African equity investment options set to expand

Sub-Saharan Africa could well have another stock market joining its ranks next year, with the news that Lesotho is planning to open an exchange before the end of 2011, according to its finance minister Timothy Thahane.

This, according to Bloomberg, follows the issue of 3 and 5 year government bonds in the week ended 22 October, and treasury bills in 2008. It is too early to forecast how many companies will trade shares, Thato Mohasoa, spokesman for the Central Bank of Lesotho said.

“These developments will, in turn, pave the way for the third phase, which would be the establishment of a stock exchange,” Thahane said.

The southern African nation dropped a plan to set up a stock market in 2000 because there weren’t enough big companies to join the exchange.

Given its relatively small size, GDP was about USD1.3bn in 2008, it will be interesting to see whether any local companies of substance will be able to provide liquidity to the market, or whether it will turn out to be another Swaziland, which sees very little equity trading activity on its bourse.

Meanwhile, since “Decree no. 14” came into force in June 2010, which allows non-resident investors to buy shares in the Libyan Stock Exchange (LSE), four sectors have been listed and Chairman of Economic Group Libya (MAL), Khalil Elkwafi, voiced his confidence that heightened activity was on the horizon which would herald an era which would bring rapid developments in the country’s capital markets.

Highlighting the progress, Reuters reports that Libyan mobile telephone operators al Madar and Libyana will each list 30% stakes on the local stock exchange early next year, according to the chairman of the bourse, Suleiman Shehoumi. He said they would be among 20 firms expected to list in 2011 on the exchange, which has become a symbol of the gradual opening up of Libya’s economy since international sanctions were lifted six years ago.

Shehoumi also said that the planned listing of a 10% stake in the state-owned Libyan Iron and Steel Company would take place “very soon”. There was a possibility that the firm would offer additional shares on the bourse later, he said.

The stock exchange was looking at attracting more initial public offerings by offering companies the option of dual listings with stock exchanges in neighbouring countries.

Libya, home to Africa’s biggest proven oil reserves, has attracted a wave of investment since its leader Muammar Gaddafi renounced illegal weapons programmes and brought the country out of decades of international isolation. It may be a bit too exotic an investment decisions for some, but no doubt it will be “par for the course” for many frontier market investors who regularly dare where others fear to tread.

Article produced by the Imara Africa Securities team. Imara is an investment banking and asset management group renowned for its knowledge of African markets.