Economy
African Exchanges Should Focus on Smaller Businesses
By Nonkululeko Nyembezi-Heita
The African growth story is no longer a fairy tale. Over the past decade multinational companies, private equity funds and infrastructure development programmes have channelled capital to the continent as they began to realise the true potential it holds, but like most emerging market regions, Africa is no longer the ‘flavour of the month’.
Yet those of us who run Africa’s Capital Markets have to admit that only a small portion of global investment flows to this region come through our platforms. Although there are 29 stock exchanges located across 27 African countries, many still do not offer enough liquidity to attract meaningful levels of investment.
This is a difficult obstacle to overcome, as a lack of liquidity can only be addressed through higher levels of investment on our exchanges.
Many of our exchanges also still need to realise the importance of providing accurate and timely market information. This lack of information makes investors much more hesitant about investing on the continent and perpetuates the view that Africa is still the dark continent.
More liquidity, better access to information and enabling regulation will generate more interest from foreign market participants because as a continent we are competing with other emerging and frontier markets for both local and international investment flows.
The role of African stock exchanges is far greater than providing foreign investors with a potential entry point to the continent. Our markets provide platforms for companies to raise capital to fund their growth and expansion and can therefore play a vital role in fostering and sustaining economic growth.
However, for Capital Markets to truly make a meaningful difference to economic growth and development we must be truly inclusive in our approach. Our markets cannot be accessible to only large companies.
While big companies make important contributions to an economy, they do not represent it in its entirety. Share price trends of these Groups often do not truly reflect the economic reality that most Africans experience and in which they are trying to build their businesses.
The JSE’s answer to this challenge has been to move down the continuum of funding to also provide capital-raising platforms for small and medium-sized businesses which form the true engine driving many developing economies.
In 2003, the JSE created the AltX platform to enable companies to grow within the framework of a highly reputable market place, while also providing investors with exposure to these businesses in a regulated environment.
At present, there are 61 companies listed on the AltX, with a total market capitalisation of R39.19 billion as at 21 November 2016. Since the inception of the AltX 13 years ago, more than 29 companies have migrated to the JSE’s Main Board, demonstrating that the AltX is a catalyst for growth.
We are also working on a project to assist even smaller companies than those on our AltX board to raise capital. This will provide these companies with the opportunity to expand their roles in the real economy.
The development of platforms for small to medium-sized businesses to list across African capital markets will also allow private equity investors to consider listing as an effective way to realising the return on their investments.
This means that the development of stock exchanges will not only encourage further investment through the exchanges themselves, but also in the broader real economy. The listing process can also contribute to a company’s development through encouraging greater transparency and stronger corporate governance.
How to bring stock exchanges and smaller businesses together will be one of the key topics discussed this month at the Annual African Securities Exchanges Association (ASEA) Conference and General Meeting.
The theme of this year’s conference, taking place in Kigali Rwanda, is The Road to 2030: Making the African Capital Markets Relevant to the real economy. This key annual event in Africa’s Capital Markets sector enables markets to discuss how African securities exchanges can become more effective so that they can play a bigger role in mobilising capital for African businesses to drive our economies onto the global economic stage.
We cannot deny that Africa is currently experiencing uneven levels of economic growth, but there are some markets that are showing consistently good growth which we need to take advantage of. The world is facing challenges on multiple fronts as the U.S. Federal Reserve continues its monetary tightening, Europe is struggling to manage migrant and debt crisis, China’s financial stability is in doubt – all weighing on emerging economies.
Most of these influences fall outside our control. But what is left within Africa’s control is the ability to create an environment in which small and medium-sized businesses can thrive. The shift in focus from large corporates to smaller enterprises is but a natural progression in the evolution of capital markets as these are the businesses which are creating jobs, fostering innovation and pushing the African economy forward despite stronger headwinds like lower global growth and depressed commodity prices.
Nonkululeko Nyembezi-Heita is the Chairman, Johannesburg Stock Exchange (JSE)
By Adedapo Adesanya
Seplat Energy Plc will revive hundreds of Nigerian oil wells laying fallow after completing the acquisition of Mobil Producing Nigeria Unlimited (MPNU) from ExxonMobil.
The company said it aims to lift oil output to about 200,000 barrels a day, a move that will help boost Nigeria’s oil production levels, as it aims to reach 2 million barrels per day next year.
The transaction, according to Seplat, “is transformative for Seplat Energy, more than doubling production and positioning the company to drive growth and profitability, whilst contributing significantly to Nigeria’s future prosperity.”
The completion of the Seplat-ExxonMobil deal has created Nigeria’s leading independent energy company, with the enlarged company having equity in 11 blocks (onshore and shallow water Nigeria); 48 producing oil and gas fields; 5 gas processing facilities; and 3 export terminals.
Recall that the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) in October approved the deal as part of a series of approvals, while it blocked Shell’s asset sale of up to $2.4 billion to the Renaissance consortium.
The acquisition of the entire issued share capital of MPNU adds the following assets to the Seplat Group: 40 per cent operated interest in OML 67, 68, 70 and 104; 40 per cent operated interest in the Qua Iboe export terminal and the Yoho FSO; 51 per cent operated interest in the Bonny River Terminal (‘BRT’) NGL recovery plant; 9.6 per cent participating interest in the Aneman-Kpono field; and approximately 1,000 staff and 500 contractors will transition to the Seplat Group.
MPNU adds substantial reserves and production to Seplat Energy; 409 million barrels of oil equivalent (MMboe) 2P reserves and 670 MMboe 2P + 2C reserves and resources as at 30 June 2024 and 6M 2024 average daily production of 71.4 kboepd (thousand barrels of oil equivalent).
Business Post reports that Seplat will be part of the payment this year, and will defer some to next year,
Speaking on the transaction, the Chairman of Seplat Energy, Mr Udoma Udo Udoma commended President Bola Tinubu for supporting this transaction and appreciated the support and diligence of the various ministries and regulators for all the work to reach a successful conclusion.
“We are delighted to welcome the MPNU employees to Seplat Energy. We are excited to begin our journey in a new region of the country, and we look forward to replicating the positive impacts we have achieved within our communities in our current areas of operations.
“Seplat’s mission is to deliver value to all our stakeholders, and we treasure the good relationships we have developed with the government, regulators, communities and our staff.”
On his part, the chief executive of Seplat Energy, Mr Roger Brown, described the acquisition as a major milestone, adding, “I extend my thanks to the entire Seplat team for their hard work and perseverance to complete this transaction.
“MPNU’s employees and contractors have a strong reputation for safety and operational excellence, and I welcome them to the Seplat Energy Group.
“We have acquired a company with one of the best portfolios of assets and related infrastructure in a world-class basin, providing enormous potential for the Seplat Group. Our commitment is to invest to increase oil and gas production while reducing costs and emissions, maximising value for all our stakeholders.
“MPNU is a perfect fit with our strategy to build a sustainable business that can deliver affordable, accessible and reliable energy for Nigeria alongside attractive returns to our shareholders”.
By Adedapo Adesanya
The National Pension Commission (PenCom) is projected to close the year with over N22 trillion in pension assets impacted by challenges like inflation and monetary policies.
This is according to PenCom Director-General, Mrs Omolola Oloworaran, at a press conference in Abuja on Thursday.
She said as of October 2024, the Contributory Pension Scheme (CPS) had 10.53 million registered contributors and pension fund assets worth N21.92 trillion.
Speaking at the conference-themed Tech-driven Transformation Shaping the Pension Landscape, which showcased PenCom’s strategic commitment to innovation, she said that the numbers reflected the agency’s unwavering commitment to fund safety, prudent management, and sustainable growth.
She explained that the pension environment was impacted by the wider economic challenges facing the country, noting that the sector battled multi-year high inflation, Naira devaluation, and the lingering effects of unorthodox monetary policies by the Central Bank of Nigeria (CBN).
Business Post reports that the apex bank hiked interest rates by 875 basis points this year alone to tackle persistent inflation which peaked at 33.8 per cent as of October.
She said that these challenges eroded the real value of pension funds and impacted contributors’ purchasing power.
“To address these issues, the commission has initiated a comprehensive review of its investment regulations.
“It is focusing on diversifying pension fund investments into inflation-protected instruments, alternative assets, and foreign currency-denominated investments.
“The goal is to safeguard contributor savings and ensure resilience against future economic volatility,” she said.
She restated the commission’s commitment to expanding pension coverage, particularly through the advanced micro-pension plan designed to encourage participation from the informal sector using technology.
“This initiative will make it easier for everyday Nigerians to save for retirement, aligning with our vision of inclusive growth and financial stability for all.
“The backlog in retirement benefits for retirees of the Federal Government’s Ministries, Departments, and Agencies (MDAs) will soon be settled.
“The federal government recently disbursed N44 billion under the 2024 budget to settle approved pension rights.
“We are collaborating with the Federal Government to institutionalise a sustainable solution to ensure retirees receive their benefits promptly, eliminating delays,” Mrs Oloworaran said.
She said that PenCom’s technology-driven transformation aimed to make the CPS more accessible, reliable, and sustainable.
“From data management to seamless contributions and regulatory supervision, we are paving the way for a future where the pension industry serves all Nigerians effectively,” she said,
Mrs Oloworaran also said that the e-application portal for pension clearance certificates has replaced the manual processes and enhanced the ease of doing business in the sector.
“Since its deployment, 38,528 pension clearance certificates have been issued. This initiative ensures compliance and secures the future of Nigerians working in organisations that interact with the government,” she said.
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange closed flat on Thursday, December 12 after it ended the trading session with no single price gainer or loser.
As a result, the market capitalisation remained unchanged at N1.055 trillion as the NASD Unlisted Security Index (NSI) followed the same route, remaining at 3,012.50 points like the previous trading session.
However, the activity chart witnessed changes as the volume of securities traded at the bourse went down by 92.5 per cent to 447,905 units from the 5.9 million units transacted a day earlier.
In the same vein, the value of securities bought and sold by investors declined by 86.6 per cent to N3.02 million from the N22.5 million recorded in the preceding trading day.
But the number of deals carried out during the session remained unchanged at 21 deals, according to data obtained by Business Post.
When trading activities ended for the day, Geo-Fluids Plc remained the most active stock by volume (year-to-date) with 1.7 billion units sold for N3.9 billion, Okitipupa Plc came next with 752.2 million units valued at N7.8 billion, and Afriland Properties Plc was in third place with 297.5 million units worth N5.3 million.
Also, Aradel Holdings Plc remained the most active stock by value (year-to-date) with 108.7 million units worth N89.2 billion, followed by Okitipupa Plc with 752.2 million units valued at N7.8 billion, and Afriland Properties Plc with 297.5 million units sold for N5.3 billion.
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