African Investor Relations

I am pleased to announce that African Information Solutions for Companies Online Limited “African Is Cool” is now offering our online managed website services to businesses other than listed companies in Africa.

To request our marketing pamphlet click here.

Our decision to broaden our product outreach has been largely influenced by the feedback we have received by the companies we have dealt, the feedback received from the users of our websites, and our realisation of the significant size of the communities in Africa using the internet. Whilst our online investor relations solution should really be an “add on” to an existing corporate website we have designed and implemented new websites for the majority of our clients and then incorporated our online IR solution – and this has been another indicator of the demand for good interactive websites.

There IS critical mass in Internet use in African markets and we believe significant returns may be gained by companies that identify how to offer their services and products in this arena. The question is how?

A big weakness of the current corporate website is that it is managed by companies themselves. People are busy and they are not well informed. From our anecdotal evidence, we believe that website statistics of some really large organisations that manage their own poorly populated and outdated websites are less than 1/30^th of the traffic that should be going through their websites had their sites been adequately populated and managed. Furthermore, and this is the critical bit, these websites lack the interactivity tools that are able to identify people wanting to do business with their companies. Lastly it’s not possible to grow sustainable relationships with people that companies cannot identify.

The dynamic nature of the web means that companies should outsource the whole aspect of online communications. To be sure, many businesses in Africa do not have the critical mass to employ someone full time in the online communications space. The corporate awareness levels of the issues involved are low. Few executives will realise that it is not “what” to do online but “how” to do it. They also don’t realise that they actually own the greatest strategic asset in an online communications policy: data. A simple example of the demand for online information is our portal of online African annual reports on www.africanfinancials.com – the growth in traffic to this website has been phenomenal as illustrated in the chart below:-

The question is: does your business generate information or data that is of use to a broad range of stakeholders or customers or agents etc. If it does you are sitting on a strategic asset and the internet is the tool you should be using. Who should you deal with?

AIC is well placed to deliver value added solutions in the general corporate space as we have been in the high-end interactive online communications space for some time. Yes, we have specialised in investor relations but we spend a lot of our time communicating with stakeholders rather than investors and this has reiterated the opportunity that the online presence provides. For the past year and a half we have managed the school websites of St John’s Educational Trust: St John’s College and St John’s Preparatory School. Our experience outside of the online IR space has been positive.

It’s not a generalisation to say that there is a high level of discontent with what existing corporate websites are delivering to their owners. It’s easy to do a review oneself to see that all is not well with the typical corporate website. Sites look outdated aesthetically, errors are quick to point themselves out and there is no assurance that any information on the website is actually complete and up to date. No alerts icons appear. Send an email and its not responded to.

In growing our African Is Cool business we have been privileged to have highly competent business partners and have had the time and capital to invest in keeping up to date. As relative newcomers to the Internet we have not been influenced by past structures, habits or technologies and have been able to adopt the latest technologies as they arrive. Our background in database programming has also been of huge benefit.

So who should consider using AIC as their strategic online communications partner? Here are a number of criteria:-

1. Your business should be one that generates on-going data or information that is of interest to a broad range of users, stakeholders, agents or customers online. Examples would include banks, stock exchanges, agricultural associations, any association, insurance businesses, multi-nationals, commodity traders, agricultural organisations with outgrowers or agents etc.
2. Your business should be one that has the ability to respond to online traffic / feedback efficiently and be a business whose senior management buy into the concept of online communications.
3. Your business should be one that seeks to develop a secure, on-going relationship with stakeholders.
4. Your business should be brand, service or data oriented.
5. Your business should be one that realises that if “you pay peanuts you get monkeys”. Either you are going to take an online strategy seriously or not. Cheap services will be just that.
6. Your business should be one that deals with a vendor that has a strong corporate reputation from existing clients.
7. Your business should agree that it will not be involved in the update of data on an ongoing basis. AIC has a team doing this all day everyday and we know what we are doing.

(African is Cool) has been managing the online investor relations initiatives of 17 listed companies in 5 African markets. Our online investor relations portfolio continues to grow and we are currently rolling out 5 new online investor relations clients in Zimbabwe and Botswana. There is significant scope for listed companies to take their investor communications initiatives online and this potential is matched by the commercial potential in normal commercial activities. Its from this background that we now enter managed corporate websites.

To request our marketing pamphlet click here.

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I have written about the inefficient information dissemination practices of African stock exchanges in the past.

The issue of stock exchanges not doing enough for its listed companies should be an agenda item for any listed company in most smaller African markets. The core of the problem as it relates to information dissemination relates to African stock exchange rules permitting hardcopy publication of corporate news / actions as the only dissemination medium.

In this modern day and age, hardcopy only dissemination is just not acceptable given the pervasiveness of the Internet as a communications tool. The absence of awareness at regulatory levels (and governance levels)  of the key issues surrounding information dissemination practices is also inexplicable.

There is some good news however. News that we expect to grow in significance.

I am pleased to announce the launch of www.africansens.com, a portal to promote the 100% online dissemination of corporate actions and news for listed companies in Africa. Initially our focus is on providing 100% coverage of listed companies’ corporate announcements in Zimbabwe and this will be extended to Zambia, Botswana, Kenya and Malawi.

Access to the portal is free and is RSS enabled. Users of the site can receive corporate action alerts in their email as soon as they are published online on www.africansens.com. We are currently unable to publish all the content we receive online because we are doing this for free. Users will notice however that African Is Cool clients’ corporate action material will appear online in Africansens in full or at least a link thereto will be available.

We expect www.africansens.com to grow into our largest portal and hope to offer sponsorship / advertising to organisations that want to present their brand to the investment communities interested in African listed equities. Sponsorship funds raised will be re-invested into providing information for free through www.africansens.com.

From an online investor relations perspective, this www.africansens.com initiative complements the many others that we have to get our clients’ message out to the broader investment community. We have two twitter accounts: www.Africanfinancials.com and www.africaniscool.com to complement this and our portal www.africanfinancials.com has over 22,000 annual reports viewed online every month.

We look forward to your feedback.

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In Kenya new legislation deems that once something is published on the website of a listed company it is deemed to have been delivered to the shareholder. Beem-me-up-scotty-Star-trek-type-thing. To listed companies this avoids the hassle of dealing with the ignorant masses of retail shareholders. The SEC in Kenya and the Nairobi Stock Exchange have endorsed this.

To every listed company though, there are those shareholders that are important. The ones that will have something to say when they ask why their shareholder proxy materials were not delivered to their door. For example, the institutional shareholders that actively monitor the creation of shareholder value. Companies that adopt the deemed-Dr Spock communications method only will alienate professional investors. So these investors will need looking after. You will have a trend developing in Kenya where the mailing list will come back from the dead and start to grow and this will create an uneven playing field, or the perception of an un-even playing field in the communication platform. The more priveleged “more important” shareholders will receive their shareholder proxy material by courier or by hand delivery or by post. The ignorant peasant shareholder will not. The rich and influential will get richer and influential and the ignorant and poor will stay like that. This will be supported by the law.

Some institutions and funds are required to vote their shares and in the USA the existence of nominees or share held in “street name” has been seen to have disenfranchised shareholder suffrage. The Dodd Frank act in the USA and other initiatives are actively trying to put the vote back into the hands of the retail shareholder. In Kenya regulators are taking it away.

In the absence of progressive initiatives to provide shareholder choice the new mailing list will grow only after a shareholder has been aggrieved i.e. they don’t receive their proxy material and then they complain and then they do receive it. You will have a situation where shareholders will attend meetings under very different circumstances but in the eyes of the law they will have been treated the same. For the listed company, the man in the middle, issues of corporate reputation will arise and the African conspiracy theory attitudes may start shareholder activism. In shareholder votes, where contentious issues need shareholders’ votes, it will be very easy for someone to stand up and accuse a listed company of purposely or negligently not distributing shareholder information. The law will be irrelevant. Perception will be relevant. Once negative shareholder emotion kicks in then a different side to corporate sustainability, or lack thereof, will be seen.

For between US$10,000 and US$30,000 a year a listed company can take and make all reasonable efforts to ensure that shareholder proxy material availability is communicated to shareholders or delivered to shareholders. This is effectively an insurance policy against the sort of shareholder actions that may arise from not communicating at all or “beeming” shareholder material via Dr Spock’s Star Trek Enterprise. Its about corporate reputation. Oh and its good corporate governance. Actually delivering shareholder proxy materials to the owners of a company is good corporate governance.

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“Governance and leadership are the yin and the yang of successful organisations. If you have leadership without governance you risk tyranny, fraud and personal fiefdoms. If you have governance without leadership you risk atrophy, bureaucracy and indifference.”

Mark Goyder (Director of Tomorrow’s Company)

The Nigerian Stock Exchange is a good example of the absence of leadership and governance and the absence of governance and leadership. Who pays the price? The man in the street. They guy that can’t do anything about it.

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“King 2 emphasizes that the most powerful enforcement body in the corporate system is the shareholder body. Via pension funds, provident funds, insurance products and other group investments, the public makes up the largest owner of many publicly listed companies.”

(King Report)

If the public is ignorant of their rights and the role they play in maintaining checks and balances in economic competitiveness who checks the checkers? Whose responsibility is it?

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Safaricom is a big, big company but it has a mediocre investor relations website. I have provided a few constructive suggestions on how to improve the website and shareholder communications below:-

SMS. Have an SMS registration module online and undertake to SMS the availability of material information being posted on your website as soon as it is released. This, critically, would be used to tell shareholders that their shareholder voting material is available online. Mobile penetration rates are high enough to ensure that the immediate, broad and nonexclusionary news of Safaricom’s corporate actions are made.

Focus on delivery of shareholder proxy material. Shareholders in any organisation should not have to actively seek out their shareholder proxy material. More importantly Safaricom should make use of all available media to keep its shareholders informed.

Optimise the Safaricom IR section for mobile. Mobile penetration is significant in Kenya and the ability to take the alert above to the website is significant.

Publish the annual reports in Scribd. It’s free! Plus investors don’t have to download the annual reports in order to read them. Plus the content is searcheable.

Publish investor presentations in slideshare. It’s free!! Plus the content is viewable immediately instead of having to download the file.

Use “push technology” to send out corporate news and information. Dealing with hundreds of thousands of shareholders is an opportunity to showcase the Safaricom brand

Use online charting. Use the sample here as a guideline and put major corporate actions on the chart. The software to do this is free.

RSS enable the website. RSS means real simple syndication. Its real simple and its effective.

Don’t put a direct link to viewing the presentation online in PDF. The full year 2010 presentation is 29 megabytes. Accessing this is obstructive as it downloads the presentation first before you view it. Enable investor choice to view the document online in scribd or similar software or to download it.

Optimise PDF downloads. A presentation that takes up 29 megabytes can be reduced to less than 2 megabytes by using the Adobe Acrobat optimise function.

Make PDFs word searcheable. Dont save PDFs in images when they contain narrative text. Ensure that they are word searcheable for the convenience of investors.

Use push technology to offer investors a menu of alerts. Automated solutions can be found so management’s valuable time need not be disturbed.

View Safaricoms annual report here in iPaper

Go to the iPaper website here

View African Telcos annual reports here

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Imara Holdings, a pan African investment banking organisation with an asset management division managing funds across Africa, and with offices in Harare, provide some really insightful research into African markets. Especially for Zimbabwe. This is some of their best stuff.

Investment Notes – July/August 2010 – “Lies, Damned Lies and Statistics!”

In recent weeks we have read reports from the IMF and heard the Mid-term review from Finance Minister Biti. In recent months we have also heard from companies operating on the ground in terms of their current sales and future intentions. We therefore find it hard to understand why both the IMF and Government are being as cautious as they are. That said we are pleased that they are not being overly optimistic as past Governments have tended to do. Nonetheless their views give a rather sobering view of the economy rather than an upbeat and exciting outlook for a country barely in its second year of reform that we would rather take.




The IMF believes that the Zim economy is just over $5 billion. We are not sure as to where they got their figures from but we assume it is based on CSO data and their own estimates. They do however point out that “Data have serious shortcomings that significantly hamper surveillance due to capacity constraints”. In past Investment Notes we have been skeptical about such a number. Zimbabwe’s $5 billion economy compares with $14 billion for Zambia, a country with a similar sized population. In the past, and before the “lost decade”, Zimbabwe’s economy was always around 50% larger than Zambia’s as our agriculture, tourism and manufacturing sectors were always much larger whilst Zambia’s copper mining industry was still recovering from years of neglect. Indeed, had Zimbabwe continued on its growth path that it began from the mid 1990s, its economy today could well be a $25 to $30 billion economy. But it didn’t and it’s not!




In this month’s Notes we will be looking at what is happening on the ground to assess whether the $5billion is reasonable or not. We start by looking at Zambia. Taking both major breweries in Zambia (owned also by SAB), in the year ending March 2010, they sold a combined $230 million worth of beverages (at higher prices than in Zim). This compares with Delta that sold $324 million in a year when they could not meet demand. That could imply that the Zambian breweries may not have such a tight control of their distribution thereby allowing in competition from imported product. Or it could mean that Zimbabweans simply drink more…or importantly can afford to drink more! At the same time, Zimbabweans are due to spend around $500 million using Econet’s mobile phone network in 2010. Zambians are spending only around $280m on their major network provider Zain (who no doubt charge less than Econet!). Innscor will soon be reporting their June 2010 numbers. We would not be surprised if  the amount of spend that Innscor is receiving domestically from fast foods, Colcom, National Foods and Spar will take the combined spend for just these three companies alone to well over $1.1 billion in 2010. Whilst the latter company is also selling imported product, it does give an indication of the current spending power in Zimbabwe just one year after dollarization. According to the IMF and Government Zimbabwe’s GNP per capita (ie economy per head) is US$450 which compares with Zambia at US$1,200 per head. The spending patterns in both countries alluded to above would suggest the opposite!

If we look at Zimbabwe’s major exports being generated by the mining, tobacco and cotton sectors in 2010, we also see an upbeat picture. Gold production is estimated by the Chamber of Mines to be around 7.5 tonnes in 2010 compared with 5 tonnes in 2009 and 3.5 tonnes in 2008. That’s a 50% increase over the year when gold prices have reached new highs. The value of those exports should be roughly US$250m. Zimplats this year will produce around 180 million ounces of platinum plus 160 million ounces of rhodium and palladium. The value of those combined is roughly $500million. Then Anglo’s Unki mine starts to sell its concentrate in the last quarter of 2010 adding to these numbers whilst Mimosa should add around $200million. In addition Zimbabwe is exporting chrome and coal and may even see ‘official’ sales of diamonds from Marange in the second half of 2010, adding to the diamond exports from Rio’s Murowa mine and River Ranch. Murowa is due to sell $30m in 2010. In the first half of 2010, the Mid-term review suggests, the value of shipments from platinum, ferrochrome and gold alone was $550 million. For 2010 as a whole a number nearer $1.2billion could be achievable for these minerals although we would expect more.

In agriculture, the tobacco crop has been revised up on a number of occasions whilst the global price for our Virginia tobacco has been high due to global demand, especially Chinese. The export value of semi and processed tobacco could reach $500million in 2010, twice the amount of 2009. The cotton crop is up 18% whilst the cotton price is also higher than in 2009. The value of lint should be $200million in 2010, an increase of 60% on 2009. Thanks to the investment by Tongaat Hullet in Hippo Valley and Triangle over the past year, sugar output should jump by 24% in 2010 to 350,000 tonnes. Maize production in Zimbabwe has also increased in 2010 whilst the price has fallen sharply on World markets. The cost of importing maize should therefore be less than $100 million although the donors often fund a part of this and the cost to Zimbabwe could be lower still. Overall agricultural exports in 2010 could surpass $1 billion.

So excluding manufacturing and tourism, exports from agriculture and mining might top $2.3 billion or higher in 2010. That’s a bigger number than the IMF forecast that includes manufacturing exports. We have not analysed Zimbabwe’s manufacturing exports for these Notes but believe that longer term, Zimbabwe’s export growth will come from mining and agriculture rather than manufacturing production. That said there will always be a place for Zimbabwean manufacturers who produce niche products that can compete regionally and globally. Sadly, long gone have the days when we can or should try to compete with large scale production from China and India in mass market products.




In the construction sector, PPC Cement has capacity to produce 700,000 tonnes of cement, a level that can be increased with clinker imports from SA. Lafarge Zim produces 450,000 tonnes, plus 350,000 tonnes of clinker. Meanwhile Lafarge Zambia’s new plant produces 1.23 million tonnes a level that easily meets Zambian demand. Zimbabwe’s cement demand is set to rise strongly as demand for housing and infrastructure increases. Investment projects announced so far by the mining companies include those for Zimplats ($445m) and Rio Tinto for Murowa ($300m). AngloPlats are also investing heavily in Unki. Recent tenders published in the newspapers highlight the amount of works about to go into housing and infrastructure for such projects.




Meanwhile the financial sector has seen deposits rise from $700 million a year ago to $1.9 billion today, a growth of 167%. Year to date the growth is 40%. As a result liquidity and lending is slowly picking up. Just as we are seeing globally post the credit crunch, credit and bank loans are hard to come by. The banks themselves will admit that the cash in circulation and held by individuals could be substantial relative to the deposits in the banking system such is the mistrust in the banking system on the one hand and the size of the informal economy on the other. In some African countries the informal economy can be the same size as the recorded formal economy. Looking at Zambia again, bank deposits at the end of March totaled $1.6 billion in kwacha deposits plus another $1 billion of forex deposits, little higher than Zimbabwe today!




The Mid-term review also gave some upbeat data. Tax revenues in the first six months of the year were 12% above target with Vat receipts 9% above budget. PAYE was 22% above budget and 290% above that raised twelve months before. This also explains in part why consumption is strong year on year. Corporation tax is also 54% above target. Overall revenue earned was $931million whilst expenditure was $813million thereby following the Government’s cash targeting. Overall budgeted expenditure for 2010 is being held at around $2.25 billion which we believe might be nearly 50% above 2009. (the year of transition makes this comparison difficult). It would appear though that most of this revenue will be generated from local sources rather than by the “vote of credit” assumed in December’s budget.




Our sources are primarily those on the ground ie the operating companies, rather than the Government or the individual Ministries. We share both the Finance Minister’s views and that of the IMF that the data is poor hence the revamp for the Central Statistical Office that is soon to be implemented. We wonder for example whether the mobile phone industry that barely existed ten years ago is even recorded in the statistics, or for that matter platinum! An economist who relies on Government statistics will find analysis tough. The Mid-term review reduced Government’s economic growth forecast from 7% to 5.4%. The IMF revised it’s down to 2.2% as they are concerned about Zimbabwe’s exports falling far short of imports. Surely not! We remain totally unconvinced and further don’t believe that the underlying number used for the economy, being $5 billion, is correct. As we saw in last year’s December budget, the Government revised up the size of the economy from $3.5 billion to $5.1 billion but with barely a corresponding uplift in the growth rate! We would not be at all surprised to see a similar ‘re-rating’ occur in the future. Last year we suggested that the economy is more likely an $8billion to $10 billion one. We stand by this and suggest that it might in fact be much bigger once the informal economy is included. That makes the current stock market capitalization of $3.5 billion look very cheap especially given the broad sector coverage of the economy that the Zimbabwe Stock Exchange provides investors. The Zim economy is pumping !

John R Legat | Chief Executive

Imara Asset Management Zimbabwe (Pvt) Limited

Block 2, Tendeseka Office Park, Eastlea

Tel : +263 4 790090, 790280, 790304

Fax: +263 4 791875

Website : www.imaraholdings.com

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I had a brief look on the Afribank website to see if they had any public statements on their commitment to good corporate governance. They did not. Another article from the www.BusinessDayonline.com, a media firm in Nigeria sets out the details. Good stuff.

The Securities and Exchange Commission (SEC) yesterday accused Afribank and its senior executives of manipulating the bank’s December 2007 public offer in an elaborate scheme that was deliberately designed to buy back its shares deceive the market.

In doing this, SEC said Afribank contravened the Investment and Securities Act 2007. It also alleged that Afribank also perpetrated a fraud in connection with the purchases and sales of Afribank shares. A statement issued by the SEC last night said : “Afribank made a Public Offer (“Public Offer”) that closed in December 2007. After the Public Offer, Union Bank advanced credit facilities to three stock broking firms, Fidelity Finance Limited, Spring Capital Limited and Falcon Securities Limited, and three subsidiaries of Union Bank Union Trustees, Union Assurance, and USL Nominees.

“These entities bought Afribank shares in the names of 1,258 subscribers, which accounted for 66.4% of the public offer. Subsequently, all six (6) entities repaid their loans to Union Bank, using funds made available to them through four (4) Afribank related entities and subsidiaries. Then on the instruction of the Afribank MD, the Afribank shares held by the 1,258 subscribers were consolidated to reflect beneficial ownership of nine (9) companies owned by the Bank and its directors in a total of fourteen (14) accounts.

“These actions are alleged by the SEC to constitute false trading. False trading is prohibited by the ISA in provisions that prohibit activities that may create a false or misleading appearance of active trading by engaging in the purchase or sale of a security that does not involve a change in the beneficial ownership of the security. Also allegedly violated is the general fraud provisions that prohibit the employment of a device, scheme or artifice to defraud that would operate as a fraud or deceit on any person in connection with the purchase or sale of a security”.

The below listed seventy-one entities have been sued in court for their varying roles and responsibilities in the above alleged schemes.

•Falcon Securities Limited

•Peter Ololo

•O.j.a. Idudu

•T.g. Ogisi

•S.a. Otegbola

•Matthew Udueho

•J.t. Ogbeha

•F. Nesiama

•Eric Nwobi

•Lucky Oghene-omoru

•Fidelity Finance Company Limited

•Osa Osunde

•Philip Emioma

•Queen Esther Erediauwa

•Jimmy Evbuomwan

•Afribank Nigeria Plc

•Afribank Capital Markets Limited

•Afribank Registrars Limited

•Ail Securities Limited

•Afribank Trustees & Investments Limited

•Asset Management Nominees Limited

•Union Bank Plc

•Sebastian Adigwe

•Osa Osunde

•Ashim Adebowale Oyekan

•Bala Zakariya’u

•Chukwuemeka Okwosa

•Anthony Adaba

•Jibrin Isah

•Chinedu Onyia

•AIsa Mohammed Zailani

•Henry O. Arogundade

•Roberts Orya

•Ben Nwoji

•J.d. Lawuyi

•Usman Zarma

•B.m. Wali

•Ndubuisi Osakwe

•Adewale Adeniji

•Chester Ukandu

•John Maha

•Bidi Umeh

•Jooji Tor

•Adetayo Ogunbajo

•Ola Ifezulike

•Henry Agunbiade

•Dayo Afolabi

•Umar Suleiman

•Oladapo Malomo

•Nathaniel Ottio

•Abubakr Rajab

•Shehu Usman

•Abubakr

•Ahonsi

•Lawrence Idowu

•Pac Capital Markets Limited (formely known Asspring Capital Markets Limited)

•Chris Oshiafi

•Anthony Adeniyi

•Mike Chukwu

•Tolu Fadahunsi

•O. Unebu •Tony Ezenna

•Cosmas Maduka•Union Capital Markets Limited

•Niyi Opeodu

•Ibrahim Gobir

•Tunde Yamah

•Salihu Ehimeakhe

•Ebenezer Emeruem

•Mohammed Adburaham

•Olatunji Olutola

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The absence of reporting by the NSE mirrors that of listed companies:- not reporting to the SEC the 2010 figures. As a member of the general public we can’t access the NSE’s 2008 figures let alone 2010. I am assuming that the figures in between have been submitted to the SEC and the SEC has not made them available to us. The article below states that the NSE has earned approximately US$280m over the past four years – I personally cant believe that this is correct given the extent of the amount. If this is true I also cant believe that none of this money has been used to put effective information dissemination practices in place. I would not be surprised if the extent of the earnings of the NSE were as a result of charging everyone in Nigeria for access to the NSE website – say 600,000 people @ US$120 per annum = US$72m – makes sense!! I am in the process of paying my US$120 so that I can get hold of information that I should have access to for free anyway.

In a way the absence of reporting can / should always be construed negatively. Those with nothing to hide can spend a few dollars and communicate with their shareholders and stakeholders and those that are hiding can hide behind poor communication and hide what they are up to. They say that communication and information is the “life blood of markets”. How true.  Now to more Nigerian scandal:-

The article below appears in Business Day, a Nigerian media firm.

FRIDAY, 30 JULY 2010 01:19

An opportunity appears to have been opened for the Arunma Otteh-led Securities and Exchange Commission (SEC) to push its agenda of full regulatory oversight following a fresh allegation of financial impropriety against the management of the Nigerian Stock Exchange (NSE) which grossed a hefty N42.2 billion income in four years. The SEC is in possession of a strongly worded petition sent by Aliko Dangote, a very senior council member of the Nigerian Stock Exchange, that could force it to open investigations into the finances of the Exchange, and test Otteh’s resolve to ensure that SEC performs its market regulatory role effectively.

On Tuesday, an academic and member of Central Bank of Nigeria’s Monetary Policy Committee, Doyin Salami, expressed concern over regulatory slacks in the market, challenging SEC to begin to bite to bring corporate governance sanity to the market, especially its managers.

A SEC source said the petition appears to express deeper concerns over cthe financial management and health of the Exchange, particularly what he described as “corporate governance and transparency challenges” in the financials. Independent investigations yesterday revealed that the Exchange’s auditors had raised a 20-point query over the 2009 accounts and have, therefore, refused to sign and pass them, as satisfactory answers to the query are yet to be provided by NSE management.

In the petition seen by BusinessDay, the NSE management is accused of not presenting to the council or members the audited accounts, seven months into the current financial year. It is also accused of “not presenting to the Finance and General Purpose Committee, interim financial statements for the first and second quarters of 2010.”

The petition is anchored on three planks namely: the expenditure pattern of the NSE; the Excahange’s inter-company and associated companies’ investments; and a huge pension hole in its pension scheme.

“In the last four years (2006 – 2009), the Nigerian Stock Exchange grossed a total income of N42.2 billion with a surplus of only N5.6 billion, representing 13 percent growth over the four year period. “Careful review of the expenditure shows major cost elements are salaries, pension, travel and marketing. At the end of 2007, NSE had a cash position of over N9 billion and as of today, the Exchange is in deficit and is unable to meet its obligations as and when due,” Dangote said in the petition. With regards to inter-company and associated companies’ investments, the petition stated that “current inter-company balances with inter-company/associated companies amount to N3billion, which have been built over a period of years. Similarly, investment in such companies is now in excess of N1.3 billion without any commensurate return being accounted for.”

Dangote also said the pension scheme of the NSE was in trouble as a result of poor management, requesting that the scheme should be “urgently audited to gain a thorough understanding of the extent of the liability of the Exchange. “For instance, I am aware that in the 2008 Accounts, there was an actuarial valuation done which presented a deficit funding of N2.6 billion. A decision was made at that time to amortise this amount over a five year period,” he said in the petition.

He also claimed that out of the funding of the NSE pension, more than N423 million was with a named insurance company, but that the existence of the funds was yet to be ascertained. The petition suggests that the NSE is in financial crisis as it is running behind in meeting its obligations to clients and suppliers, expressing serious worry that the “NSE is currently experiencing financial difficulties mostly arising from undisciplined spending and financial imprudence exhibited by the management of the NSE,” said Dangote.

The petition, dated July 21, 2010, was signed by Dangote, the Forbes Magazine-listed billionaire cum entrepreneur and longstanding member of the Exchange, whose election as president of the Council had been affected by a March 12 court ruling.That ruling is currently being appealed, with another case for the discharge of the ruling also pending, Dangote’s lawyer, Ricky Tarfa, said last week.

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This was obtained from www.newsday.co.zw and the original article was posted on July 22, 2010. We are obtaining the SI 100/2010 and will provide some news in due course. The charges and levies of capital markets players are payable during the absence of an economic  upturn and improvement in Zimbabwe’s capital markets, which markets, in return, rely on political and economic certainty from the people that set these rules and regulations in the first place.

“The Securities Commission of Zimbabwe (SEC) says it will be introducing 11 more rules and regulations to tighten its regulation and surveillance of local capital markets with emphasis on compliance and transparency.

The initiative is part of Zimbabwe’s preparation for Sadc’s securities convergence in two years, a process in which Zimbabwe Stock Exchange (ZSE) and SEC chief executive officers are taking part.

The new measures aim to expand the current set of rules covered by Statutory Instruments (SI) 100/2010, which put into force the Securities Act of 2004 repealing the ZSE Act.

The Act became operational in 2008, the year the commission was apointed.

Willia Bonyongwe, SEC chairperson, says the envisaged rules seek to develop a code of conduct for corporate governance, set the criteria for accessing the investor protection fund set up last year and develop a clear complaints procedure.

The general regulations will also widen the current framework for integrated reporting and disclosures, set the qualification criteria for traders and broaden the requirements for listing, licensing, business conduct, safety of custody, corporate governance and rules of the stock exchange, among other goals.

SEC proposes regulating the number of minimum shares that go to the public for firm that intends to float an initial public offering. The regulatory body is still consulting key players comprising securities dealers, brokers, the Zimbabwe Stock Exchange (ZSE) and pension funds to develop a draft, which would be gazetted into law with the approval of the Ministry of finance.

The initiative also aims to bring additional players under SEC, including asset management companies and securities custodial services, both of which are currently under the jurisdiction of the Reserve Bank of Zimbabwe. This should happen “within the next 12 months or so”, according to Bonyongwe.

“We want to take a look at what is happening in Sadc and look at look at ourselves in the light of that,” Bonyongwe said. “The Securities Act charges us to regulate each area and come up with rules.”

“Brokers did not participate much in the development of the current set of rules. I hope it will be different this time.”

“We want to regulate the market based on where we think the market should be going.

The buzz word everywhere is compliance and transparency. Everything is our business.”

SI 100/2010 laid out specific rules that put the Securities Act of 2004 into force. The statutory instrument sets out provides for criminal and civil penalties for offenses such as insider trading, market manipulation, fraud and financial crime and the fees and levies for securities dealers and authorised brokers, making a clear distinction between a dealing firm and a licensed broker.

It also provides for the establishment of a Centralised Securities Depository.

The Securities Act deals with licensing requirements for market participants, the registration requirements for securities exchanges and the corporate governance framework for licensed players. Under the new structure, the ZSE will no longer be self-governing, but would be registered and licensed by SEC.

Its role would be limited to the supervision and monitoring of the trading process to ensure transparency, including forestalling manipulations of the market at the first level.

Every broker registered under the repealed ZSE Act is deemed a licensed under SEC, but all prospective player would have to apply.\

The deadline for registration and licensing is December 31.

The fees set by SI 100/2010 are as follows:

• Securities (dealing firm) licence $8000

• Securities (dealer) licence$2000

• Securities (authorised dealer) licence  $2000

• Securities (client liaison) dealer $1000

• Securities (transfer) licence $2000

• Securities (trustee) licence $1000

• Securities (custody) licence $1000

• Securities (investment advisor) including journalist $ 2000

• Securities (investment management) licence$10 000

• Securities (multiple) licence $10 000

• Securities (dealing firm )licence $3000

• Securities (dealer) licence$1500

• Securities (authorised dealer) licence $500

• Securities (client liaison) licence$500

• Securities (transfer) licence $1500

• Securities (trustee) licence $1000

• Securities (custody) licence $1000

• Securities (investment management ) licence $3000

• Securities (multiple) licence $4000

• Securities levy of 0.18% of total transaction consideration

• Investor protection levy charged at 0.05% of total transaction consideration

• Securities levy charged at 0.5% of monthly gross income

• Securities (investment management ) company levy charged at 0.5% of monthly gross income

• Securities (investment advisors) company levy charged at 0.35% of gross income for the month

• Corporate Action levy charged at 0.1% of gross amount raised through sale, charged monthly.”

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Our performance this year is a sober reminder that African capital markets have not yet fully recovered from the impact of the global crisis and in hindsight the period under review has been difficult to accurately forecast. Although, the Group remains resilient, our headline results are disappointing. Revenue declined by 9% to P92.8 million, whilst attributable earnings decreased by 96% to P246 765. Although the profit for the year is below expectations, the Statement of Financial Position has strengthened with cash and cash equivalents improving by P21,89 million to P123,4 million with no borrowings.

This creates a strong foundation for a more profitable company going forward. In this respect, we have been able to protect shareholder wealth with shareholders’ equity having grown by P 8,64 million during the year.

In addition, we have been able to contain operating expenses in a difficult trading environment. Operating expenses have been contained to P82,27 million, almost P200 000 lower than the previous year. Although not apparent in this announcement, our core divisions of Stockbroking and Asset Management have generated strong revenue streams and funds under management have recovered significantly. Unfortunately, this improved performance has been partially reversed by a poor performance in the Corporate Finance division, which is partly attributable to timing issues on significant mandates which could not be closed in the year under review. However, these have now started to come through, and in addition, the group will benefit from the cost cutting measures taken in this division during the second half of this year. On the positive side, the Imara Funds have continued to grow with good inflows coming through and limited redemptions. Asset Management South Africa has become profitable this year and the flagship Imara Equity Fund SA has been well received and continues to perform well. We believe this division is now set to deliver long term growth and profitability. It is encouraging to report that income from associates has grown 12 fold to P1,92 million, a clear indication that our acquisition strategy is working and yielding positive momentum. We will continue to raise our stakes in these entities going forward with a positive impact on the Group and will continue to look for further expansion opportunities.

OUTLOOK

We remain cautiously optimistic about our future prospects. Annuity income streams continue to improve, albeit slowly, our acquisition strategy remains robust and is yielding positive returns, and the Group footprint continues to expand. Using the strong Statement of Financial Position as the spring board, we will continue to focus on improving performance in our existing footprint by extending our services and product range in individual markets, whilst also looking for opportunities in new markets. We believe the current uncertain world economies and severe slow down will continue well into 2011, so our expectation is for a quieter year ahead. We look forward to reporting better results in due course.

DIRECTORATE

Philip Gray stood down as Chairman of the board at the Annual General Meeeting of the company on 26 September 2009. He subsequently resigned as a non-executive director on 14 March 2010. Roger Matthews also retired as a non-executive director at the Annual General Meeting of the company on 26 September 2009. Lethebe Maine was appointed as a non-executive director of the company on 25 November 2009. His appointment is still subject to formal approval by Non Bank Financial Institutions Regulatory Authority (“NBFIRA”) and the application is pending.

DIVIDEND

The dividend for the year has been passed.

For & on behalf of the Board of Directors

SM Ndoro       MJS Tunmer

Chairman       Chief Executive Officer

Transfer Secretaries:

Corpserve Botswana

First Floor, Block A, Unit 3, Plot 117

Millennium Office Park, GABORONE

Telephone 393 2244: email: corpserve@info.bw

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TNM, a mobile operator in Malawi, recently released their annual report.  Here are a few extracts:-

The Chairman’s overview Subscribers and Summary Financial Results The program of network expansion continued through 2009 with an expenditure of MK4.4billion on new network elements. This included acquisition of a new switch to provide enhanced capacity and redundancy, commissioning of a further 77 BTS sites, roll out of GPRS/Edge, first to launch 3.5G services in the major cities of Blantyre and Lilongwe, electronic voucher distribution and several new value added offerings. …

Revenue, EBITDA and ARPU EBITDA margin was also negatively impacted by the cost of mitigating persistent outages of power supply and a 50% increase in the cost of subsidizing low cost handsets to increase market penetration. Nevertheless, in absolute monetary terms, 2009 EBITDA was 6% higher than that achieved in 2008. However, an increase of MK440million in depreciation charge on the company’s greatly enhanced fixed asset base and finance charges of MK115 million on local borrowings has seen net profit decline from MK1.5billion in 2008 to MK1.2billion in 2009.

Prospects and Forecast 2010 Moving into 2010, TNM continues to invest in network quality, capacity and coverage, positioning itself to further grow its subscriber base. In line with our mission statement, we remain committed to connecting the country and will continue to roll out coverage network to more areas. The 3.5G layer will be made available in more centres, thus providing subscribers with higher speed data transfer and internet access. We remain focused on increasing the subscriber base, customer retention, and revenue maximization while maintaining strategic cost control.

Download the full 2009 annual report

View the online interactive annual report here

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