the short-term, and exciting in the long-term given the profile of agriculture and food globally. Seed Co, also listed, is the Group largest asset and is also applying progressive investor outreach initiatives through their website and communication practices.

Some key stats from AICO’s presentation:-

1. Revenues up by 117% to US$m
2. PAT growth in Cotton up by 183% – recorded profit of US$4.6 m
3. Growth in Group sales volumes up by 19%

So does the investment story of a company determine whether the management adopts progressive online communications practices? Clearly not. Management, or the Board does. 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.”

The “methods open to them”: a website, Twitter, Facebook, RSS feeds, Linkedin, SMS, emails, podcasts, conference calls, webcasts…….none of these applied in 1971, but they do now and they provide companies the opportunity to build brand and corporate reputation by forming and retaining relationships with stakeholders individually. At low cost. How? Technology.

With the slackening off of global markets and the withdrawal of foreign demand for securities in emerging African markets companies feel that they need to go “the extra mile” to seek and retain investors’ attention. There are two aspects of this “extra mile” that are disturbing. The first is that the “extra mile” should be the “norm” in these markets, as they are elsewhere and secondly, the number of companies not adopting the basic tenets of online disclosure (timely and comprehensive info) is high. My favourite quote above has been lost in time. Lost to the regulators and lost to directors because they are stuck in their past ways. But times have changed.

My experience with our clients is that the core decision makers know that “it is the right thing to do” but do not necessarily understand how or why – which is fair game. I make the mistake trying to promote these practices by  jumping up and down and waving my hands because I’m so excited. But life is not like that. Learning happens slowly. Confidence building takes time, as does seeing the benefits of how online communications benefits companies in areas other than investor relations.

The fact is that in the absence of prescriptive regulation, proactive adoption of good corporate governance it is only the commercial imperative that remains as a key motivator to promote progressive online investors. This message is not lost on AICO and Seed Co and they are building now for the future. Others are following too.

Ironically, when the world is embracing technology because of the opportunity to link directly with people at zero or almost zero cost, Africa is going in the opposite direction. Regulator’s dropping of the requirement to send annual reports (and proxy voting material) to shareholders (Kenya is one example of where this has been entrenched in law) is evidence of this. As is the absence of technology being adopted by Africa’s regulators.

Dominic Jones , a world leader in online investor relations, has this opinion about the trends in African markets regarding de-linking the direct communications channel with shareholders:

“Scrapping requirements for companies to mail printed disclosure documents to investors is a global trend, but it has exacerbated shareholder apathy in every jurisdiction where it has been implemented. This is largely because regulators have failed to replace printed disclosures with suitable standards of online disclosures. Apathy and an uniformed investing public is, to my mind, the single worst thing that can happen in any market. It ultimately will lead to market abuses.”

Brokers are realising the opportunity to link with investors too and the recent launch of the Lynton-Edwards website ( a Zimbabwe Stock Exchange registered stockbroking firm) shows how investment data can be used to reach out, identify investors and create a secure two way communications channel with them.

Sounds so airy-fairy doesn’t it? Consultant’s or marketing speak. But its not.

• Listen to the AICO business overview podcast here
• Listen to the AICO financial overview podcast here
• Listen to the AICO “Q & A section” podcast here
• View the latest AICO investor presentation here
• Sign up to AICO investor alerts here
• Sign up to Seed Co investor alerts here
• Visit the Seed Co investor relations website here

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On its Facebook account the Nairobi Stock Exchange suggests that high coffee prices could be good for shares listed on the exchange in the coffee industry. In a comment underneath, an investor bemoans the fact that even though the coffee prices are high the shares of Sasini closed lower. This exposes the complexities of capital markets to investors and underlines the need for shareholder education initiatives in Kenya and more importantly the need for the regulator to refrain from offering investment advice.

I do not believe that regulators have any place in making such statements to the market and if accidental comments are made (which I hope this is) then the opportunity should be taken to fully brief the investor on why share prices might fall following the announcement of seemingly good news. This can be a slippery slope because the more you explain the more you need to explain and a regulator has no place doing this when an actual industry or listed company is mentioned.

My key message is that if social media is used in African markets then it should be done in a fully informed manner. Fully informed of the rights and obligations and legal requirements applicable to regulators.

This was not a serious transgression but it does underlie the need for more awareness on the NSE’s side. Consider such utterances in an IPO situation and consider the heavy speculation and extraordinary (unsustainable) price rises in previous Kenyan IPOs and the matter could become a lot more serious (when the share price comes crashing down after all the stagging).

I read a few more posts and there is an utterance about the euro crisis from the NSE. Whilst the NSE has given a disclaimer on the content of its Facebook account, and the use of Facebook is a positive move to bring investing in the mainstream, there should be supporting education initiatives for the regulators and investors to ensure that Facebook’s use is fully understood. Any comment like that relating to the share price of Sasini should be seized upon to explain in detail why share prices can go down on the release of good news. The absence of any explanation just leaves the website user frustrated and disillusioned.

In another post the NSE says this

‎”Be fearful when others are greedy and greedy when others are fearful………..’ Invest in stocks when are others are running away from the market and sell when others are running back to the market.”

It should have been attributed to Warren Buffet but was not, as was pointed out by a NSE Facebook user. Its great to see the market correct the regulator or at least raise issues with the regulator whenever a wayward post is published by the NSE – social media is such a leveller and that’s why it needs to be taken seriously by regulators.

I have previously blogged about Kenya’s absence of internationally acceptable shareholder communications practices, law and stock exchange practices. See my previous blogs here.

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The Nairobi Stock Exchange sells a broad array of data and generates close to US$100,000 a year from this activity which accounts for approximately 2.5% of total revenues. There are 7 authorised data vendors whose deposits held at the NSE total about US$8,500. These data vendors re-package the NSE data into products and services that theoretically “add-value” to the users thereof. Data vendors in most cases re-charge for this data or package it in a way that they are able to generate revenues therefrom eg portal sites, that generate advertising revenues by virtue of their website traffic.

For the larger media firms such as Thompson Reuters and Bloomberg the value add to investors is significant as the data is bundled into global databases and other products.

There is a bigger question here for the NSE and that’s whether the foregone benefits of wider information dissemination exceed US$100,000 of revenue every year? “A bird in the hand is worth two in the bush”? At the moment it would seem that its easier to justify the 100-grand-in-the-hand. Is the NSE rent seeking from data that it should not be?

The products below show what you can buy – you can buy this information from the NSE using your cell phone! Which IS progressive, but is it really necessary? As a shareholder or an active investor, is it acceptable for me to pay for basic investment data? How many people does NSE have to sell to, to add to the “bottom line” and is the “bottom line” becoming more and more important for the NSE now that it is de-mutualising? Are the long term interests of Kenya’s capital markets being prejudiced by virtue of the fact that the  NSE is a monopoly on investment data and is selling it?

An alternative view is that this investment data should only be consumed by those that understand it and can afford it and through registered investment professionals i.e brokers. Yes, there are the ignoramus investors out there being misguided all the time as a result of their ignorance, but that’s the nature of the industry (look at World markets and they are supposed to be filled with educated people). From a regulators perspective, one could argue that  no-one really understands the markets so who cares? My retort to this response is consider the power of 4 million ignoramuses (those with access to internet in Kenya and with shares but no knowledge) being misguided by their ignorance and able to express this ignorance on a global platform 24/7. Phew!! An example? IPOs whose share prices rocket to stratospheric levels and then collapse: no shortage of evidence of this in Kenya.

Is this sort of ignoramus behaviour acceptable to the regulators whose core obligation is to protect investors?  ”An informed investor is a protected investor” I believe.

Whether African regulators like it or not, the growth of social media is changing the landscape for everyone. Social media is full of ignoramuses. In the absence of wide and engaging education efforts by the regulators (now) there is significant scope for the ignoramus market to completely dominate (over-positively or over-negatively) the general public’s perception. In that situation the regulator can’t do anything its too late. So they have to be pre-emptive. One could argue that the listed companies should bear some responsibility for educating investors and enabling them to make informed investment decisions – but that’s a different conversation.

My view is this:-

- the NSE should review the products below and make free the ones that are not well subscribed. Charge the top data vendors for the value add data / systems / feeds. Don’t charge for anything else (the basic products) but make it freely available to anyone who wants to sign up.

- engage the market as widely as possible with an online shareholder education course (linked to social media) – charge US$20 for it (enable payment by M-Pesa) and if you get 3,000 people signing up then that’s US$60,000 of the US$100,000 that you might have forgone above. Investors become more “informed” and “protected”. These education initiatives deal specifically with irrational exuberance in IPO situations and ignoramuses are learning things rather than buying data.

There’s a degree of intuition needed here in deciding the way forward for the NSE and I don’t have the stats to be able to say much more. The fact is that they have been selling data now for some time and know what the market does and doesn’t want. They need to reflect on this and amend their strategy to achieve both objectives.

Why is this relevant?

Well with the World melting at the moment, with Africa being seen as the last investment frontier, and with foreign investment at risk, there should not be any barriers to getting hold of timely information. The bigger picture is that the way the web is developing, all of this information is going to be available for free anyway in the future to almost everyone, by phone,iPad, PC, whatever and its only the likes of Thompson Reuters and Bloombergs that can justify the need to pay to re-package packaged real time data on account of their professional investor bases.

All of this debate is all so terribly over-intellectual isn’t it?

BUT, ask yourself whether 10 years ago you would have predicted that so much information and functionality could be available on the web FOR FREE. So really at the end of the day the future for African capital markets is whether the regulators that run them have a vision, a long term vision that embraces how the web is changing the world. A vision that does not involve US$100,000 now, vs benefits that are intangible and in the future and for the greater good. Like investor education. Mmmmm….

Daily FIX Log File (flf)Contains all the day’s trading activity (both equity and debt) in electronic form.	Kshs.50000(monthly subscription)+/- US$6,480 p.a.
End of Day Listed Equity Securities Data (eded)Listed equity data, which is published no sooner than sixty (60) minutes after the close of trade on each trading day.Available in excel format	Kshs.7200(monthly subscription)+/- US$936 p.a.
Historical daily Price lists for bond data (hdpl-bond-market)Historical daily market reports for equity and debt data. Available in excel format.Data Available From 24th Feb 2011 to 13th Oct 2011	Kshs.30(per day’s price list)+/-US$71 p.a.
End of Day Listed Debt Securities Data (eddd)Listed debt data, which is published no sooner than sixty (60) minutes after the close of trade on each trading day. Available in excel format	Kshs.7200(monthly subscription)+/- US$940 p.a.
Historical daily Price lists for equity data (hdpl-equity-market)Historical daily market reports for equity and debt data. Available in excel format.Data Available From 4th Jan 2010 to 13th Oct 2011	Kshs.30(per day’s price list)+/- US$71 p.a.
Historical weekly Price lists for equity data – weekly market statistics (hwpl-equity-market)Historical weekly market reports for equity and debt data. Available in excel formatData Available From 4th Jan 2010 to 16th Sep 2011	Kshs.100(per weekly report)+/- US$56 p.a.
Historical weekly Price lists for debt data – weekly bond statistics (hwpl-bond-market)Historical weekly market reports for equity and debt data. Available in excel formatData Available From 4th Jan 2010 to 2nd Sep 2011	Kshs.100(Per weekly report)+/- US$56 p.a.
Historical monthly trading equity volumes (hmev)Historical trading volumes per month in excel formatData Available From 2010 to 2010	Kshs.1000(cost per annum)+/- US$11 p.a.
Historical monthly trading equity deals (hmed)Historical equity traded deals per month in excel formatCurrently No Files	Kshs.1000(cost per annum)+/- US$11 p.a.
Historical monthly trading equity turnovers (hmet)Historical equity traded turnover per month in excel formatCurrently No Files	Kshs.1000(cost per annum)+/- US$11 p.a.
Historical monthly debt traded deals (hmdd)Historical debt traded deals per month in excel formatCurrently No Files	Kshs.1000(cost per annum)+/- US$11 p.a.
Historical monthly debt traded volume/turnovers (hmdv)Historical debt traded volume/turnover per month in excel formatCurrently No Files	Kshs.1000(cost per annum)+/- US$11 p.a.
Historical monthly foreign investors trading data (hfid)Historical monthly trading summary of foreign investors. Information consists: purchases, sales, total turnover, percentage to total equity market turnoverAvailable in excel format.Data Available From 2009 to 2010	Kshs.3000(cost per annum)+/- US$33 p.a.
Historical Annual equity turnovers (historical-annual-equity-turnovers)Historical equity traded turnover per year in excel formatData Available From 1992 to 2011	Kshs.1000(cost per annum)+/- US$11 p.a.

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Imara has had a securities office in Angola for a number of years. The Group is bullish about the prospects for the country whose yet-to-emerge-stock-exchange could be the third or fourth largest in Africa based on the size and value of the companies that could come to market. There is nothing more I would like than to be a regulator in the Angolan Stock Exchange to be able to shape and influence the future of online investor relations in that country. A clean sheet. No bad habits, no legacy issues, just the opportunity to catapult Angolan companies onto the global investment stage with comprehensive, timely information that actually promotes investment, not promises to promote investment. I rub my hands in anticipation……

I replicate the Imara press release below. Their London event sounds ground-breaking and exciting.

Angola’s investment case gets big response – Imara

Angola is fast emerging as the next big sub-Saharan opportunity, judging by the response to the oil-rich nation’s upcoming investment indaba in London. The event on November 8 is believed to be the first forum to be convened in a major financial centre to foster closer contacts between the international institutional investment community and Angolan corporates and public bodies.

It has attracted a Who’s Who of attendees from the fund management and financial service sectors, says Anthony Lopes Pinto, head of Angolan operations at Imara, the pan-African financial services group.

Imara and London-based asset management Group Fleming Family & Partners are co-hosts of the event. Two years ago, the long-time associates launched a similar London investment day to showcase opportunities in Zimbabwe. The initiative helped free up investment flows and contributed to an international reappraisal of Zimbabwe’s post-dollarisation prospects.

“Response to our Angola conference has been overwhelmingly positive,” says Lopes Pinto. “We therefore believe we are well placed to repeat the success of the watershed Zimbabwe event.

“Angola has one of the fastest growing economies in sub-Saharan Africa. Some northern hemisphere economies may be struggling to cope with the continuing international financial crisis, but Angola is back in the black, foreign currency reserves are at an all-time high and government efforts are gaining traction to diversify the economy and reduce Angola’s dependence on oil.”

Delegates are expected from North and South America, Europe and the UK. Representatives of financial service companies significantly outnumber those from the energy and resource sectors. Senior Angolan officials will present a strategic overview of national prospects, with a focus on opportunities for public-private sector partnerships. In addition, speakers from major corporates currently active in the Angolan market will address the conference on operational conditions and progress toward a business-friendly policy environment.

The Angolan government has publicly stated that next year it will develop its capital markets in Luanda, deepening the financial sector and creating new sources of funding for Angolan enterprises.

“The diverse mix of attendees confirms that international investors have picked up official signals that opportunities are not restricted to the oil industry. With the recovery of the oil price, wide-ranging investment possibilities are fast emerging; which is why the response has been so positive from so many quarters.”

Imara has been represented in Luanda for more than two years by Imara Securities Angola SCVM Limitada, a joint-venture with an Angolan conglomerate. The Angolan JV launched corporate finance activities at the beginning of the year. Two deals are currently in the pipeline, a property project and a financial services transaction.

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I welcome the introduction of the Kenya Index Series from the FTSE from a governance and investor relations perspective. Firstly, the indices will provide greater outreach for Kenyan companies on the global investment stage and enable fund managers and investors to benchmark performance on a like for like basis with international peers. Secondly, the existence of the indices will I expect provide tangible empirical evidence of the volatility associated with equity returns from companies in Kenya.

Why is this relevant to me? Kenyan corporate governance lags its international peers and the dropping of the core tenet of investor protection, that of ensuring the delivery of hardcopy annual report and proxy voting material, will, over time, reduce listed companies’ accountability to the broader investment community.

Dominic Jones , a world leader in online investor relations, has this opinion about the trends in African markets regarding de-linking the direct communications channel with shareholders:

“Scrapping requirements for companies to mail printed disclosure documents to investors is a global trend, but it has exacerbated shareholder apathy in every jurisdiction where it has been implemented. This is largely because regulators have failed to replace printed disclosures with suitable standards of online disclosures. Apathy and an uniformed investing public is, to my mind, the single worst thing that can happen in any market. It ultimately will lead to market abuses.”

The Kenyan Index Series will hopefully accentuate the need for globally acceptable governance standards in Kenya (albeit slowly and indirectly) and spur regulators and listed companies to treat all shareholders equally and transparently. The advent of social media and general internet access means that now more than ever, investing can be (or will be whether listed companies like it or not) brought into the mainstream. What is required is an educated and informed investment community that is well protected by legislation and good corporate governance practices.

The Kenya Index Series is good for Kenyan capital markets on a number of fronts.

Here is the speech of the CEO of the NSE

REMARKS BY THE CHIEF EXECUTIVE OF THE NAIROBI SECURITIES EXCHANGE
MR. PETER MWANGI
DURING THE LAUNCH OF FTSE NSE KENYA INDEX SERIES
HELD ON 8^th NOVEMBER 2011
AT THE NSE TRADING FLOOR

Mr. Donald Keith, Deputy Chief Executive Officer, FTSE Group
Mr. Jonathan Cooper, Managing Director, Middle East & Africa, FTSE Group
Mrs Stella Kilonzo, Chief Executive,CMA
Mr. Carilus Ademba, Chief Executive Officer, the Sacco Societies Regulatory Authority (SASRA)
Mrs. Rose Mambo, Chief Executive,CDSC
Board Members of theNairobiSecurities Exchange
Member Firms of theNairobiSecurities Exchange
Members of the Media
Invited Guests, Ladies and Gentlemen

On behalf of the Board of Directors and Management of the Nairobi Securities Exchange, I warmly welcome you all to the official launch of our partnership with FTSE International – the preeminent provider of global indices and index products. Ladies and Gentlemen, we commence our partnership with the launch of the FTSE NSE Kenya Index Series. The index series consists of:

• The FTSE NSE Kenya 25 Index

This tradable index reflects the performance of the 25 most liquid stocks trading on the Nairobi Securities Exchange.

• The FTSE NSE Kenya 15 Index

This tradable index reflects the performance of the largest 15 stocks, ranked by full market capitalisation trading on the Nairobi Securities Exchange.

These equity indices have been developed in partnership with FTSE International and in consultation with local asset owners and fund managers. The FTSE NSE Kenya Index Series is built to FTSE’s renowned standards of index design, which emphasize transparency, tradability and strong governance, with index data available across a range of global vendor platforms. They reflect the growing interest in new domestic investment and diversification opportunities inKenya. The new indices will run concurrently with the NSE 20 Share and NSE All Share Indices. They will act as a gauge by which our investors can measure the performance of their portfolios. They also act as a foundation for the development of index related products such as Exchange Traded Funds (ETFs). The launch of these new indices is a milestone for the NSE.

It is the first such initiative of its kind in East andCentral Africa, and the third inAfricaafter JSE Ltd. (South Africa) and Casablanca Stock Exchange (Morocco).

In line with our vision “To be a leading securities exchange in Africa, with a global reach.”, the NSE endeavors to build on its existing suite of products and services in order to meet the evolving needs of our domestic and international investors. Our partnership with FTSE International, illustrates our commitment to meeting this need. I am convinced that the indices shall attract additional capital flows into the domestic market and enhance liquidity and market capitalization. It is a crucial part of the efforts of the Nairobi Securities Exchange to evolve into a full service securities exchange which supports trading, clearing and settlement of equities, debt, derivatives and other associated instruments. In this regard, we intend to expand the family of FTSE NSE Kenya Index Series by offering a treasury bond index, very shortly. With these few remarks, allow me to welcome Mr. Donald Keith, Deputy CEO, FTSE International, to address us.

PETER MWANGI
CHIEF EXECUTIVE

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With the political heat being turned on Zimplats, one of the largest platinum mines in the World, 10 per cent of the company was pledged to the “local community” according the local press here today (The Herald). This falls far short of the majority stake sought by the politicians, but that’s not my concern and I certainly do not condone what is going on on the broader political stage regarding indigenisation in Zimbabwe.

Employee share schemes in listed companies in sub-Saharan markets are usually immaterial financially, to the beneficiaries. There may be good reasons for this but I also suspect that it’s bit of a “smoke and mirrors trick” sometimes by managements to “tick a box” for political reasons. Executives can say that they have an “employee share ownership” scheme in the annual report and on the website, but actually there’s no material substance to it. Accordingly its generally forgotten in day to day shareholder communications and staff (or stakeholders) are the last to receive, or don’t receive shareholder communications. They are alienated and because the sums are small it does not matter.

Having been involved in a number of IPOs and employee “empowerment” schemes there is a trend in corporate Africa to pay lip service to stakeholder share schemes and so, from my perspective, if a community share scheme is to be put in place it should be done properly.

Take the Implats website as an example of online communications to shareholders (stakeholders) of Implats, the 87% shareholder of Zimplats. Here is the Zimplats website as a comparison. Zimplats is not listed on the Zimbabwe Stock Exchange. You can’t help get the feeling that a World class organisation such as Implats should possibly take its Zimbabwean corporate communications a little more seriously. Why the fancy website overseas and the basic one locally?

Zimplats is different.

There is big money involved in addition to the political agenda. There are serious sustainability issues involved here and the rest of the country and the World is watching. Whatever the outcome of the Zimplats empowerment saga, there should be tangible and modern and transparent communications tools to enable all recipients to actively play a role as shareholders. If not, the political rhetoric can be accelerated exponentially, on account of a few grumpy individual shareholders, who may feel that they are not being engaged appropriately. Perception is reality – so Zimplats needs to manage it down to every last shareholder. Peasant or not, illiterate or not.

Shareholder education programmes should accompany Zimplats‘ initiative to the extent that all of the beneficiaries understand fully their rights as shareholders. The Zimplats website should have an online investor relations section specifically for its community shareholders.

You may ask what use is a website to an employee or farmer in the community? Well there’s something call social media and mobile internet and many more things that make it easy to engage stakeholders – one-on-one.

With modern day communications tools it’s possible to convert an emailed shareholder notice into an SMS for onward transmission to any member of the Zimplats community share ownership scheme with a cell phone. This should be part of a proactive shareholder engagement policy of Zimplats. Such smss could be used to solicit feedback from the community at all times to understand their needs and concerns. Small cost, huge impact, positive perception. Get this sponsored by Econet.

The typical attitude of African executives is that peasant shareholders don’t count for much (they have the vote don’t they – just like you and me – we are equal?) and if an organisation is going to give (or have taken away) millions or billions of US$ worth of shares, then a few thousand dollars should be spent on ensuring that those peasant shareholders (or employees) are treated equally to any other shareholder. Through sms or otherwise, it does not matter: good corporate governance requires “reasonable efforts” to be made to engage shareholders. 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.”

I do not want a community shareholder scheme to be part of a political game (which unfortunately it is) but whatever is put in place, should abide by the principles of the King III Report on Corporate Governance on sustainability in the community. And then have added to it progressive IR practices of the USA – to result in a progressive shareholder communications strategy, where every shareholder is treated equally.

It’s good corporate governance and it will ultimately add value to Zimplats and its community in the long run.

I do acknowledge that its early days for Zimplats and they could have plans on the communications side but I have no reason to believe that my ideas herein are going to be actioned. I hope they are.

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