African Investor Relations

Over 63,000 annual reports were viewed by over 24,000 individual website users on www.africanfinancials.com in the past three months. Traffic to Africanfinancials.com has grown exponentially since 2007 when the portal was launched:-

Africanfinancials.com was established in 2007 by African Is Cool, to enable online viewing of annual reports by sector, year or country, as a free service to the users of financial information / annual reports in Africa. This is also a free service to listed companies who are able to send us their annual reports for scanning and publication online. This has now evolved into a useful tool for the many thousands of users of financial information on African markets and we want to take this to the next level.

Sponsorship funds raised will enable AIC to invest in procuring timely publication of more annual reports online for the benefit of African capital markets and investors alike.

Freely available information increases the investment message outreach of African companies, reduces systemic market risk and increases transparency. Noble objectives for corporate sponsors.

Recent traffic statistics for the past three months reveal the following:-

• No of countries visiting the portal      140
• Average time on site                                 4 minutes and 14 seconds
• No of annual reports viewed                  67,154
• No of individual visitors                          22,025
• Top country visitors                                 Nigeria, Kenya, USA, UK, Ghana, India, Egypt

Africanfinancials.com displays African annual reports online by year, sector and country and a weekly alert is sent to over 800 contacts that have requested notification of new publications of annual reports online. The significant traffic visiting africanfinancials.com provides sponsors with a unique opportunity to target their brand and corporate message to specific users of African financial information.

African Is Cool seeks the following sponsors for the portal:-

• “Master” sponsor: a single pan African corporate sponsor. The objective of this sponsorship is to increase transparency and promote informed investment into African markets.
• “Sector” sponsors for the following categories:-
  • “African banking”: the sponsor’s logo and message will appear in annual reports, publications and banking sector reports in which any African banking organisation appears. Africanfinancials.com greatest country traffic comes from Nigeria so any sponsor here would ideally seek exposure to or be  dominant in Nigeria.
  • “African construction”: the sponsor’s logo and message will appear in annual reports, publications and construction sector reports in which any African construction organisation appears.
  • “African beer”:- the sponsor’s logo and message will appear in annual reports, publications and banking sector reports in which any African beer or beverage organisation appears. Africanfinancials.com greatest country traffic comes from Nigeria so any sponsor here would ideally seek exposure to, or be dominant in, Nigeria.
  • “African telecommunications”: – the sponsor’s logo and message will appear in annual reports, publications and banking sector reports in which any African banking organisation appears. Africanfinancials.com greatest country traffic comes from Nigeria so any sponsor here would ideally seek exposure to or be  dominant in Nigeria-
  • “Country” sponsors for the following countries are also sought:-
    • Nigeria – a country sponsor for all Nigerian annual reports viewed online
    • Ghana – a country sponsor for all Ghanaian annual reports viewed online
    • Kenya – a country sponsor for all Kenyan annual reports viewed online
    • Zimbabwe – a country sponsor for all Zimbabwean annual reports viewed online
    • South Africa – a country sponsor for all South African annual reports viewed online

Note that there are other “Sectors” and “Countries” to sponsor besides the sectors and countries indicated above.

The electronic format of the annual reports (ipaper) provide unique opportunities to embed sponsors’ brands and corporate messages online. The professional html email distribution service which, at the current level of registrants, provides sponsors with significant targeted exposure of their brand, is again an ideal marketing tool especially if this platform is used to provide specific sectoral or country alerts.

A key attribute of the sponsorship of africanfinancials.com is that sponsors know that they are targeting users of financial information in African capital markets. These users include investors (retail and institutional), analysts, data vendors, research professionals and research academics (a growing area of users using the ease of access to data for academic purposes).

If your organisation has pan-African outreach, has, or wishes to market its brand to users of Nigerian financial information (a significant area of online activity) and other African financial data then you should consider seriously the sponsorship opportunity provided by Africanfinancials.com. Call me on + 263 4 850735 or send me an email on ceo@africaniscool.com for more information.

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The Nigerian SEC website announces

“It is with great pleasure that I forward to you, the Annual Report and Accounts of the Securities and Exchange Commission for the year 2008″

and then provides a link to a document which provides a myriad of market statistics in the form of an annual report. The report refers to the annual accounts on page 57 which do not appear on page 57 or anywhere else. The statement immediately below the announcement of the availability of the SEC’s annual report and accounts states:-

“This is to remind the under listed Public Quoted companies and others who may not have been listed but have their financial year end as December 31st and whose securities are traded on the floor of the Nigerian Stock Exchange that they are due to publish their quarterly financial reports and file same with the Commission on or before 30th April 2010″

The Nigerian SEC’s Vision Statement is to be “Africa’s leading capital market’s regulator”.

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This notice appeared from Pioneer Africa in the Zimbabwean press today – see below. Here are a few observations:-

- THE ANNUAL REPORT IS NOT ONLINE AS AT THE DATE OF THIS ANNOUNCEMENT – IT IS ONLY THE ABRIDGED ANNUAL REPORT THAT IS – NO PROXY VOTING MATERIAL EITHER – a few more days and shareholders will be able to claim that proper notice was not given

- This notice obviously has the sanction of the ZSE but no mention is made of this

- The notice in the hardcopy press advert does not appear on the website

- There is no mention of why the annual report was not sent – presumably because the company can’t afford it?

- There is no explanation of the threshold of shareholder votes required to approve the waiver of the receipt of the hardcopy annual report – is it 75% of the votes (in which case a majority shareholder could unilaterally deny minority shareholders) or 75% of the shareholders by number? Or 75% of the number or votes in attendance at the meeting – usually the quorum at an AGM is just a few shareholders

- is putting the annual report on the website enough? Do Directors have an obligation in terms of good corporate governance to make available to shareholders the annual report?

- proxy forms are available at the Head office but not on the website – shareholders have to collect these forms and then forward them to the Company Secretary – if the annual report can be put online why not the shareholder proxy forms? The shareholders that are asked to waive their right to receive hardcopy annual reports

- are the directors reasonably sure that all of their shareholders have a reasonable chance of receiving their shareholder voting material? How can a shareholder vote on something if the voting material is not sent to them. Surely the logical thing to do, assuming that this initiative is legal, is to send all of the hardcopy announcements of the company’s intention to be carried out in the following year.

- How many contact email addresses does Pioneer Africa have of its shareholders? What initiatives has it taken to ensure that the voting material – the stuff that all shareholders are entitled to – is sent to shareholders?

- There is no corporate governance section on the Pioneer Africa website. The 2008 annual report (since the 2009 one is not online) says that the Board endorses the King II Code of corporate governance……mmmmmm…..

- S149 of the Companies Act requires that the balance sheet etc. “be sent to all persons entitled to receive notices” – the penalty if this is not done? s149 (3) of the act says ” If default is made in complying with subsection 1 the company and every officer of the company who is in default shall be guilty of an offence and liable to a fine not exceeding one hundred dollars……….gasp.

- so why havent other companies done this previously?

- which is more or less excusable? Denying the shareholders a reasonable right to receive their voting material or denying them the right to receive the annual report?

- forgetting the bigger picture issue here – if the annual report does not get published in the next day or so the clear 21 day notice period will have been breached – so what? You may ask.

This is a good example of the ignorance of directors when it comes to their obligations associated with shareholder communications. The IOD Zimbabwe and other institutions have high-flying-fluffy-puffy corporate events and training sessions where the oft-stated cliches of progressive corporate governance etc are stated over and over again to a sleeping audience. There should be hands on practical training sessions showing how executives can use the web effectively to communicate with shareholders, interactive sessions with legislators to come up with ways of solving the issues facing Zimbabwe

I hope this does not set a dangerous trend. Pioneer Africa is not a Safaricom and does not have the ability to significantly influence the regulators in turning a blind eye to corporate governance principles that have evolved from the South Sea Bubble days.

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.”

Globally intellectual debate about the end of “shareholder value maximisation” has come to the fore. A recent article in the Economist highlights that “stakeholder values” are emerging as the core objectives of management.

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

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

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

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

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

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

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

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

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

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

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We believe that listed companies have now been required by the ZSE to prepare hard copy annual reports for all shareholders. The question of cost now comes to the fore given that there are thousands of shareholders whose shareholdings are of insignificant value (penny stocks). The practical focus should be how listed companies can reduce their shareholder bases significantly to avoid the costs of preparing annual reports. There has to be some form of share buy back solution specifically to make shareholders meaningful again.

Is it all really about cost? Isn’t the annual report a marketing document too? Isn’t business tough in Zimbabwe at the moment? The fact is that no-one has information on how much it costs to prepare annual reports in  hardcopy. If you want to share this information with us we will aggregate all the data we have, without disclosing names and let you know whether this is the issue that everyone thinks it is. Tell us how many shareholders you have and the total cost of your annual report per annum here .

Zimbabwe is at a crossroads in its securities legislation and corporate governance – a new code will be released by the end of the year. Now is the time to start looking at using electronic shareholder communications within a framework of corporate governance and the law. The solution is to provide investor choice and there is ample evidence elsewhere on how to slowly wean ourselves off hardcopy communications.

Click here to track internet use in Zimbabwe and other countries (you will need an internet connection). Or just read the document attached herein see below.

Remember all shareholders have to be treated equally. Companies can’t only have 10 institutional shareholders and still be listed.  If companies view them as an asset then the question is how to use the relationship to better advantage. This advantage may be in corporate reputation, commercial return, brand enhancement. Each listed company will have its own story. Every company has a story. You may not think it does, but it does.

When the obligation to send hard copy communications is dropped, an alternative communications governance model has to be adopted. The Internet can be an important cog in this wheel. The fact is no one channel of communications is perfect. Directors should use whatever tools they have available to them. Hardcopy, electronic and the Internet. You can’t ask shareholders to vote on a proxy card without giving him the information to make a decision on which he is voting. The issues are complex.

In Zimbabwe, the regulatory environment has been unclear and its up to companies to adopt a new communications governance model in consultation with legislators and regulators. Fat chance. There needs to be a culture of co-operation and like minded concern. This does not exist because everyone is so apathetic.

The attached paper outlines what an alternative communications governance model might look like. Read it here online here or download it here and send me your feedback. Zimbabwe is formulating a new corporate governance code and its precisely these issues that need to be addressed.

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As our population of annual reports on africanfinancials.com grows (2,268 at the last count), so does the opportunity to carry out research on a broad array of African companies. Long-term research. The Intelligent Investor, by Benjamin Graham and updated commentary by Jason Zweig should be a bible for anyone interested in investing in Africa. One of Benjamin Graham’s insights is

“the investor who permits himself to be stampeded or duly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage”.

Zweig points out the Graham’s basic advantage is the full freedom to think for your self in whether to follow the market or not. To have this independence though you need information.

There are 1,500 listed companies in Africa and Africanfinancials.com seeks to put the last 10 years annual reports of each of these online. Call it 15,000 in total.  We have just over 2,200 annual reports online. We have made reasonable efforts to do this, with some success, but it’s clear that the information is just not there. Using the annual report as an investment bible proxy less than 15% of the information that should be available online is online.

Is there a single organisation that has correlated the long term earnings of listed companies in Africa? Not sure. Perhaps the likes of Thompson Reuters and Bloombergs have and to be sure this information is not readily available in market at low cost. Hard to find information is valuable because you can charge for it. Stock exchanges are natural repositories for this sort of data and making this available to the market is, in my mind, one their basic obligations. But alas this is not to be.

When asked what keeps most individual investors from succeeding, Graham had a concise answer:

“The primary cause of failure is that they pay too much attention to what the stock market is doing currently”.

This is all very well, but when finding out what they (African companies) did in the past 3 – 5 let alone the last 10 years is not possible investors are left to concentrate on market sentiment and what the stock market is doing currently. Africanfinancials.com is slowly addressing this enabling investors to access information that they can digest themselves with or without the influence of others.

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Investor traffic on www.Africanfinancials.com measured by visits is almost 8,000 a month. Actual visitors are in excess of 5,800 a month.

The UK leads in visits at just under 1,000 a month. Not surprising as the London is a financial capital. In the next month or so we intend to add over 800 additional annual reports and more.

Why do we love www.africanfinancials.com? It introduces investors to our clients, it gives investors what they want (f0r free), it encourages studies into African capital markets, it increases transparency, it enables educated investment decisions, it achieves the basics. It’s ahead of the Governance Curve.

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Searching for annual reports on Africanfinancials.com has just got easier. A simple Google search bar now enables investors to search our portal directly and immediately.

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Legislation and regulation in most African capital markets are not as strict as those in other markets and therefore corporate liability not as high. Progressive investor relations practices are therefore not as prevalent. However, according to AIC, the rapidly growing Internet access across the continent and the fact that many investors in African equities are a global community, the potential to build a relationship and communications with investors online is enormous. AIC’s Online IR Awards reward the pioneers in this field.

Online investor relations practices comprise strategic management responsibilities that integrate finance, communication, marketing and securities law compliance to enable the most effective secure two-way communication between a company, the financial community, and other constituencies, which ultimately contributes to a company’s securities achieving fair valuation.

Category	:	Best Online IR Programme 2009
Winner	:	African Sun Limited
Key_criteria	:	Comprehensiveness of data published online Profile of website feedback Commercial returns from website feedback Timeliness of posting data online Diversity of media use Enhancement of the IR function
Comment	:	African Sun received our top prize for its balanced online IR programme implemented over the past year. African Sun’s www.africansuninvestor.com provided equal focus on investors as www.africansunhotels.co.za provided on customers. Their transparent investment thesis, comprehensive website data, a new CEO blog and strong business growth all contributed toward positive ratings. African Sun received excellent ratings for the timing and nature of feedback provided to the queries submitted online. The key aspect, however, that enabled African Sun to clinch the award was the commercial value of the feedback they received through www.africansuninvestor.com. A pity that their share price has yet to respond.
Category	:	Best Performance 2009
Winner	:	Econet Wireless Zimbabwe
Key criteria	:	Share price performance for the period under review
Comment	:	Econet Wireless has staged an unbelievable operational comeback less than a year since Zimbabwe’s hyper-hyper inflation forced the economy to re-start from ground zero through dollarisation. Throughout this period, Econet’s management could see the other side of the crisis and invested heavily in ensuring that when the US dollar replaced the local currency, they were in a strategic position to take advantage of it. This happened and continues to happen and the share price responded accordingly, recording the highest gain compared with other AIC clients for the period under review.
Category	:	Best Investor outreach 2009
Winner	:	Copperbelt Energy Corporation plc.
Key criteria	:	Geographic diversity of website traffic Number of unique website visitors Number of website page views Conversion ratio of visitors into registered InvestorPass™ visitors
Comment	:	CEC’s website analytics speaks for themselves: Amongst AIC’s clients, the company enjoyed the highest number of page views, the highest number of unique visitors, and highest number of visits from over 100 countries. Now that CEC has settled into its online IR programme following its launch in February 2009, tangible commercial benefits are starting to accrue through feedback to their website. CEC is a unique infrastructural public investment opportunity, which contributes to it being the radar screens of investors around the world.
Category	:	Best CEO blog 2009
Winner	:	Geoff Goss of Celsys Limited
Key criteria	:	Frequency and consistency of blog posts Blog content Insight and motivation in content
Comment	:	Geoff Goss has habitually provided an excellent blog to complement Celsys’ investor relations website on www.celsys.co.zw. His jovial views into the pain suffered by Zimbabwe managements over the past few years have been extraordinarily insightful. Yes, the CEO blog doesn’t exactly have millions of visitors every day, but the message we get from Geoff – and it’s a message that we give to all our clients is that every effort should be taken to inform shareholders through many different media. It only takes one investor to change the fortunes of a company and so the effort is worth it.
Category	:	Best IPO Online Investor Relations 2009
Winner	:	Telekom Networks Malawi Limited
Key criteria	:	Investor responsiveness before, during and after the IPO Website interactivity before, during and after the IPO Online prospectus
Comment	:	We only had one participant in this category, but there are some significantly unique aspects of this transaction that you will not have seen in any other African IPO. Firstly, regulatory approval was obtained to distribute the prospectus online with an application form. Secondly, the majority of TNM’s investment community was identified in InvestorPass at IPO stage. This secure two way communications platform has been key in merging corporate strategy (i.e. brand enhancement) with investor communications. TNM’s outreach measured by the number of countries visiting www.tnminvestor.com was AIC’s highest at 112.
AIC’s inaugural annual awards recognises the performance of AIC’s online investor relations clients during the previous calendar year.

Based on best investor relations practices, modified for African markets, African Is Cool (“AIC) uses corporate investor relations websites to create and grow an online investment community with which companies communicate, and from which they can receive feedback. The bigger the online community, the lower the costs of communication, the greater a company’s influence and the more efficient their communication.

Website feedback brings business deals, lowers the cost of doing business and gives listed companies the ability to modify corporate strategy. Because AIC’s services are unique they do not conflict with companies’ current financial reporting, IT, PR or marketing initiatives. In contrast, AIC services complement them.

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Our portal of African annual reports www.africanfinancials.com recorded almost 5,000 visits from over 82 countries last month. Top of the visiting country list was Nigeria primarily viewing, you guessed it, Nigerian annual reports. The UK and South Africa came second and third respectively.

Africanfinancials.com is Africa’s largest online portal of freely viewable, sortable annual reports. Our portal offers a free service to African listed companies to scan their annual reports into PDF and publish them online. Our portal also attempts to assist investors in  sourcing annual reports from listed companies but this proves challenging given African listed companies’ low levels of  awareness of the level of investors’ needs for information.

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