African Investor Relations

I have done a quick review of African stock exchanges’ use of social media to connect with the broader investment public. I considered whether the stock exchange website had a feedback centre, email alerts, categorised email alerts, RSS, a watchlist function, client login, categorised RSS feeds, Facebook, Twitter and YouTube. 10 categories in all.

My review was cursory as I wanted to get a general feel for whether certain aspects of social media were being adopted by Africa’s stock exchanges. The spider diagram above summarises the % incidence of basic interactivity & social media indicators on stock exchange websites. The long and the short of this quick review is that social media is not seriously on any agenda of African stock exchanges. This, when Africa’s new Facebook statistics show a total of 37.7m users as at 31 December 2011. This, when the African Stock Exchanges Association is theoretically lacking strategic direction and when it’s raison d’etre is being eroded by regional stock exchange associations. There is ample scope for these organisations to seriously consider the extent of the opportunity offered by social media and other online platforms, especially in coal-face investor education initiatives.

Here are the various country scores representing how many of the 10 main indicators above appeared on African stock exchange websites – 100% is all of them appeared, 10% is only one appeared:-

Interestingly the Stock Exchange of Mauritius does not score highly but the exchange does have a very comprehensive website – just little interactivity. Zimbabwe’s website is currently being re-developed and it will be interesting to see where this emerging exchange fits into the overall ratings above.

Traditional capital markets regulators will argue that it is not the role of regulators to engage directly with investors. This may have been applicable in the past and certainly the prospect of African stock exchanges doing so now is scary given the absence of resources in this area. The fact is the conversation about these sorts of things needs to start happening now and a framework set out for the future.

There is no better platform than one to one communication to educate investors and an educated investor is a protected investor – and a protected investor is what African stock exchanges should be developing by the thousands, every day. But its not happening. OK the sky is not going to fall because of it, but there may be long term downsides to not engaging retail investors in African markets even if its just to provide them with corporate actions, annual reports and price sheets everyday.

My message is that these media are sitting ducks for someone to do something progressive for a change rather than lag behind the rest of the world.

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

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

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

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

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

In another post the NSE says this

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

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

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

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Facebook’s online global community exceeds 500 million people. It’s a communication channel that’s receiving a tremendous amount of interest overseas because of its immense immediate outreach to a targeted audience.

The interesting question for many executives in the region is “should we be looking at Facebook as a means of targeting prospective customers?”.  In a recent blog I outlined that there are over 17m Facebook users in Africa and I promised to get back to you on what the individual country statistics said. Well thanks to Enrique at Internet World stats I have published the stats for countries with stock exchanges below:-

Source InternetWorldStats.com

In South Africa, a country I have left out above, there are 49 million people of which 5.3 million use the Internet and 3.2 million have Facebook accounts (60% of internet users have facebook accounts). My statistics above are distorted significantly by Nigeria, so without Nigeria, on average one in every five Internet users has a Facebook account (20%). This is high but still behind the World average of near 50%.  With Nigerian statistics 1  in every 15 Internet users has a Facebook account.

Zimbabwe’s statistics are unavailable but can be reasonably assumed to be at least the average of the African statistics illustrated above it. This suggests at least 98,000Facebook users but could probably be much higher. More than double.

In assessing whether these statistics are meaningful enough from a business perspective these would be my thoughts:-

• Who are the actual users of Facebook in these markets?: youth, image conscious, cash wielding youth and middle aged housewives would be the dominant groups in my opinion.
• Would they be a target market for my business? Depends on your business. The demographics of Facebook users suggest that they would be excellent targets for the retail clothing and mobile frenzied crews.
• How much would it cost to engage them through a managed corporate Facebook account? Better questions might be “do the skills exist in my country to set up and manage a Facebook account?” and “does my website do justice to the content that should exist on my website?” The best manager of your Facebook account is probably between the ages of 13 and 16 years old. This group of youngsters, currently very active on Facebook will grow into the new age market.
• What are the risks of my business running into problems through the use of Facebook? Depends on the industry you are in.
• Are the Internet World Stats data reliable? I know Malawi well and there is no way there are 716,000 internet users there so perhaps more investigation is required. The sources of information generally appear to be reputable.

My gut feel is that for businesses in each of these markets, for businesses in the right industry, the number of Facebook users appears to be of sufficient critical mass for it to be taken as a tool to identify and communicate with a target market of customers.

The low down though is that as a business in any of these markets you need to engage a consultant that can apply a bit of intuition and perspective as to what using Facebook  actually means for one’s business. And therein lies the rub. A start would be to grab any thirteen year old by the scruff of the neck, sit them down, with a fruit juice and instruct them to tell you the” ins” and “outs”. The beauty of Facebook though is that from a corporate perspective it costs nothing, can be pulled if it’s not working and accelerated if it use.

What’s the story from the investor relations perspective? Facebook is also receiving a lot of attention in the investor relations arena. Dominic Jones, the global guru on online IR, recently noted that “the National Investor Relations Institute and its chapters also have been actively promoting social media through conferences, seminars, magazine articles and webinars. Yet the message appears to be falling on deaf ears.”

Dominic also points out falling shareholder suffrage standards evidenced by poor retail voting rates at annual meetings, the scrapping of the broker vote for uncontested director elections, and the recent adoption of proxy access rules as having failed to inspire IR departments to reach out to their shareholders via social media. In the African context, my gut feel is that there just isn’t the awareness amongst investors of investment related issues and so active engagement with companies is unlikely. This is where progressive companies could “do the opposite”. Establish a Facebook account with the intention of using it as a shareholder education initiative. This progressive communication would enhance corporate reputation and brand.

My message is get involved. Do it with a trusted online partner and learn from your mistakes. You can see where this is going in the long run and so start the journey and be ahead of the pack.

Read about our managed corporate website services here.

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Enrique of the Internet World Statistics sent me this email in his newsletter :-

“We are almost there, very soon the Internet will hit two billion users. Yes, almost2,000,000,000 with a big B, two billion people are using the Internet. An amazing accomplishment because in just 15 years (1995-2010), the Knowledge Society has conquered Planet Earth, and nothing will be the same ever again. “One small step for man, a giant leap for mankind”, like someone said before me, 41 years ago.

But today I am not going to discuss the Internet. Today, for the first time, we show our methodology applied to analyzing the Facebook World Stats. The results are very revealing regarding the power and worldwide force of this web platform that has grown to become by far the largest and most important social network in the Internet.

The results are summarized in a new statistics table and three bar charts, that you can view at Facebook World Usage, using data as of August 31, 2010. We have found useful to introduce a new Internet Metric that we shall call the Facebook Index. It corresponds to the percentage of Internet Users that are also Facebook Users, in any country or geographic region.

The statistics show that Africa’s Facebook Index (the percent of Internet users on Facebook) is just 1.7% compared with 43% in North America and 2.4% in Asia. Facebook is set to grow significantly in Africa and from a commercial perspective might provided an effective means of targeting specific sectors of the economy.

I do not have the breakdown of Facebook users of individual African countries but will get them and discuss the implications of this on investor relations and corporate strategy. Facebook is growing into a platform that cannot be ignored.

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