Bloomberg had a story out late last week about plans for an Angola Stock Exchange, entitled, “Angola Plans 6th-Biggest Africa Bourse With Value at 10% of GDP
”. Since we (and by we, I mean you and me, in an apparently small minority) are resolved to have a realistic approach in discussing economic prospects anywhere, here are the main points of interest from the article once we strip away all the spin and optimism:
- Angola, Africa’s second-biggest oil producer, expects its stock exchange to have a market value of 10 percent of gross domestic product within 18 months of its startup, making it at least the continent’s sixth biggest.
- The capitalization of the exchange, set to start in 2015, would be a minimum of $11 billion based on last year’s output of $114 billion.
- The Angolan government is forecasting economic growth of 7.1 percent this year, down from 7.4 percent in 2012.
- A secondary bond market will start this year to help develop a yield curve.
- South Africa’s bourse is the continent’s largest at $842 billion, more than double its GDP.
- Angola ranks 157th out of 176 countries on Transparency International’s 2012 Corruption Perceptions Index.
The investment bank Imara just put together this brief which summarizes some key data points for other stock markets in Africa. There’s some good trading info in there but missing is any indication of market capitalization figures. I should add that this isn’t Imara’s fault necessarily as this data is generally pretty hard to come by.
The thing is, this isn’t the first time Angola has made efforts at opening a stock exchange. In December 2007, allAfrica.com ran a story entitled, “Angola: Stock Exchange Opens in 2008”, but I definitely remember hearing about this before then, though not as far back as 2003, which is when this article dates the beginning of the process.
In any event, here’s a more “recent” take on the Angola stock exchange prediction, from How We Made It In Africa in 2010. Apparently, Angola’s planned exchange was then expected to be the third largest in Africa. Particularly striking from the 2010 article was this little snippet:
Posted in Africa, Angola, Egypt, Ghana, Kenya, Nigeria, South Africa, Zambia
Tagged Commodities, equities, Frontier Markets, Investing, Oil and Gas, Risk
I can’t get this article
from the FT’s William Wallis out of my head. The headline is “Currencies pressed by trade imbalances” but this really only captures a small slice of the picture. Check it out:
With import demand outstripping export growth in some of the continent’s fastest expanding economies, rising trade imbalances are putting pressure on currencies. African and international investors hedge against this by spreading risk – one factor that is driving African banks and businesses across borders.
But even an expansive footprint is not always enough. MTN, the continent’s leading telecoms provider with a presence in 21 African countries, announced that currency swings had weighed heavily on its earnings.
More broadly says Razia Khan, head of Africa research at Standard Chartered Bank, widening current account deficits are the result of an investment and consumption boom, new resource exploration activity and “the scaling up of output”. Ghana fits into this category. It is also on the risk radar this year as heavy investment in oil and gas infrastructure continues, with only modest increases forecast for oil output.
A weak currency does not help those African countries with limited capacity to ramp up exports in response. Kenya cannot for example suddenly double tea production. So, it is forced to defend its currency to avert importing inflation.
Loose monetary policy in major developed economies has driven a rush of short-term funds into African markets. David Cowan, Africa economist at Citibank, says the way in which central banks defend their currencies and the margins that foreign investors earn will be one determining factor in how long the appetite endures.
I don’t disagree with any of this but would point out that this is all just the tip of the iceberg and there are a lot of ways to slice this.
One is that just six of Africa’s 53 countries account for two-thirds of the entirety of Africa’s $2.0 trillion economy. In descending order of nominal GDP: South Africa, Nigeria, Egypt, Algeria, Angola and Morocco. I think a pie chart best demonstrates this relationship:
Another is to think about how much of Africa’s total economy is driven by oil exports. Let’s try the following table to demonstrate this:
Posted in Africa, Algeria, Angola, Egypt, Ghana, Kenya, Libya, Morocco, Natural Resources, Nigeria, South Africa, Tanzania, Trade
Tagged capital controls, FDI, Frontier Markets, FX / Interest rates, Infrastructure, Oil and Gas
Is it just me or are people becoming more and more desperate for certainty? This is the thought that occurs to me after reading Quartz’s recent attempt
to draw out some sort of corruption forecast from the recent news that Angola has created
a $5 billion sovereign wealth fund. To their credit, they did produce this handy chart as a good starting point for thinking about this topic:
The higher number on the x-axis is meant to convey a worse ranking in Transparency International’s Corruption Perceptions Index for oil producing nations around the world. Quartz readily acknowledges that this chart simply shows a static comparison taken today, without any notion of time-elapsed changes in corruption perceptions (not corruption). Its attempt to rectify that shortcoming is apparently this table:
I just finished reading Alterio Research’s new Frontier Africa report, “Surging oil prices – gift or curse?” which frankly could quite easily be renamed, “Dutch Disease by any other name”. The report (available for free here) attempts to measure the impact of rising oil prices on inflation, fiscal stability and economic growth on the following countries: Angola, Botswana, Ghana, Kenya, Namibia, Nigeria, Tanzania and Zambia.
The essential takeaways here that I see are the following:
Posted in Africa, Angola, Features, Ghana, Kenya, Namibia, Natural Resources, Nigeria, South Africa, Tanzania, Zambia
Tagged FX / Interest rates, Inflation, Oil and Gas, Risk