Category Archives: South Africa

Making Sense Of Angola Stock Exchange Plans

Africa Stock Market Cap FiguresBloomberg 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:
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A Diplomatic Way Of Saying A BRICS Development Bank Is A Stupid Idea

Dani Rodrik has this in Project Syndicate today:

It can be cause only for celebration that the world’s largest developing economies are regularly talking to each other and establishing common initiatives. Nonetheless, it is disappointing that they have chosen to focus on infrastructure finance as their first major area of collaboration.

This approach represents a 1950’s view of economic development, which has long been superseded by a more variegated perspective that recognizes a multiplicity of constraints – everything from poor governance to market failures – of varying importance in different countries. One might even say that today’s global economy suffers from too much, rather than too little, cross-border finance.

What the world needs from the BRICS is not another development bank, but greater leadership on today’s great global issues. The BRICS countries are home to around half of the world’s population and the bulk of unexploited economic potential. If the international community fails to confront its most serious challenges – from the need for a sound global economic architecture to addressing climate change – they are the ones that will pay the highest price.

Yet these countries have so far played a rather unimaginative and timid role in international forums such as the G-20 or the World Trade Organization. When they have asserted themselves, it has been largely in pursuit of narrow national interests. Do they really have nothing new to offer?

Read the rest here.

What The BRICS Really Have In Common

2013.03.28.BRICS as The_Breakfast_ClubSometimes news editors exercise such brain-dead judgment that it’s a wonder journalism as a practice even survives.

That sentence was one of a few I conjured up as a possible lead-off thought. Well, technically, it was the only sentence, since the rest are thoughts posed as questions. Here they are:

Is the BRICS Durban conference officially the acronym’s 14th minute of fame?

When will the country grouping of France, Uganda, Chad, Kenya, Oman, Fiji and Finland finally supplant the BRICS as the political economy cadre du jour? What about Bulgaria, Uganda, Lithuania, Latvia, Spain, Haiti, Italy and Thailand?

2013.03.28.bric_summit_durbanDoes anyone honestly still believe in the BRICS as an investment theme?

Am I the only one seeing that Brazil, Russia, India, China and South Africa may actually have less in common than a brain, an athlete, a basket case, a princess and a criminal?

What drives this apparently human need to shrink everything down into bite-sized archetypal infonuggets?

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Chart of the Day: Sub-Saharan Africa’s Mobile Phone Market

Lots of room to run here. What this doesn’t give us a clear view of though is undersubscription relative to absolute market size. Nigeria would obviously be the winner on that front.

2013.03.18.Sub-Saharan Africa Mobile

How Oil Divides The Economies Of Africa Into Winners And Losers

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:

2013.03.20.Africa 2013 GDP composition

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:

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Chart of the Day: World Gold Production in 2012

World gold production last year, sourced from here. Kind of speaks for itself I think.

2013.02.26.world-gold-production

Chart Of The Day: Emerging Markets Currency Wars Landscape

This is interesting:

2013.03.06.Swan FX Diagram

2013.03.06.Swan FX Table

And here’s an explanation of what we’re looking at:

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9 Emerging and Frontier Markets Uncle Sam wants YOU to export to

On the heels of the latest update to the World Bank’s annual Doing Business index, I thought I would use this opportunity to try a different take on the usual blather surrounding this study about which country did or didn’t move up five spaces in the shareholders’ rights category.

I recently happened to attend a function sponsored by the US Export-Import Bank that was part of its Global Access for Small Business Initiative. In the interest of not getting bogged down here by too much bureaucratese, the nutshell of this initiative can be summed up as such:

“Increasing exports and access to foreign markets is a proven tool for strengthening our economy and creating durable jobs. The United States is well positioned to capitalize on the types of products and services that fast-growing markets around the world are demanding. Ex-Im Bank is committed to ensuring that American small businesses can compete in this global climate.”

For those not in the habit of tuning in to this sort of thing, this initiative basically is targeting American small businesses looking to export to emerging and frontier markets. At first glance, this isn’t too far off from what the Overseas Private Investment Corporation (OPIC) does, but the focus here is less about investing overseas and more on businesses looking to export overseas. Where exactly overseas? Officially, anywhere, but Ex-Im representatives made a point of letting the audience know that those looking to export to the following nine countries would receive special attention, determined by “a variety of macroeconomic indicators”:
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Chart of the Day: South Africa’s share of global minerals and metals

We know South Africa’s a major commodities player, but every once in a while it’s worth reminding ourselves just how much of a player it is:

Sourced from Mr. Mobius.

Must See TV, South Africa edition: Top Trader debuts

As a general rule, I kind of hate everything reality TV represents, but I have to admit…this is pretty cool. CNBC Africa has just debuted its first ever reality series, “Top Trader”, which features 8 aspiring traders from across South Africa competing for a 250,000 ZAR prize in the JSE all share index.

Here’s part I of the first episode, which is not much more than an introduction to the eight contestants and three mentors:

Here’s part II of the first episode, which goes a little deeper. Seems to me the one to watch is the guy with the shirt that says, “FAT CHICKS–FUN ‘TIL YOUR FRIENDS FIND OUT”:

Something about the stripped-down production ethic of this makes it way easier to swallow than any remotely close equivalent in the American or British canon.

I can’t believe the reality TV racket actually came up with something that I’m going to watch with any regularity. And from CNBC no less.

What Higher Oil Prices Mean for Sub-Saharan Africa

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:
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Political Risk in South Africa and Kenya

Business Monitor International assesses political risk in South Africa and Kenya following a recent trip to the countries by Lisa Lewin, Head of Sub-Saharan Africa Country Risk, and Matthew Searle, Sub-Saharan Africa analyst. Following are my notes summarizing the podcast.
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