African Investor Relations

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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Stock exchanges in most countries are in a unique position: they are monopolies in the supply of trading data. They add value to that data, package it and distribute it real time and in other forms etc. for a fee. Fair enough. But what about the basic information that an exchange should make publicly available, daily, for free, in an easily accessible format? Try accessing a market capitalization report (shares in issue X share price) on any particular day in any of the African markets. The information does not exist other than through a broker. Even then with brokers there’s no assurance that the information will be given to you.

My question. If there were to be minimum data on a particular day made available freely by stock exchanges would it be the following:-

• Status of listed companies – suspended etc.
• Share price
• Corporate actions
• Indices
• Shares in issue
• Volume traded
• Corporate announcements

I am talking here of the most simplistic availability of core data. I realise that if this data is to be processed and value added there is scope for the exchange to be compensated for this.

Many African stock exchanges need to formalize their information dissemination practices and it would be useful to have a good practice template through which the IR fraternity can judge them.

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The CEO breakfast on investor relations (IR) management, hosted by AIC on 15 September 2009, discussed some of the grey areas that still persist in Kenya’s regulatory environment with regard to online IR management, and whether this indicates a shift in the approach towards investor protection.

In a bullish market, one-on-one meetings between listed companies and their larger investors were well accepted by listed companies and created meaningful interaction. In the current bear market, however, many listed companies have begun to show apathy towards their investors, finds Gregory Waweru, an analyst with Kestrel Capital stockbrokers, warning that in a sluggish market, the communication of strategy becomes even more important. If costs are a concern in the current environment, then online mechanisms offer an affordable alternative. But so far, websites are not picking up the slack either.

Most companies in East Africa have not yet fully explored the potential of online communications. If, a few years ago, the lack of access to the internet had been a powerful restraint, this excuse is rapidly falling away: The first of several fibre optic cable ventures has become operational, and internet access will expand exponentially. The largest growth in access will be through handsets as the purchase of computers will still be out of many people’s reach, but digital means of communications will certainly reach a much broader audience.

Cost savings were a driving factor in how Safaricom, a key player in the mobile and data business, prepared for their first AGM: Safaricom have made extensive use of recent legal changes that allow the use of electronic means of communications, e.g. providing their annual report in a digital version rather than printing and dispatching paper copies for every single one of the more than 800,000 shareholders. The large number of retail investors may be a logistical headache for Safaricom, but digital means make it a lot easier to deal with this group of shareholders that has previously often been neglected for sheer cost reasons.

Transition in the Legal Framework

The US Securities Exchange Commission (SEC) has only allowed electronic means of communications with shareholders in 1995. But today, they are the standard, and hard copies of information have to be explicitly requested. In the UK, it is the opposite: Shareholder consent is required for the delivery of electronic communications.

In Kenya, electronic communications have not yet become mainstream in IR management, and the regulatory environment reflects this transition: Kenya’s Companies Act requires notices to be given to shareholders ‘in writing’. At first glance, this seems straightforward, but it does not actually define what qualifies as ‘writing’, i.e. it lacks clarity whether electronic means of communication are admissible. Amyn Mussa, a partner in law firm Anjarwalla and Khanna, also suggests that lawmakers need to look at the concept of ‘deemed delivery’ again, i.e. the question when it can be reasonably assumed that a shareholder has received the information sent by the listed company. The new draft Companies Bill, in contrast, is clearer: When information is e.g. posted on a company’s website, this is considered ‘deemed delivery’. This is, of course, much easier for the listed company – but may lead to a dilution of shareholder rights.

Perspectives

Rob Stangroom cautions that this new proposed legislation would imply a significant shift in the approach to shareholder protection: So far, the underlying principle is that the burden lies with the listed company to make sure – within reason, of course that the shareholder will receive the company notices. Under the new legislation, this burden would shift to the shareholder who would be expected to make an active effort to obtain information. This, he says, it not necessarily wrong: It may well be that the overall challenging infrastructure of reaching shareholders – unreliable postal services, high transport costs and so on – justify this shift. Safaricom’s approach would certainly suggest that the high costs of attempting to provide all shareholders with a hardcopy of the annual report would not necessarily be rewarded with commensurate success.

But it has its own risks: It is one of the fundamental principles of governance, Stangroom argues: The board need to give a reasonable return to shareholders for a given level of risk. In the Kenyan context, the question then arises whether costs savings resulting from simply expecting investors to find the necessary information will worth the possible risk – dilution of shareholder rights and possible litigation. More substantially, can a board adequately assess future risk in the face of such rapid technological changes in digital investor relations platforms? What would constitute significant savings today would no longer be expensive in a year or two. A board, he argues, should err on the side of caution.

Source: Ratio Magazine

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The following extracts from the 2009 ASEA conference in Abuja from This Day, a newspaper in Nigeria, illustrate that:

• ASEA needs a proper vision;
• ASEA needs resources and leadership;
• African markets will not grow until regulators facilitate that growth through actions;
• Markets exist for the benefit of listed companies and investors not the other way around; and
• Oft-repeated annual clichés do not build markets; and finally
• ASEA has not achieved anything significant.

I have taken the text out of This Day’s article ( a Nigerian newspaper) and added my 2010 New Year’s wish in the form of narrative that I would liked to hear from ASEA 2010 conference (where-ever that may be).

Here goes:-

What was said in 2009: “Regulations must be strong, enforcement efficient and effective while investor education must also be given priority to enhance market competitiveness.”

What I would like to hear in 2010: “Through the studies undertaken by our A, B C members during the year we have identified the following opportunities to improve enforcement and investor education: X, Y and Z. ASEA markets have agreed to implement A, B and C of these before next years conference. The person responsible for this is Mr X of Y stock exchange.

What was said in 2009: “For African securities exchanges to be strengthened and attract desired patronage, they should adopt globally accepted disclosure mechanism such as International Financial Reporting Standards (IFRS) and high corporate governance standards.”

What I would like to hear in 2010: “For African securities exchanges to be strengthened and attract desired patronage, they should be responsive to the needs to investors and listed companies. An online African wide consultation and feedback process will commence on 1 January 1 2010 and ending 30 September 2010 with results and recommendations being submitted to ASEA board prior to the next board meeting. US$X00 has been set aside for an independent third party to manage this process. The person and exchange responsible for the supervision of this process is Mr Smith of Y exchange.

What was said in 2009: “Demutualisation will leads (sic) to enhanced corporate governance practices and should be a priority for African stock exchanges.” 

What I would like to hear in 2010: “Demutualisation is being considered by the following markets, A, B and C. The positive impact of demutualization for investment promotion prospects, investor responsiveness and listed companies are as follows: A, B and C. You may contact Mr X of the Y stock exchange if you have any information requirements.

What was said in 2009: “Risk management procedures will be crucial to developing African markets”

What I would like to hear in 2010: “Through the studies undertaken by our A, B C members during the year we have identified the following opportunities to improve risk management procedures: X, Y and Z. ASEA markets have agreed to implement A, B and C of these before next year’s conference. The person responsible for monitoring this is Mr X of Y stock exchange.

What was said in 2009: “Liquidity is still an issue in Africa, due to small floats and small size of many listed equities.”

What I would like to hear in 2010: “The following statistics on the liquidity of all ASEA member markets show improvement over the previous year. Many thanks to Mr Smith of X market in compiling this information. ASEA encourages its members to adopt the following mechanisms to improve liquidity and float sizes: A, B and C. A file of tips to do this is available for download on our website.

What was said in 2009: “The establishment of a strong investment banking industry and usage of mutual fund (sic) to deepen the market is recommended.”

What I would like to hear in 2010: “This is a summary of the initiatives of each of the ASEA exchanges to promote and deepen their market structures: A, B and C. The delegates agreed that the following areas: A, B, C have the greatest impact and should be adopted in 2010. The person and exchange responsible for this feedback is (). The ASEA strategic plan for 2010 – 1015 is available to download here.

What was said in 2009: “Efforts should be made to list the large companies that are currently outside the markets via legislation especially telecoms and oil and gas.”

What I would like to hear in 2010: “The following efforts were made to make listing more attractive on our stock exchanges: by category. ASEA agreed that the single biggest area to promote listings is in X area.” The ASEA strategic plan for 2010 – 1015 is available to download here.

What was said in 2009: “There must be conscious efforts to attract and sustain foreign investments into Africa since prospects for long-term investments abound on the continent.”

What I would like to hear in 2010: “Since prospects for long-term investments abound on the continent and information is the life blood of markets ASEA has, through a consultative process with market players from X date to Y date and managed by Z independent consultancy, adopted minimum voluntary standards of information dissemination for its listed companies. ASEA concluded that Africa’s long term opportunities cannot be appraised as such without adequate information.”

What was said in 2009: “There was need for African exchanges to integrate their markets for improved liquidity, access to greater capital pools, and efficient operations. 

What I would like to hear in 2010: “The prospects for market integration will not be mentioned ever again until A,B,C,D,E and F markets address the basics of exchange control, equality of investor treatment and information availability. The attached annual report, kindly prepared by H exchange, is a succinct summary of the restrictive exchange rate regimes adopted by ASEA member countries.

What was said in 2009: “The adoption of compact technology should be a way of reducing the cost of acquisition as this will enhance the integration of trading platforms.”

What I would like to hear in 2010: Something that is coherent.

What was said in 2009: “The participants identified implementation capacity as a major constraint to executing large capital projects – and therefore sees Private Public Partnership (PPP) as the future of infrastructure development in Africa.”

What I would like hear in 2010: “ASEA recognises that it cannot achieve its objectives on its own and will first achieve A, B and C in order to ensure that it becomes a credible enough organisation for it to partner with private sector resources.

These are my New Year wishes for ASEA and African stock exchanges.

Happy New Year!!!

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In further evidence of the absence of the African Stock Exchanges Association’s (ASEA) capacity to deliver meaningful vision to African capital markets the NSE sought financial assistance from the private sector to fund the ASEA 13^th annual conference held in Abuja in early December 2009. The request came just three weeks before the event.

The conference, touted as the highlight of the activities of ASEA, has been advertised from the beginning of the year. One would assume that, if ASEA had meaningful relationships with its members and Africa’s more than 1,300 listed companies, some form of sustainable funding could have been raised and applied to greater benefit. The objectives of ASEA have not been pursued effectively and therefore ASEA and the NSE find themselves short of cash.

I guess the National Institute of Investor Relations (NIRI) link in the USA is a parallel organisation that has similar objectives to ASEA but within the investor relations field. The organisation in its early years pondered at great length on how to structure its membership, what to charge and what to do in order that it had as broader support as possible. It worked and the organisation now has over 4,300 members worldwide and is a leading organisation in participating in the interface between regulators and market practitioners and listed companies. ASEA has over 22 African stock exchanges, over 300 brokers and over 1,300 listed companies from which to solicit funds in exchange for investment into activities for the benefit of its members and markets as a whole.

I can think of more than a few products that ASEA could offer listed companies, brokers and exchanges in Africa in exchange for some nominal funding or “membership fee”. Let’s look at some numbers:-

If Africa’s 22 stock exchanges each donated US$20,000 per annum (on average – with the smaller markets paying a lot less) and if 50% of Africa’s + / – 400 brokers paid, on average US$750 a year, and say 50% of Africa’s 1,300 listed companies paid, on average, US$1,000 a year then ASEA could raise US$980,000 per annum for market development and improvement initiatives. These initiatives could have, as their beneficiaries, those organisations that subscribed to ASEA.

Add to the above revenues from advertising to the dedicated stakeholder base that would result from the progressive products ASEA would offer.

ASEA’s activities should be outsourced to the private sector. I will give you an example of why. A topic on the agenda at the Abuja meeting is addressing the illiquidity of Africa’s capital markets.

So all of the regulators and market officials, the ones responsible for perpetuating high levels of illiquidity, are tasked with the responsibility of addressing illiquidity in Africa’s markets. Those responsible for the status quo are asked to debate the way forward. In a single sitting. In Abuja. There is no evidence of active dialogue with the listed companies themselves, investors or capital market practitioners prior to the conference. Or at the event for that matter – the conference does not attract a broad base of stakeholders. The meeting is not an accumulation of the views and professional opinions of the dialogue of hundreds of stakeholders over the year. It’s an event where the most likely outcome will be rhetorical and clichéd calls for promotion of a greater number of listings to increase “liquidity”.

This is what the ASEA should do. Sort out their website and make it truly interactive. Adopt say three annual themes. Get member exchanges to provide meaningful data, which aggregated, is attractive to a broader range of stakeholders. Get those stakeholders commenting on the three annual themes. Use the feedback to have a round table discussion at the annual conference and then set concrete and achievable goals for ASEA to pursue.  

It’s simple but ASEA can’t achieve this because the organisation is poorly structured and no-one is applying their mind to what ASEA should be doing to have a meaningful impact.

 OK say that you think that it’s not possible to co-ordinate African markets through the ASEA. Say it’s just not doable. Fair enough. Then disband ASEA and take a regional approach but you can’t have it both ways.

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I read a study by the SEC on US investors and it go me thinking how none of the African markets have anything similar. The results of the profiling are interesting:-

• 38% of investors in the US get company information from corporate websites, 24% from portals
• 51% of US investors found the language used in annual reports “somewhat difficult” to understand and 21% “very difficult” – thats a total of 72% of the readers of annual reports finding difficulty in reading annual reports
• 55% of investors found “too much” information in annual reports
• 60% of investors revert to the Internet to find information missing in annual reports
• US investors do not read annual reports because “they are too complicated – 38% of respondents” or ”they are too long – 21% of respondents”
• 55% of US investors access information on their investments from the Internet
• 20% of US households invest in shares and 26% in mutual funds

My suggestion is that once the African Stock Exchanges Association sorts out its directionless state it should co-ordinate market- wide studies into African markets. They need not be complicated. I bet you studies on cell phone ownership and internet penetration and what the needs are of African investors will reveal some real opportunities for Africa’s markets and companies to improve their capital markets.

One last statistic here is the scary one: investment literacy was measured and 70% of Americans with investments in shares acknowledged they owned a part of the company BUT 22% thought they had lent money to the company by investing in its shares. There has to be a high percentage chance that Africans are more investment savvy than Americans if studies were indeed carried out.

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This week, the US Securities and Exchange Commission (SEC) published its draft strategic plan outlining its
strategic goals for fiscal years 2010 to 2015. The draft plan surveys the forces shaping the SEC’s environment and outlines over 70 initiatives designed to support its primary strategic goals. The SEC’s draft plan also invites the public to comment on the document for the next 40 days. The draft strategic plan is available here.

Africa has been touted as the last emerging market frontier, but ‑ where is our strategic plan for pan-African stock market development? Internal bickering, political motivations and national pride all stand in the way of national and regional securities
associations defining some long-term strategic objectives to strive for. These bodies really need to focus on the bigger picture of where African capital markets want to go, and map out a strategic plan how to get there. If the task is too big, then divide an overall plan into different stages that are relevant to the smaller, medium and larger markets.

Some markets like Mauritius and South Africa are progressive and shooting ahead, but the smaller markets are not following in their wake. The divide between the rest of the world and Africa grows bigger in those markets whose resources theoretically hold the future of our growth.

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Read ASEA’s annual report for 2008 and a total of USD10,000 was received from its 20 member exchanges – a total of USD500 each. What is this if not an indication of the confidence that Africa’s stock exchanges have in the association and the resources available to it? Yes, the member exchanges have utlilised their own resources to assist in managing ASEA, but I think that ASEA is just a white elephant. Here is why:

A review of the stated objectives of ASEA versus outcomes shows that very little has been achieved since its inception 12 years ago. And this perpetual non-achievement is due to continue. In 2008, ASEA participated in an African Union workshop for the establishment of a pan-African stock exchange “where a gradual approach to its implementation was recommended”. Why can none of the decision makers involved in these events see the fragmented manner in which regional markets are developing and tell it like it is: There is no hope for a pan African stock exchange anytime soon? Anyone who suggests otherwise is purely there to ride the wave of free financial grants to enhance their airmiles status. ASEA’s annual conference, the highlight of every year, never results in any subsequent action or achievement. ASEA is discussing exactly the same issues that they were discussing in 1997.

Or perhaps ASEA has achieved a lot and has just not been able to communicate it to the market through its website or any other means? This is what the Chairman Maged Shawky says about the ASEA website:

“…we attach a great value to ASEA website, launched under the URL www.africansea.org, as well as the ASEA Yearbook, first released in 2006, as a summary reference for ASEA members, to serve as marketing tools to attract interest to the African region.”

The 2008 annual report goes further to state:

“To enhance the ability of ASEA in providing a credible and central source of information on the Association and its members, ASEA website was upgraded several times to have a more user-friendly interface, updated information and useful features that best serve all users. The website provides a medium that highlights ASEA programs and latest achievements, together with members’ profile, news, trading data as well as direct links to their websites.”

The website is out of date, incomplete (contrasting sharply with the “comprehensive” information ASEA undertook to present) and no responses were provided to any of the email communications to the stated representative contacts. I will not go into any detail but there is plenty of it.

The primary objects of ASEA also include the sharing of information and marketing and establishing markets, but 25% of the 20 stated member exchanges profiles do not exist in the 2008 annual report: namely, BRVM, Casablanca, the Libyan Stock Exchange, the Swaziland Stock Exchange and the Zimbabwe Stock Exchange.

Apparently an ASEA 2008–2010 corporate plan was prepared but this consists of little other than the establishment of three “task forces” on corporate governance, integration in Africa and promotion and marketing. Without a practical focus, financial resources and insight into what is actually needed in African markets to promote investment, ASEA has no hope of achieving anything significant other than the right of passage of its members to the annual conference.

Africa Investor has partnered with ASEA in its annual awards in the mistaken belief that it adds credibility to their excellent initiatives. In fact, in essence, the complete absence of substance to ASEA is not the issue. ASEA provides its office bearers with a pan-African appearance whilst at the same time avoiding the country-on-country politics that typifies how Africa’s regulators have carved up their respective markets.

If ASEA only had one core task, that of ensuring and promoting standards of information availability, that would suffice. But they want to change Africa in all respects. Wrong approach. Our free portal of annual reports www.africanfinancials.com is achieving more investment promotion in two days than ASEA has achieved on over a year: We have over 100 visitors a day ASEA has had 169 visitors to its site in a whole year according to its ticker.

Stock exchanges with any semblance of common sense should withdraw their support from ASEA (what support you may ask?) until a practical and common sense strategy is adopted that actually promotes investment.

So what is a “practical and common sense strategy”:

• Sort out the membership fee structure (this has been on the table for some time now) and how it is invested: Just a little from each exchange would go a long way if an internet platform were core to strategy, i.e. forget secretariats, vast travel budgets and the like, spend on practical things like a decent website and ensure it is up to date.
• Focus, and focus on something both sensible and achievable: information availability. This is practical. It adds value. All the rest such as corporate governance, integration etc. have been or are currently being flogged to death by overpaid traveling consultants that understand very little about what is actually needed to do something instead of talk about it. After five years or so, another theme could be adopted. Being all things to all men is rubbish. The internet is changing the world and Africa’s regulators are fast asleep.
• Outsource managing the strategy set out by the ASEA board to a qualified company.

It’s that simple.

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TIP 1:

Make it mandatory that annual reports be published online as soon as they are made available or posted to shareholders. Less than 30% of African annual reports are currently online!

TIP 2:

Require an IR contact to be clearly indicated on the company website or stock exchange website and require a maximum turn around time. Investors should have access to companies that they own. They usually don’t!

TIP 3:

Automate the publication of corporate actions online with free access to attachments. The JSE has been offering the SENS platform to African stock exchanges for years – why not use it? Investors need information to make educated investment decisions.

TIP 4:

Incorporate the core investor relations best practices into the listing rules. And name the companies that are not compliant. Why? It makes sense, and it creates value.

TIP 5:

De-list companies that should not be listed, i.e. those with very low free floats and low number of shareholders. They are not serving any purpose except adding to the apathy of other listed companies.

TIP 6:

Do not seek rents from investment data of listed companies. Africa can’t afford it. Monetising these data should happen later, after the value has been created.

TIP 7:

Host a mandatory annual investor presentation event and ensure that all companies participate. Make sure to follow up and disseminate the presentations online. Why? To increase awareness in directors that they have a duty to ensure information is available.

TIP 8:

Standardise minimum requirements for the investor relations sections of websites, and name those not complying. Why? To create awareness.

TIP 9:

Pay for an IR specialist to present to listed companies at least every 6 months to increase awareness.

TIP 10:

Have an active public investor education programme, co-funded by government. Typically governments have created the masses of shareholders by privatising former state-owned companies through the stock exchange. Therefore it should be a joint responsibility into ensuring these investors become meaningful participants.

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I attended an investment conference recently and asked institutional investors how they obtained information on listed companies in Africa. The response was that they just called the management and asked the questions they wanted like, just before the release of the annual results or interim results,  ”are there going to be any surprises?” They receive the response they want most of the time and thats that. The same can be said for other material information requests.

Yes there are two levels of information generally and with regulation of this sort of thing being poor, the opportunity presented to directors of listed companies who do take their communications obligations seriously are significant. As an institutional investor extracting non-public material information from a listed company and having just put down the phone to the investee company, would you not think to yourself “what has management told other investors that they have not told me”.

The issue for listed companies in Africa is to adopt a disclosure policy, apply it, tell the investment community and show tangible evidence of this. This is the way to enhanced reputation and reducing the perception from the investment community that there might be a few surprises. The result: a lower discount rate as one percentage point is removed for consistent, reliable, transparent and meaningful financial reporting.

What does the heading of this blog have to do with this? In order for information to be deemed to be in the public domain it has to be available on an immediate, non-exclusionary and broad basis. Namely a newswire service post, submission to the stock exchange, or a webcast. Forget newswires and webcasts in Africa for the moment – how gooder job do the stock exchanges do – just check out the websites and see how many products are available for investors to receive news immediately. Very few.

This is an opportunity for listed companies.

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