Dialectic Africa Analyst

Dear Africa Interested Individuals:                                                          Six years ago, Lamido Sanusi (then CBN governor) used his executive powers to take over control of 8 banks in two batches.  Six of the eight banks were later on sold to other existing banks while one was sold to a core investor who recapitalized it and the other is still awaiting sale by the Asset Management Company of Nigeria. I remember being on a conference call four years ago with Access Bank CEO when the acquisition of Intercontinental Bank was announced.  Size and the capabilities it provides clearly stuck out as the driving force behind the acquisition.  So, four years on, how is the merged entity doing compared to when either bank was independent and immediately after the merger?  Given that size is most clearly evidenced by assets and performance is most clearly evidenced by profit, the ratio pre-tax income to assets will guide our discussion in this article.     Access Ban

Dear Africa Interested Individuals:                                                         Appointments typically send a particular message to the general public.  It shows the direction the person appointing wants to go with the organization in question.  Appointments of a federal nature are supposed to be driven by national best interests and not personal best interests even though the appointments are made by people.  I picked six countries and four are in Africa to review their Central Bank appointments which were all made in the past two years (this was not a preset criterion for selection.)  I picked the USA, U.K., Nigeria, Kenya, Angola and South Africa.  I picked the USA and U.K. because they are developed countries with advanced financial systems that should understand by now the proper way to do things.  I picked Nigeria as the largest economy and most populous nation in Africa, Kenya as the dominant economy in East Africa and a prominent frontier market, Angola as a maj

Dear Africa Interested Individuals:                                                         After reviewing Nigerian banks over the years and up to the half-way mark of 2015, I have now come to the following nutshell summations.   1. Nigerian Banks have always had a problem with fully disclosing their state of affairs.  There has been a slight improvement with the emergence of conference calls, investor relations teams and IFRS reporting.  Have looked extensively at the financials of African Banks from North to the South of the continent, I can say without a doubt that Nigerian banks have a lot more information to provide (and can provide) to the investing public and have not yet done so.  I will mention a few : Capital expenditure broken out into replacement & addition .   Breaking out of loan book into detailed tenors: <1 year, 1year - 2 years, above 5 years etc. Revealing interest rate(s) charged on comprehensive loan book in narrow value ranges   Employee turnov

Dear Africa interested individuals;                                                                 I got thinking today when I saw the different price trends for ZCCM on the Lusaka Stock Exchange and NYSE Euronext.  Why are prices on majority of African stock exchanges not fully reflective of present day operational, structural and event specific developments?  Let us welcome Ecobank Transnational Incorporated (ETI) into the picture. ETI trades on the Nigeria, Ghana & BRVM stock exchanges.   ETI on the Nigeria Stock Exchange closed on September 21st, 2015 at $0.093 , $0.094 on the BRVM exchange and $0.076 on the Ghana stock exchange (GSE.)  ETI's price on the GSE is 18% - 19% less than that on the NSE & BRVM respectively. Clearly, Ghanaian investors do not rate ETI equitably and the reason may not be farfetched. Ecobank Nigeria was delisted from the NSE in January 2012.  Just prior to delisting, ETI was trading at a price approximately 5X greater than that o

Dear Africa interested individuals:                                                          Tea is a major foreign exchange earner for Kenya.  Kenya Tea prices have risen about 66% year-to-date.  How did the stock price of three of its listed tea companies fare so far this year?  Williamson Tea rose 35% , Kapchorua Tea rose 33% and Limuru Tea rose 41% .  The price of the Tea companies have risen but, below the price surge of the underlying commodity.  The overall market gloom in Kenya may have something to do with this.  The key is that both (commodity price & commodity company price) are in positive growth territory.   Raw Tobacco prices in Zimbabwe have risen by about 1.5% so far in 2015 while, British American Tobacco, Zimbabwe has risen 4.46% year-to-date as at September 18th, 2015.  Both are on the same page in terms of direction though, the stock price is ahead  of the commodity price which is the reverse of the Kenya case.   Zimbabwe is also a major exporter of

Dear Africa Interested Individuals:                                                         In 2006, Cadbury Schweppes UK increased its stake in Cadbury Nigeria from 46% to 50.04% giving the parent majority control.  By December 2006 a grievous accounting scandal broke that led to the removal of top management of Nigerian origin and the restatement of earnings going back three years.  The increase in stake took place in the same year of the accounting scandal.  Less than three years later in 2009, the parent increased its stake to 75%.  Unilever UK earlier in 2015 successfully increased its stake in Unilever Nigeria from 53.4% to 75%.  Unilever Nigeria is struggling and has been struggling since 2011 from my own vantage point.  The best analogy I can give here is when a baby's cry becomes a shrill .  Many people are talking about Unilever Nigeria's struggles now because it is more than obvious.  Another multinational sought an increased stake when the going got rough an

Dear Africa Interested Individuals:                                                         Happy Hump Day!  Let us get to it.  As African countries seek more listings on their respective stock exchanges, I decided to look at developments and strategies deployed to achieve more listings.   First Rand Bank is the third largest bank in South Africa and has listed subsidiaries in Namibia and Botswana.  First Rand Bank has contributed to the increased listing of companies on African Stock Exchanges.  Rand Merchant Bank has been operating in Nigeria for over four years.  Will they ever list?   Barclays Africa (Absa) is the second largest bank in South Africa and has listed subsidiaries in Botswana and Kenya.  Barclays Africa has applied for a merchant banking license from the Central Bank of Nigeria.   Illovo Sugar South Africa owns Zambia Sugar Company (ZSC) and ZSC is listed on the Lusaka Stock Exchange and the Johannesburg Stock Exchange.     Societe Generale is a pop

Dear Africa Interested Individuals:                                                           I am going to give a rundown of some of my major policy opinions with insights on certain matters and decisions taken by policy makers thus far.  All these insights are contained in one or more of my 64 articles (and counting) on this blog. 1. I said that Nigeria should do crude oil swaps (total overhaul of the existing system) in exchange for imported petroleum products.  This will save foreign exchange that is dwindling in supply given the steep drop in crude oil prices over the past twelve months.  Nigeria is aggressively working on this as we speak.  The Nigerian oil company also wants to be the major importer of gasoline into the country to reduce subsidy fraud by diverse downstream oil marketers.  Foreign reserves have been on a consistent increase over the past three month and counting as leakages are being plugged.    2.  I said that the fuel subsidy should not be removed n

Dear Africa Interested Individuals:                                                            Stanbic IBTC about four months ago made known its intention to raise fresh equity in the amount of $102m (N20.4B) from its existing shareholders (the way Nigerian banks blaze through capital should be a case study for Harvard & Darden Business Schools - the two largest producers of business school case studies worldwide) at a price of N25.50 per share later in 2015.  About two months after expressing its intention, Stanbic IBTC releases its H1 2015 earnings and tells the world its profit attributable to shareholders has declined 46% year-on-year for the first six months of 2015 after rising by 57% from FY 2013 - 2014. The result was released (in record time) within the first week after the end of the reporting period on June 30th, 2015.  What does a bank that wants its shareholders to grant it fresh equity in the amount of $102m do?  It gives out $45m (N0.90 per share) in the for

Dear Africa Interested Individuals:                                                         This is based on the performance of the nineteen (19) banks reviewed as at June 30th, 2015.  Standard Bank and ETI were excluded due to a particular line item not being disclosed.  Half-year basic earnings per share was annualized for all banks.  Prices used were today.  Figures used were as published by the bank whether audited or unaudited.  All banks have a December fiscal year-end.  This value-discovery approach is self-created .  I will give you a straight ranking and then provide my best picks in each country.     Best Value 1. Ghana Commercial Bank 2. CAL Bank Ghana 3. Credit Agricole Egypt 4.  Ecobank Ghana 5. Access Bank Nigeria 6. UBA Nigeria 7. GT Bank Nigeria 8. Barclays Kenya 9. Zenith Bank Nigeria 10. First Bank Nigeria 11. KCB Group Kenya 12. CBZ Holdings Zimbabwe 13.   Equity Group Kenya 14. SCB Ghana 15. Comm.

Dear Africa Interested Individuals:                                                          A country is not a person; a country is made up of people.  A country gets its identity from its people.  While people are referred to as human capital by companies, I consider people as human identity by countries.  So, how are multinational companies rating Nigerian and Ghanaian C-level executives presently?  Recent developments are ominous for Nigerian executives and those in the pipeline and blossoming for Ghanaians executives and bodes well for those in the pipeline. Diageo appointed its first Nigerian CEO for Guinness Nigeria in 2012 (appointment took effect July 1st, 2012) since the appointment of Ralph Alabi in 1991.  He was prior to that the CEO of East African Breweries Kenya and before that Guinness Ghana.  He was removed from the position of CEO of Guinness Nigeria in October 2014 after a brief tenure that was deemed unsatisfactory.  His current professional whereabout is

Dear Africa Interested Individuals:                                                         The clamor continues for commodities export dependent (especially oil) economies to further devalue their currencies.  I keep asking myself "when is enough finally enough?"  The clamor is largely driven by global economists across the spectrum loyal to economic theory and the countries they are domiciled in, portfolio managers and large commercial banks in the countries of focus with net positive (more dollar inflows expected than dollar outflows) dollar exposures.   What does devaluation do to the people in the countries that have devalued their currencies multiple times (or one devaluation of 20% or more) over a short period? 1. Inflation rises quickly and is driven by those directly and indirectly impacted which is everybody .   2. Chances are high that the Central Bank (Fed in the USA) will have to raise interest rates to stem inflationary pressures in the economy. T

Dear Africa Interested Individuals:                                                        United Bank for Africa (UBA) has released its half-year audited result for 2015.  Beyond the progressive numbers, the bank knows where its problems are and is tackling them and making progress as the numbers can confirm.  This bodes well for the future when fresh challenges arise.  Let us start with where the bank had success. Net income rose by 40% and gross earnings rose by 21% .  More earnings trickled down to the bottom-line and boosted net income growth relative to gross earnings. PBT margin was 23.4% . Management has been focused on consolidation (not expansion) for about three years now and this is paying off and still has more room to further impress going forward.  Fixed assets declined by 0.3% over the first six months of 2015.  23% of group net income came from Africa subsidiaries excluding Nigeria.  This has perennially been the bane of UBA from a group perspective; the bank w