Angola Expects Its New Bourse to Be Africa’s Sixth BiggestColin McClelland
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 probably the continent’s sixth biggest, according to data compiled by Bloomberg.
The capitalization of the exchange, which is set to start in 2015, would be a minimum of $11 billion based on last year’s output of $114 billion, Archer Mangueira, president of the Capital Markets Commission, said in an interview on April 10 in Luanda, the capital.
“There is light in the tunnel that will encourage foreign investors to join our capital markets,” he said.
While South Africa’s 126-year-old bourse has a market value more than double the nation’s gross domestic product, investors in other markets such as Mozambique, which recorded 250 trades in 2012, struggle with liquidity, making it hard to buy and sell shares. Ghana’s GSE Composite Index recorded trading of 189 million shares last year, compared with 85.5 billion in Nigeria’s stock market and 5.25 billion in Kenya, according to data compiled by Bloomberg.
Angola is developing the market, which would be almost twice the size of Slovenia’s, to attract investment as it continues rebuilding after a 27-year civil war that ended in 2002. With the government forecasting economic growth of 7.1 percent this year from 7.4 percent in 2012, it’s under pressure from volatility in the price of oil, which accounts for three-quarters of budget revenue, according to the International Monetary Fund. Angola ranks 157th out of 176 countries on Transparency International’s 2012 Corruption Perceptions Index.
Angola’s largest banks, which include Banco Angolano de Investimentos SA and Banco de Poupanca e Credito SA, as well as mobile-phone companies Unitel SA and Movicel Telecomunicacoes Lda., are expected to list on the exchange, Mangueira said. Local coffee, oil and cement makers may also offer stock, he said.
“There are a lot of different interests at play, so getting some of these companies onto market is going to take a long period of time,” Joseph Rohm, a portfolio manager who helps manage more than $1.5 billion for Investec Asset Management’s African funds, said by phone from Cape Town today. An Angolan exchange “would create more investment opportunities across the continent. It’s a high growth market that we view as very attractive given the oil dynamics and the growth that’s generating and the large population.”
A secondary bond market will start this year to help develop a yield curve, Mangueira said. The curve is a graph that plots returns on investment over time and can help investors asses risk in an economy, such as the potential for default. Debt with longer terms generally earn more for the lender than shorter duration securities, such as Treasury bills.
“The development of a secondary market this year will give us a reference point for corporate debt and a stock market to follow,” said Mangueira, a 50-year-old former economic adviser to President Jose Eduardo dos Santos. “A yield curve is very important” for marketing securities, he said.
Domestic oil companies will raise capital from the bourse to develop onshore concession blocks, Mangueira said. The state oil company Sonangol EP is pushing local companies to bid on 10 Kwanza basin concession blocks near Luanda and five in the Congo basin in the nation’s north when they are auctioned later this year. Onshore crude oil exploration and production is less expensive than the deepwater projects operated by companies including Total SA, Exxon Mobil Corp. and BP Plc.
While Investec’s Rohm said he didn’t expect Sonangol to be added to the bourse, there are “other distribution companies in the energy space that could be listed, perhaps real estate companies.”
The commission is working with the central bank and Governor Jose de Lima Massano on establishing uniform interest rates for government bonds and Treasury bills with the same maturity, he said.
On April 8, Dos Santos’ cabinet, known as the Council of Ministers, began discussing how it will allow foreign investors to take profit out of the country without adversely affecting exchange rates, Mangueira said. The cabinet approved several laws to set up the legal, regulatory and technical framework for securities trading, he said.