Thursday, 31 July 2008

Zambian Kwatcha

High commidity prices, especially copper, have totally changed the outlook for the Zambian Kwatcha and indeed the whole economy. At its peak in the 1970s, the country produced 700,000 tonnes of copper. 2008 output should be back to 650,000 tonnes having almost declined to nothing. New production coming on stream will see production rise to over 1,000,000 tonnes in 2010. Another piece of good news is that Zambia is diversifying this narrow economic base. Zambia’s first two uranium mines begin production from 2009.

In 2008, the Government introduced mining tax reform that which will greratly improve the fiscal surplus (less offshore transfer pricing). Added to a trade surplus and a balance of payments surplus, Zambia’s currency, the Kwatcha, is likely to rise, especially as foreign exchange reserves equate to 12.5% of GDP of US$12 billion.

Wednesday, 30 July 2008

Argentina may get downgraded to frontier status

The MSCI has announced it will consider downgrading Argentina to frontier market status from emerging market status “unless significant improvements in the relevant capital flow restrictions are observed” by December of this year.

Tuesday, 29 July 2008

Bloomberg TV Appearance

We enclose a link to today's Bloomberg TV appearance by Daniel Broby. We will be obtaining permission to host the video on our website fairly soon.

Monday, 28 July 2008

Malawi IPO activity

Malawi Telekom Networks, United General Insurance, and Eastern Produce Ltd are all expected to IPO within the next six months, adding much needed depth to the Malawian market.

Colomibian Uribenomics

The rescue of Mrs Betancourthas, on the eve of Senator McCain's visit to Colombia and a constitutional showdown with the Supreme Court, has seen President Uribe's popularity soar to 92%.

Security is the foundation of President Uribe's economic model, locally known as Uribenomics. The idea is that a sense of greater security engenders virtual cycle. The goal of this economic policy is to release the pent up demand of 44 million Colombian consumers who have put there money under the mattress during two and half decades of civil war.

The concept is working. GDP growth is 7.3%, the highest level in three decades. The peso has appreciated 20% since the start of 2007.

Ukrainian stock market worst performer

The Ukrainian stock market has been one of the worst performing in the world so far this year. It has declined 47% from its high on January 15, 2008. The average P/E is now a more respectable 16.

Despite this, Ukrainian companies continue to demonstrate strong fundamentals as the GDP is set to grow by an average 6% p.a. in 2008-2012.

Zain grows first half EDITDA by 20%

Cerainly, one to watch. Zain, a leading Kuwaiti mobile telecommunication operator in its own country,the Middle East and Africa with presence in 22 countries, has anounced a first half sales increase of 26 per cent and an EBITDA increase of 20 per cent.

Zain has recently listed a subsidiary, Zain Saudi Arabia's where the share price currently trades at double its initial offering.

Zain introduced its 'One Network' mobile service to 14 million customers in four countries in the Middle East-Bahrain, Iraq, Jordan and Sudan. Saudi Arabia and Ghana will join One Network on launch of commercial services.

Sunday, 27 July 2008

Standard Chartered Bank Zambia Plc

Rumours out suggest that Standard Chartered Bank Zambia Plc, a subsidiary of Standard Chartered PLC, will post poor results on August 5th.

Saturday, 26 July 2008

DiamonEx Limited

DiamonEx Limited, the emerging diamond producer in Botswana, has finished work at its new Lerala Diamond Mine Processing Plant. As such it is now preparing for its first diamond sale, planned for the end of August.

Under DiamonEx's mining lease covenants with the Botswana Government, DiamonEx must offer its diamonds to Botswana registered cutters and polishers. That said, simultaneous with its Botswana offering, it is allowed to offer its goods for sale internationally. Let's hope it lives upto expectations.

Friday, 25 July 2008

Zimbabwe inflation...

Giesecke & Devrient, the European company that was providing paper for the printing of Zimbabwe dollars has cut supplies and is reported to be considering withdrawing their contract. Now, that is one way to bring the money supply under control. Just stop printing!

Thursday, 24 July 2008

Kenyan yield curve

There is clearly a mismatch between local Kenyan expectations and the rest ofthe world. With overall 12-month inflation coming in at 29.26 percent in June 2008 and annual average inflation increasing to 18.47 percent, this yield curve looks like it is living in a different country.

Wednesday, 23 July 2008

Kenyan Insurance industry robust

The insurance industry in Kenya, which last year grew by 14 percent compared with a 7percent increase in gross domestic product, remains robust despite the riots seen in the early part of this year.

Growth in premiums for general insurance are, not suprisingly, growing slower than life which is growing at 16 percent.

Tuesday, 22 July 2008

Gulf Hotels Group profits sours 55.4%

Bahrain's Gulf Hotels Group posted first half net profits up 55.4 percent. The company, which owns and operates the Gulf Hotel, Gulf Convention Centre, Gulf Executive Residence and Gulf Brands International, saw gross operating revenue ahead by 23.1 percent, to 14.8 million dinars.

The increase in profits is largely down to the renovation work done at the hotel as much as the growth in the economy of the region due to high oil prices.

Kuwait, UAE and Qatar

According to analysis just released from Morgan Stanley, Kuwait, UAE and Qatar are the best markets in which to invest in the Gulf. The company prefers banks and telecom companies.

The strategy report says "Strong underlying economic growth, negative real interest rates and pressure for currency appreciation present an attractive backdrop for regional equity markets."

Press Corp rights issues

The Press Corp rights issue to raise approximately MK2 billion is now well underway. The capital raising is due to the large number of major investments made during the past six years leaving a dent in the liquid capital. These investments include the acquisition of 80% of Malawi Telecommunications Limited (MTL) through Telecom Holdings Limited, a consortium in which Press Corporation has a 62.63% stake, increased stake in TNM Limited, establishment of the second Ethanol production plant, and the fish farming project.

The investments were financed to a large extent from internal sources supplemented by external borrowings.

We do not expect the company to provide cash flow returns to the Holding company for some time. Further capital expenditure is also required to complete the infrastructure in the Maldeco Aquaculture fish farming venture. These entities together with the second Ethanol distilling complex, which has now
turned-around, make taking up the issue attractive. Noteworthy are the company's extensive holdings in Malawi.....

44% Bottling & Brewing Group Limited
55% BP Malawi Limited
66% Ethanol Company Limited
100% Hardware and General Dealers Limited
42% Limbe Leaf Tobacco Company Limited
50% MacSteel Malawi Limited
50.1% Malawi Telecommunications Limited
100% Maldeco Aquaculture Limited
51.8% National Bank of Malawi Limited
50% People’s Trading Centre Limited
50.1% PressCane Limited
100% Press Management Services Limited
62.6% Telecom Holdings Limited
100% The Foods Company Limited
37.6% TNM Limited

Al Salam Bank Sudan

Investing in Sudan is very difficult, especially as the country has Sanctions imposed on it. The Security Council sanctions regime was modified and strengthened in 2005. This expanded the scope of the scope of the arms embargo and imposed additional measures including an assets freeze on designated individuals. It is still not a case of outright sanctions.

Al Salam Bank Sudan is the largest and most influential bank in Khartoum's stock market due to the unique banking services offered to the bank's clients. Obviously, its very small. The Bank has capital of just $100m. It is one of the few companies that can be bought by way of its co listing on the Dubai stock market in May.

Al Salam Bank Sudan was the first bank in Sudan to set up a fund dedicated to real estate investments; the Al Salam First Property Fund provides the bank's clients investment opportunities in the Sudanese real estate market.

Gulf Finance House

Yet another set of good results from Gulf Finanance House, Bahrains second largest company by market value. The leading Islamic investment bank posted second quarter profits of $104 million, an increase of 41 per cent over the corresponding quarter last year. Having made a formidable start to 2008, its momentum is undiminished thanks to the robust demand from oil rich governments for economic infrastructure projects in which it specialises. Other rapidly growing business lines include its MENA Venture Capital business.

Across Middle East and North Africa and Asia, the bank has established a unique and market dominant position in the business of originating, financing and delivering economically driven infrastructure projects anchored around industry specific business clusters.

Gulf Finance House has unveiled plans to create the largest cement company in the Middle East and North Africa region at a cost of $2 billion to feed the surging demand for the material that fuels the region's construction boom.

Monday, 21 July 2008

Zimbabwe - Finally... some good news.

Robert Mugabe, Zanu-PF and the Zimbabwean opposition have signed a deal committing both sides to formal talks over the country’s political and economic crisis. After the scenes of the past few months, this shows that there is hope for re-conciliation. Should that happen, we believe that Zimbabwe assets will be a ten-bagger in investment terms....

Ramin Habibi joins fund as independent director

Ramin Habibi has joined the board of Danfonds Frontier Markets fund as an independent director with immediate effect. Ramin Habibi is Managing Director and Founder of Rating Developments Limited, a bank credit analysis and advisory service covering banks in specific emerging markets

Born 17 April 1952, Ramin Habibi started his banking career with Bank of America’s Middle East Area Office where he worked on correspondent banking and sovereign lending, later moving to BoA’s Karachi branch where he was primarily responsible for relationships with Pakistani banks and several multinational subsidiaries. RH later served for five years as Chief Analyst of Capital Intelligence, a credit rating agency, where he initiated and maintained credit ratings of dozens of banks in the Middle East, South Korea and Thailand. In 1990, RH founded BREE, the first credit rating agency covering banks in Central & Eastern Europe, initiating more than fifty international credit ratings. RH became the regional head of Thomson BankWatch after TBW acquired BREE in 1995, expanding coverage through the CIS and East and South Africa. After Fitch acquired TBW in 2001, RH founded Rating Developments, a rating advisory service that has undertaken projects in Bulgaria, the Baltics, Cyprus and Libya. RH has also served as Senior Advisor to Keefe Bruyette & Woods Ltd’s investment banking team on developing relationships with banks in CEE and CIS countries.

Daniel Broby, CEO of Danfonds, notes that Ramin “will bring unique insights on the valuation of banks in frontier markets that represent 40% of our investment universe.” Ramin brings a wealthy of experience to the role, having worked in the banking and credit rating industries in numerous frontier and emerging markets.

Sunday, 20 July 2008

Nigeria considers removing oil subsidies

The Nigerian Government is looking at a systematic removal of the N1.5 trillion subsidy for petroleum products. Abolishing the subsidy over night, however, could prove too difficult to do. A market approach to pricing is definately needed. The current capacity of petroleum production needed for local consumption is 30million barrels per day, but the refineries in Nigeria are only capable of producing about 360,000 barrels out of their capacity of 445,000 barrels.

Visit to GNPC

The visit to the Ghana National Petroleum Corporation (GMPC) in Tema proved very revealling as to the extent of the reserves in the Western region. Our conclusion is that the recent discovery of 600 million barrels of light oil is just the tip of the iceberg.

Market estimates suggest a likelihood for companies to drill between 100,000 and 250,000 barrels a day by the year 2011-2012. Obviously, it takes time to build infrastructure but medium term we calculate there could even be potential to drill 500,000 barrels of oil a day, assuming the current find is not a one off.


Driving through Benin, Cotton appears to be the only intensive economic activity. Indeed, cotton accounts for 40% of GDP.

Although a very corrupt country, Benin is a constitutional multi-party democracy and, despite a history of military-rule, democracy is firmly established and widely accepted as the ground rule of political life.

Foreign investment in Benin has for the most part entailed the purchase of interests in privatised companies by investors from Lebanon, India, Germany, and France. Foreign investment is reportedly subject to government approval, and part-Beninese ownership of privatised companies is prioritised by the government.

Standard Chartered Bank Ghana Limited

Our meeting with Ebenezer Essoka confirmed why Standard Chartered Bank Ghana Limited deserves a premium rating. In fact, Ebenezer Essoka probably personally represents some 10% of that premium. A true banker with a clear focus and the ability to walk the talk as well as talk the talk.

Standard Chartered Bank Ghana Limited was the only bank we met on our visit to Accra that was no planing on a massive branch expansion. Essoka explained in a clear and logical way why the bank would not participate in the drive for funding at the expense of cost income ratio.

Ghana Commercial Bank Ltd

Following our meeting with Ghana Commercial Bank Ltd we concluded that the Ministry of Finance and Economic plannings 21.36% in the bank will not be going away anytime soon, at least not in the next three years. As such, it looks like the loan book will continue to be dominated by the Tema Oil Refinery Limited, with its associated price control risks.

Too bad. If they could get the refinery off the books the bank, and the government off its back, it would be a great restructuring story.

CAL Bank

Ghana's most actively traded stock is seeking a further USD 200m in capital, probably in two traunches, the first USD 100m by the end of the year. This is in response to the Bank of Ghana's requirement that all banks have to have a minimum capitalsation of USD 25m by 2010 and USD 60m by 2012. It should not be too difficult to achieve because this niche merchant bank has already attracted a number of frontier market players as investors (Renaissance, Vangaurd, Consilium and Eaton Vance).

We discussed the capital raising when we met with the bank in Accra as this will change its lending book. With the new oil industry kicking in around 2010, the bank sees opportunities to lend to ancilliary oil industries and in project financing.

The bank trades at a discount to its larger Ghanian peers. We attribute this to its size and quite large contribution to histroic earnings from its treasury operations.

Societe Africaine de Plantations D'Heveas

The rubber price is on fire. The high price of petroleum has driven up the cost of synthetic rubber, providing a boom for Societe Africaine de Plantations D'Heveas, Ivory Coast's largest natural rubber producer (46% of national production).

Societe Africaine de Plantations D'Heveas is enjoying a 22% net margin. Its customers, the likes of Michelin and Bridgeton, are seeing demand growing by 3% pa whilst its competitors (In SE Asia) are unable to expand acarage.

Unique Trust IPO

A Ghanian company on steroids, Unique Trust's CEO, Prince Kofi Amoabeng, told us that the company will finalise its much awaited IPO within the next three weeks. With a Return on Invested Capital of 247%, a low cost income ratio and earning growth of 83%, the float is bound to be a success.

Unique Trust provides credit for business expanison and arrnages finance for inport/export.

Saturday, 12 July 2008

International Development Association

Frontier markets get a lot of aid and this can distort the investment landscape. It is because of this that there is a lot of focus right now on the World Bank which is working on the replenishment of the finances of its affiliate, the International Development Association.

The IDA provides the bulk of low-interest loans for frontier markets.

Negotiations for the IDA replenishment continue in Washington in September during the joint World Bank-International Monetary Fund annual meetings. The World Bank needs to raise at least US$25 billion from donors because of the additional costs of its debt relief programmes. If it fails, governments may shift their funds from the Bank to bilateral programmes and smaller multilateral organisations, such as the African Development Bank.

The key issues are the type of aid and the increasing competition from regional development banks (European Union programmes, sovereign lenders such as China and India and philanphropic funds).

Stock Exchanges in Africa

Bourse d’Alger, Algiers Stock Exchange
27, Bd Colonel Amirouche, Algeria
Tel: (213) 21 429686

Bourse Regionale des Valeurs Mobilieres (BRVM)
18 Joseph Anoma Ave, (Rue des Banques)
Abidjan 01 BP 3802
Abidjan, Cote D'Ivoire
Tel: (+255) 2032-6685

Botswana Stock Exchange (BSE)
Unit 11, Plot 115 Millenium Office Park, Kgale Mews
Private Bag 00417
Gaborone, Botswana
Tel: (+267) 318-0201

Cairo & Alexandria Stock Exchanges (CASE)
4A, ElSherifien St.
P O Box 358 Mohamed Farid
Postal Code 11513
Cairo, Egypt
Tel: +20 2 395-5266/ 5477

Casablanca Stock Exchange
Angle Avenue des Forces Armées Royales et Rue Arrachid Mohamed
Casablanca, Morocco
Tel: +212 2 245-2626/27

Dar-es-Salaam Stock Exchange (DSE)
Twiga Building, 4th Floor
Sokoine Drive
P O Box 75713
Dar es Salaam, Tanzania
Tel: 007 022 2128522

Ghana Stock Exchange (GSE)
Cedi House, 5th Floor
Liberia Road
P O Box 1849
Accra, Ghana
Tel: +233 21 66-9908/9914/9935

Johannesburg Securities Exchange (JSE)
One Exchange Square
2 Gwen Lane, Sandown
Private Bag X991174
Sandton 2146
South Africa
Tel: (+27) 11 520-7777

Uganda Securities Exchange Ltd (USE)
Plot 1, Pilkington Road, Workers' House 2nd Floor
Northern Wing
P O Box 23552
Kampala, Uganda
Tel: 006 41 343297/342818

Lusaka Stock Exchange (LuSE)
3rd Floor Farmers House Building
Cairo Road, P O Box 34523
Lusaka, Zambia
Tel: (+260) 1 228391/228537/228594

Malawi Stock Exchange (MSE)
Old Reserve Bank Building
Victoria Avenue
Blantyre, Malawi
Central Africa
Tel: (+265) 0162-4233

Mozambique Stock Exchange
Bolsa de Valores de Mocambique
Avenida 25 de Setembro no. 1230, 5th Floor
Maputo, Mozambique

Nairobi Stock Exchange (NSE)
1st Floor, Nation Centre
Kimathi Street
P O Box 43633 - 00100
Nairobi, Kenya
Tel: 254 2 2831000

Namibian Stock Exchange (NSX)
P O Box 2401
Shop 8, Kaiser Krone Centre
Post Street Mall
Windhoek, Namibia
Tel: (+264) 61 227-647

Nigerian Stock Exchange
Stock Exchange House, 8th, 9th and 23rd Floor
2/4 Customs Street
P O Box 2457
Lagos, Nigeria
Tel: (+234) 01 2660287

Stock Exchange of Mauritius Ltd
4th. Floor, One Cathedral Square Building
16,Jules Koenig Street
Port Lous, Mauritius
Tel: (+230) 212 9541

Swaziland Stock Exchange (SSX)
c/o Capital Markets Development Unit
1st Floor Imfumbe Building,The Central Bank of Swaziland
Warner Street Opp. Mbabane Post Office
P O Box 546
Mbabane H100, Swaziland
Tel: (+268) 404 9491/6748/2114

Zimbabwe Stock Exchange (ZSE)
8th Floor Southampton House
Union Avenue
P O Box U.A 234
Harare, Zimbambwe
Tel: +263 4 736-861

Royal Swaziland Sugar Corporation

Funny how things change. The Swaziland sugar industry was facing ruin a few years back due to European Union suger deregulation. No, thanks to ethanol expansion, the company is back in investors minds.

The Royal Swaziland Sugar Corporation is one of the largest Swaziland businesses, producing two-thirds of the country’s sugar. RSSC has two mills located in Mhlume and Simunye, and an ethanol plant located in Simunye. Profit attributable to ordinary shareholders improved by 88.9 percent on the previous year.

Listed on the Swaziland Stock Exchange, the stock is very illiquid, its free float is less than 20% and owned by only about 562 shareholders. That make buying even half a million dollars of shares extremely difficult.

The company owns and manages 15 629 hectares of irrigated sugar cane estate on land leased from the Swazi Nation and manages a further 5 009 hectares on behalf of third parties, delivering approximately 2.3 million tonnes of cane per season to the Group’s two sugar mills. These two mills currently crush cane at a combined throughput of 700 tonnes per hour, producing approximately 434 000 tonnes. It also operates a sugar refinery, situated at the Mhlume mill, which produces 120 000 tonnes of refined sugar, and a 32 million litre capacity Ethanol plant, which is situated adjacent to the Simunye mill.

Friday, 11 July 2008

The Old Mutual Implied Rate

In Zimbabwe, you have to think laterally if you are to value anything. One example of this is the Old Mutual Implied Rate ('OMIR'). This calculation is a broad unofficial proxy for the value of the Zimbabwe Dollar to the US$ based on the relative values of shares on the London and Zimbabwe Stock Exchanges. With hyperinflation and a fixed official rate, it is the only reliable way to know what the real exchange rate is.

Nigerian insurance sector

Amid a poor week in markets the Nigerian Insurance sector was the most active sector by volume, accounting for over 66% (3.83 billion shares) of total turnover of shares in Nigeria. Activity in the sector was driven by trading in the shares of IAINSURE, GNI and LASACO.

The Nigerian insurance market is unique. It has undergone a dramatic chnage. In November 2007 the National Insurance Commission seized control of the largest insurer, NICON. This had only been privatised in 2005. NAICOM ousted its CEO Jimoh Ibrahim, alleging improper conduct. NAICOM's battle with Jimoh Ibrahim is still being fought in the Federal High Court. The drama was played out publically. The offices of NICON were occupied by riot police!

Even in relation to other notoriously corrupt countries where transparency is low, hard numbers on Nigeria's insurance industry are hard to find. Newspaper reports indicate that premiums have been growing rapidly. 49 insurance companies are permitted to operate in Nigeria, a decline from 100 in 2005. NAICOM has faced allegations of corruption and impropriety in the supervision of the recapitalisation and consolidation exercise.

The challenges of doing business in Nigeria result in few multinational groups having a presence. AIG is the only one.

Frontier Markets 2008 - 30 September

A unique event designed to explore the investment opportunities offered by frontier markets, or the “emerging” emerging markets as they are sometimes known. The program promises discussion on areas such as Central and South East Asia, the Middle East and Sub-Saharan Africa all offer portfolio diversification away from traditional emerging markets but often with increased risk. This seminar will explore the major financial, economic and political issues related to investing in these new and exciting markets

30 Pavilion Road, London SW1, 30 September 2008

08:30 Registration and coffee
09:00 Welcome and introduction

Daniel Broby, Danfonds
+ Why look at frontier markets?
+ Which countries are they and what are their characteristics?
+ Challenges and risks
+ Best performing economies

William Stoops , Dragon Capital Markets
10:40 Refreshment Break
Slim Feriani, Progressive Developing Markets
Eric Berglof, European Bank for Reconstruction and Development
12:30 Lunch
Henry Hall, Merrill Lynch
+ Information channels
+ Corporate governance
+ Regulatory and liquidity issues
+ Rating and indexing
15:00 Refreshment Break
Richard Segal, Renaissance Capital

African debt

Thursday, 10 July 2008

UAE, Bahrain and Oman index status as frontier markets

Investors often express suprise to us that the UAE, Bahrain and Oman are major constituents of frontier markets. S&P are currently in the process of reviewing their indices, and are hinting that the GCC might be upgraded to emerging in this review.

Any rerating will result in a massive influx of cash from institutional investors and hedge funds.

Dangote Group

Nigerian industrial conglomerate, Dangote Group, which already controls two-thirds of Nigeria's domestic cement market, plans to build two new plants in southwest Ogun state. This will expand its Nigerian capacity to 26 million tonnes a year. It will also build a 2.5 million tonnes a year plant in Senegal, which is expected to come on stream in 2010.

Dangote has been growing aggressively. In April it acquired a 45 percent stake in South Africa's Sephaku Cement, a unit of Sephaku Holdings Ltd. It signed contracts worth $1.2 billion in February with Sinoma to built cement plants in Democratic Republic of Congo, Equatorial Guinea, Ethiopia, Tanzania, Senegal and Zambia.

Dangote's other interests include the manufacture of sugar, flour, salt and spaghetti, as well as hydrocarbons, shipping and telecommunications.

The Chinese in Africa

We are often asked about the extent of Chinese involvement in Africa. The answer is that it large and getting larger. Sub-Saharan Africa’s natural resource exports to China have grown exponentially, from just over $3 billion in 2001 to $22 billion. Oil accounts for 80 percent of this. Other important African export commodities are iron ore,timber, manganese, cobalt, copper and chromium.

There are strong economic complements between China and Africa. China’s growing demand for natural resources is matched by Africa’s under-developed resources.

China is not the only national player in Africa. India is also increasing its investments, committing $2.6 billion since 2003. The bulk of Indian investments were in Nigeria. Oil-rich Gulf states and increasingly Russian investors are also playing a substantial role in African infrastructure, committing $500 million every year over the past seven years.

Wednesday, 9 July 2008

The Zambian kwacha

The Zambian kwacha weakened following the president’s health scare. Conflicting information is coming in. For a short period, it appeared that Vice President Rupiah Banda would become acting president, although President Levy Mwanawasa medical condition is described as stable and no channge of leadership has occurred. In view of the situation, trading in the foreign exchange markets was informally suspended last week.

We would point out that economic fundamentals remain encouraging!

Rising food prices in frontier markets

Rising food prices in frontier markets are one of our biggest risk factors. The CPI basket in all the countries we follow is heavilly tiled towards food prices. This chart is interesting and shows import tarrifs, which is the natural political response to such price dynamics in poor countries.

Is it too late to invest in Vietnam?

Apparently not.. The market has now corrected to levels seen before all the hype began.

Tuesday, 8 July 2008

Botswana foreign ownership rules

Botswana is one of our favoured markets from the perspective of the top down assesment. There are, however, a few rules and regulations that we have to be aware of, although significntly fewer than in many other frontier economies.

In Botswana permission is required for more than 5% ownership from the stock exchange. There are no restrictions on the ownership of listed companies by foreigners as exchange controls were fully abolished in February 1999. Without further reference to the Bank of Botswana, non-resident cannot own more than 49% of the capital of a public company.

Foreign investment is restricted in a number of areas, including manufacture of school furniture, welding and bricklaying, hawkers and vendors, butchery and produce, petrol filling stations, bars and liquor stores, supermarkets, and retail, but these restrictions are easily circumvented in most cases. Most utilities, telecommunications, postal services, water, railways, and agriculture are closed to private investment. These restrictions are not a meaningful impediment to serious foreign investment.

Interest earned by non-residents is charged at a 15% withholding tax, double taxation is avoided with some countries.

Royal Exchange Assurance (Nigeria) Plc to split its business into life and non life insurance

Royal Exchange Assurance (Nigeria) Plc, which posted gross premium of N899.42 million for the first quarter, has approved its split into life and non life insurance entities. The new subsidiaries will be Royal Prudential Life Assurance Company Plc and Royal Exchange General Insurance Company Limited while Royal Exchange Assurance will cease to be an insurance company.

The initiative was borne out of a regulatory authority direction. Royal Exchange Assurance, in its new role as a holding company, hopes to expand into other subsidiaries in the financial service sector, such as pension and mortgage.

Oman Telecommunications

The sale of 25 percent in Oman Telecommunications Co. began yesterday. Governments across the oil producing frontier markets are opening up their telecom sectors to competition as their economies grow on the back of a seven-fold rise in oil prices since 2002.

Oman will only accept investments from telecom firms that operate in multiple countries, have at least five million subscribers and agree to hold the Omantel stake for at least five years.

Frontier markets 2nd quarter returns

Ghana, Uganda and Nigeria topped the leader board in frontier markets in the second quarter of the year as their stock markets registered 25 per cent, 19.8 per cent and 13 per cent respectively.

Friday, 4 July 2008

Ethiopian Airlines

Although not yet quoted on any East African exchange, we decided to check Ethiopian Airlines out as we will be flying with them for an investor trip. Turns out it has a long pedegree and was founded in 1945, initially with the assistance of the US airline Trans World Airlines (TWA). Its initial fleet was five DC3's but apparently the fleet is a more recent!

Ethiopian Airlines has grown to become one of Sub-Saharan Africa's top three airlines. Hopefully, they will find there way to the capital markets one of these days.

Pakistan Oilfields Limted

Pakistan Oil Fields plans on drilling another exploratory well, Bela-1 in Meyaland Dhulian field. MOL, the operator of Tal block and in which POL owns 21.05% stake is in the process of drilling and talks about encouraging results.

The overall production outlook of the company is more positive than it has been for a long time. It still has problems at the Pindori field.

Oil production contributes to more than 56% of revenue, so it is enjoying the high oil price. The government has announced 'Petroleum Policy 2007'and has removed the $36 per barrel cap. The new policy holds incentives for the E&P companies, especially those companies, which are pursuing aggressive exploration activities. The policy will lead to a 6-8% increase in the oil and gas production prices.

Oxus Gold announces sulphide project in Uzbekistan

Oxus Gold plc, listed in the UK, has just announced a go ahead for Amantaytau Goldfields Underground Sulphide Project in Uzbekistan. The Uzbekistan gold and silver producer wants to develop underground sulphide mining at its 50% owned Amantaytau Goldfields Joint Venture.

The conclusion is that development of a 1.2mtpa underground gold mine and process plant based on the current reserves at the Severny and Centralny ore deposits is technically and commercially feasible. The Project will exploit a reserve of 1.74Moz within a resource of 2.99Moz, over an initial 7 year life at the Sulphide Project, producing up to 270,000 oz gold per annum.

Total costs are an average of US$ 402 per oz gold produced over the initial 7 year life of mine, including operating taxes, royalties and management fees. The ungeared after tax NPV for the Project is US$ 329 million at 7% discount rate per annum

Qatar Telekom in bid for Indonesian PT Indosat.

Qatar Telecom (Qtel) has announced a tender offer to acquire all outstanding 'Series B' shares of PT Indosat of Indonesia.

The company is already the controlling and single-largest shareholder in Indosat.

Masher - Argentinian milk and dairy

Argentinian milk and dairy Masher released disappointing results in the first quarter which resulted in its 2012 bonds widening from a May 07 yield of 12.5% to a June 08 yield of 20.08%. That's quite a yield so we looked further int the results.

While net sales for the quarter increased 8.4% YoY EBITDA dropped from Ps.30.7 million in 1Q’07 to Ps.-20.8 million. This was primarily because exports collapsed.
The company did not account for government subsidy payments (compensaciones) during the quarter and that the farmers’ strike in March caused a deferral. Excluding these factors, 1Q’08 results would have been fairly comparable to 1Q’07 results!

Thursday, 3 July 2008

MENA Private Equity Confidence Survey

Deloitte's, Danfonds accountants, have conducted a survey of confidence and market sentiment in the Middle East and North African private equity market.

They conclude the attractiveness of the relatively untapped potential of the MENA region, against a backdrop of strong economic growth, looks set to continue. The survey finds that increasing levels of available capital and continuing macro-economic growth are identified as the key drivers. Entry P/e multiples are expected to increase, stimulated by high levels of liquidity. A shortage of skilled investment professionals is regarded as being the critical challenge impacting the MENA private equity industry.

The summary of the survey may be downloaded from

Wednesday, 2 July 2008

Ghana Telekom

Rumours in Ghana are that Vodafone will seal a $960m deal to acquire
a controlling stake in Ghana Telecom.

Vodafone has reportedly concluded negotiations with the Ghanaian government to acquire a 66.7% in the company according to an unnamed source
at the Ministry of Finance and Economic Planning.

Ghana Telecom's wholly-owned GSM provider Onetouch had a customer base of
1.4 million at the end of Q1 2008, while Ghana Telecom's fixed-line
network comprises around 360,000 connections.

Mozambique - Paris Club of Highly Indebted Poor Countries (HIPC).

One less Highly Indepted Poor Country.

Portugal has cancelled Mozambique's remaining debt in accordance with the Paris Club aggreement. The amount, was estimated at US 393.4m dollars. Most other European creditors have already cancelled Mozambique's debt. The initiative was bilateral between Mozambique and Portugal, but also involved the international community, the International Monetary Fund and the World Bank.

Tanzania gets last minute bank holiday

An unexpected announcement on Monday by the Bank of Tanzania resulted in a bank holiday on Tuesday! The highly unusual move was to allow banks to take stock at the end of the fiscal year. Please don't tell the Central Bank of Denmark about it....

Nordiska Afrikainstitutets - Seminar

China and India in Africa: New Strategic Encounters

Samir Amin will speak at an international conference (put on by the Nordic African Institute) in Uppsala, Sweden on 22-23 September 2008. The subject is both China and India's involvement in the industrialisation of Africa. Themes to be discussed include new colonialism, the oil rush and the military dimension.

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