JSE Africa trading exchange to boost inter-Africa investment

The African Board, which will be launched on 19 February, will be a new trading exchange which lists the top companies across the continent.

"The Africa Board lists African companies in an Africa segment on the JSE. Foreign investors approached the JSE looking for ways to diversify their portfolios, so the Africa Board is in response to that expressed need.

"Only companies classified as African by the South African Reserve Bank will list on the Board, and a company is African if it is domiciled in Africa, or its activities are geographically located in Africa.

"If a company is based outside of Africa but the majority of its activities are geographically located in Africa, then it qualifies as an African company," JSE Executive Head Africa of the Africa Board Maureen Dlamini, told BuaNews, Thursday, 29 January.

An African company that is already listed on its home exchange can also be listed on the JSE's Africa Board, Dlamini said.

There are two qualifying criteria to be listed as a company on the Africa Board, she said, one being that a company has to be World Federation of Exchanges (WFE) accredited, or if a company has subscribed capital of at least R500 million.

Currently only three countries in Africa are WFE accredited and these include South Africa, Egypt and Mauritius.

Foreign clients, including investors within Africa, are able to trade on the Africa Board through their local brokers or alternatively through JSE member brokers, she said.

With the global economic recession intensifying, foreign investors have pulled their capital out of emerging markets, shedding as much risk as possible by reinvesting in developed markets.

Dlamini said the establishment of the Africa Board was not primarily done to coax investors back to Africa as 40% of the JSE already consisted of foreign investors.

The Board, however, was established to give Africans the chance to invest in profitable African companies, allowing "Africans to invest in Africa", Dlamini said.

Pension is a massive industry in South Africa and Africa, and the Africa Board gives pensioners and those with a bit of money behind them the chance to invest in Africa's top companies.

The benefits to African companies listed on the Board include increased trading hours and greater exposure; increased liquidity which is attractive to foreign investors, improved product offering, strategic positioning for the rest of Africa; favourable listing requirements, fees and obligations; and it creates wealth in Africa for Africa, Dlamini highlighted.

There are currently nine companies on the JSE which qualify to move onto the Africa Board, and as of 19 February, the Africa Board already has one listed company from Africa on the exchange.

While traditionally, emerging markets have been seen as riskier than developed markets for investors, the stock performance and market value changes between the two markets show quite a different story.

As at October 2008, the stock price performance of emerging markets far out-performed developed countries.

Emerging markets' performances included Mauritius with (-17%), Nigeria (-41.68%), Egypt (-54.46%), Nairobi (-18%), Uganda (9%), Lusaka (18%), Morocco (-16.23%), Botswana (-15%) and JSE with (-48.91%).

Developed markets' performances included Toronto with (-44.58%), London (-45.53%), USA (-33.99%), Paris (-45.69%), Germany (-49.65%), Moscow (-66%), Australia (-52.99%) and Hong Kong with (-54.85%).

Article published courtesy of BuaNews