Cross-listings in Africa: To be or not to be?

Dear Africa interested individuals:

                                                  Most African stock exchanges are thinly traded on a volume and activity basis.  Some listed companies rarely trade at all and others that trade regularly do so in insufficient quantities relative to demand.  African companies across industries have embarked on an expansion spree across the African continent in the quest for revenue as markets became saturated in their home countries.  As these companies improve their performances through the conquering of new territory, are investors across the continent being given a chance to partake in ownership of these companies?  Shakespeare said "to know you is to love you"  Investors say "to see you is to buy you"  

There are two types of cross listings: Listing of the parent company's ordinary shares on another stock exchange in another country or the listing of depository shares of parent company on another exchange in another country.   ETI in Ghana and BRVM and Shoprite in Namibia and Zambia are examples of the former while Acacia Mining cross-listed on the Dar es Salaam stock exchange with a primary listing on the main market of the London Stock Exchange an example of the latter.  A global example is the listing of Alibaba's (Chinese ecommerce company) depository shares on the New York Stock Exchange in 2014.  

Kindly note before I proceed deeper that the listing of the local subsidiary of a parent in the local market is not a cross listing.  Standard Bank Group has many local subsidiaries listed in Africa through this approach.  Standard Bank Group is only listed on the Johannesburg Stock Exchange and not on any other African stock market.  Local subsidiaries are listed in Nigeria, Kenya, Uganda, Malawi among others.  While the Nigerian market eagerly awaits the listing of MTN Nigeria on the Nigerian Stock Exchange, this is not a cross listing  The listing of the shares of MTN Group South Africa on the Nigerian Stock Exchange is a cross listing  I see this third most popular approach as a local listing of a foreign company and not a cross listing.  This appears to be the approach most often taken if a listing outside the company's home country must happen.  This is not cross-listing.   

This has been the route taken by multinational companies operating in Africa for many years and is now being used by African companies who do not want to actually cross list.  Nestle Switzerland has its local subsidiaries listed in Nigeria and Cote' D' Ivoire.  The local subsidiary of Total (downstream) is listed in Kenya, Ghana, Cote' D' Ivoire and Nigeria.  The local subsidiary of Diageo is listed in Ghana, Nigeria and Kenya.  The local subsidiary of Unilever is listed in Ghana, Nigeria and Cote' D' Ivoire.  The local subsidiary of PZ Cussons is listed in Ghana and Nigeria.  The local subsidiary of Standard Chartered Bank is listed in many African countries - Botswana, Kenya, Ghana, Zambia...  Nigeria is curiously not on the list despite Standard Chartered Bank having a good history of listing local subsidiaries on stock exchanges in countries where it operates.  Let us start off with African companies who have done cross-listings in Africa (kindly note this list is not exhaustive.)  

The below companies have listed their parent holdings on these exchanges and not the local subsidiary of the parent.  

1. Illovo Sugar of South Africa is cross listed in Malawi and Zambia   

2. Shoprite of South Africa is cross listed in Zambia and Namibia

3. ETI (Nigeria is referenced as the home because it has the core of the asset base of ETI and is the most liquid of the three exchanges) is cross listed in Ghana and Cote' D' Ivoire  

4.  Equity Bank Group of Kenya is cross listed in Uganda and Rwanda  

5.  Kenya Commercial Bank is cross listed in Tanzania, Rwanda and Uganda

6.  Uchumi Supermarkets of Kenya is cross listed in Uganda, Tanzania and Rwanda  

7.  Nation Media Group of Kenya is cross listed in Tanzania, Uganda and Rwanda

8.  Kenya Airways is cross listed in Uganda and Tanzania.  

9.  Jubilee Insurance of Kenya is cross listed in Uganda and Tanzania

10.  National Insurance Corporation of Kenya is cross listed in Uganda

11 Centum Investments of Kenya is cross listed in Uganda

12.  Choppies of Botswana is cross listed in South Africa

13.  Umeme of Uganda is cross listed in Kenya

14. Sanlam of South Africa is cross listed in Namibia

15. Old Mutual of South Africa is cross listed in Namibia and Zimbabwe and has a primary listing on the London Stock Exchange.   

16. Oando of Nigeria is cross listed in South Africa since 2006. 

17. Anglogold Ashanti of South Africa is cross listed in Ghana.  

18. Investec of South Africa is cross listed in Botswana.   

19. Standard Bank Group of South Africa is cross listed in Namibia

20. Anglo American of South Africa is cross listed in Botswana and Namibia.  It has its primary listing on the London Stock Exchange.  

Two worthy mentions due to most of their business operations taking place in Africa.

Tullow Oil listed on the LSE is cross listed on the Ghana Stock Exchange.

Acacia Mining on the LSE is cross listed on the Dar es Salaam Stock Exchange (DSE).   

Speaking of the DSE, an amendment to a new finance bill is in play that will require all eight (three are foreign - Vodafone, Millicom and Airtel) telecom operators in Tanzania to list on the DSE before the end of 2016.  The government of Tanzania wants to 'keep tabs on revenues and widen share ownership through the bill making local listing compulsory.'  

Let us now look at some of the visible African companies that have expanded their operations across the continent but have not done any cross listings in Africa.  

1.  GT Bank of Nigeria is not listed on the Ghana, Kenya, Uganda, Rwanda or BRVM stock exchange based in Cote D' Ivoire.  GT Bank has operations in all these countries.  

2. Access Bank of Nigeria is not listed on the Ghana, Kenya, Rwanda, Zambia, Tanzania or Uganda stock exchanges.  

3. UBA of Nigeria is not listed on the Ghana, Kenya, Tanzania, Uganda, Zambia or BRVM stock exchanges.  

4.  Dangote Cement of Nigeria is not listed on the BRVM, Zambia, Tanzania or South Africa stock exchanges.  Dangote Cement wants to conquer Africa and list elsewhere.  Aliko Dangote intends to list his company on the London Stock Exchange. 

5. Naspers of South Africa is not listed on the Botswana, BRVM, Egypt, Ghana, Nigeria, Kenya, Malawi, Mauritius, Namibia or Zimbabwe stock exchanges.  Naspers has an ADR listing on the London Stock Exchange.  

6. Forte Oil of Nigeria is not listed on the Ghana stock exchange despite having operations in Ghana.

7. Attijariwafa Bank Group of Morocco is not listed on the Tunis or BRVM stock exchange. 

8. FBN Holdings (First Bank) is not listed on the BRVM or Ghana stock exchange.  

9. I & M Holdings of Kenya is not listed on the Tanzania, Rwanda and Mauritius stock exchange.  I & M Bank is in a legal spat with Keystone Bank of Nigeria that sold its 80% stake in Orient Bank of Uganda to 8 Miles (a private equity firm) instead of I & M that thought it had expanded into its fourth African country outside of Kenya given its impression it was the sole serious bidder.  I & M reported the manner in which Keystone went about the deal to the Ugandan and Nigerian bank regulators.  This kind of news will not hit the headlines in Nigeria...   

10. SAB Miller Group of South Africa is not listed on the Nigeria, Zambia, Botswana, Tanzania and Uganda stock exchange.  The company is listed on the London and Johannesburg stock exchanges.   

11. Zenith Bank Group of Nigeria is not listed on the Ghana Stock Exchange.    

12. MTN Group of South Africa is not listed on the Nigerian Stock Exchange despite Nigeria being the main driver of the company's earnings.  The best Nigeria will ever get is a listing of the local subsidiary only.    
 

African countries are clamoring for foreign companies to list on their exchanges while African companies that operate mainly in Africa are not listing on other African exchanges.  These African companies prefer to make their money from Africa and cross list outside of Africa.  The largest cement company in Africa (Dangote Cement) clearly intends to tow the same path.  

Naysayers will quickly defend these actions by saying the markets are not developed enough to effectively list on any other African stock exchange.  This is clearly not true...  Doing business in Africa is much harder than listing on an African stock exchange outside of your home market.  These companies keep expanding into more and more African countries seeking market share and revenue growth.  Money is being made from the residents of these countries and these residents should be allowed to make money from ownership of these visible African companies.  

If African companies keep running to the London Stock Exchange, they are only helping to further develop the LSE while losing the opportunity to develop and deepen African stock exchanges.  Pakistan (Karachi Stock Exchange) has moved from a standalone market (where Ghana is presently) to a frontier market (where Nigeria is now) to an emerging market (where South Africa is now) within eight (8) years.  Foreign investors are now throwing money at the Pakistan market as if money is going out of fashion.  Pakistan developed its market and then the foreign investors kept coming and keep coming.  Markets are developed internally and then attract external attention.  

There is a grey area of cross listings that I need to address.  These African companies only operate in one African country, list there and then list on the London Stock Exchange, Paris Euronext and/or New York Stock Exchange.  My concern here is for African companies that have operations in multiple African countries but decline to list on multiple African stock exchanges outside of the primary market.  Tullow Oil and Acacia Mining headquartered in London, generate most of their revenue from Africa and have cross listed in Ghana and Tanzania respectively.  The least African companies that generate all/most of their earnings from one African country and list in a developed market can do is cross list on one other African stock exchange to bring capital market development where it is urgently needed.  This is an appeal and not a demand unlike my original premise.  I will mention two of these companies for reference purposes: Seplat of Nigeria and ZCCM Investment Holdings of Zambia.      

It is very unfortunate that companies in the largest economy in Africa do not find it appealing to cross list their shares on other major African stock exchanges where they do business or seek to do business.  Nigeria is the worst culprit in this regard with only one entrant - Oando.  Nigeria is typically very occupied by itself to actually look within the continent.  This is the same reason why Kenya (the largest importer of sorghum in Africa) will import sorghum from USA when Nigeria (the largest producer of sorghum in Africa and among the top five in the world) is relatively close by.  Whenever Nigeria looks beyond itself, it looks beyond the African continent.  

I am not advocating African companies to cross list on most African stock exchanges.  This is frankly not feasible.  I am advocating for at least one cross listing of the parent company on another African stock exchange.  A good example will be if Attijariwafa Bank Group of Morocco list on the Tunis stock exchange instead of just listing its local subsidiary, Attijari Bank.  Standard Bank Group can list its shares on the Nigerian Stock Exchange in addition to its local subsidiary that was already listed prior to the majority stake acquisition in 2007.  

Regulators, listed companies and legislatures of African countries need to work together to ensure that visible African companies cross list some of the parent company's shares on at at least one other African stock exchange.  Some of the challenges thus far have to do with lack of fungibility of shares which leads to lack of  liquidity in markets of secondary listing and wide disparity of prices across markets.  Shoprite South Africa had a bad experience with its listing in Zambia and sued some of its Zambia based shareholders due to what it termed an unauthorized sale at an unauthorized price.  Another challenge is not enough shares being provided for trading by the parent company on the market of secondary listing at the time of listing.  This makes it difficult to successfully execute arbitrage trades and garner investor interest for the African company in the secondary market as volume traded is too small.  This is the case with Oando on JSE, Acacia Mining on the Dar es Salaam stock exchange and even ETI on the Ghana Stock Exchange among many others.  

Nonetheless, cross listings help to develop African stock markets and expose local investors to more investment opportunities across the continent.  East Africa clearly understands this; West Africa apparently does not want to understand this. West African exchanges based on my discussions and utterances from its leaders, are more interested in being able to execute transactions from their exchanges and make purchases on other West African stock exchanges (Nigeria, Ghana, BRVM) instead of cross listing.  For example, a Nigerian broker places a trade on the Nigerian Stock Exchange for X amount of shares of Societe Generale Bank Cote D' Ivoire on the BRVM and the trade is successfully executed and settled across currencies and the shares deposited with the custodian of the buyer and the seller receives the sale proceeds in CFA while the Nigerian buyer paid Naira.               

Dangote Cement should list on the Dar es Salaam stock exchange (second largest cement plant of the company in Africa is based in Tanzania) or the regional powerhouse Nairobi stock exchange and the Johannesburg stock exchange before listing on the London Stock Exchange.  Charity will always begin at home.  Southern and East Africa realize this, West and North Africa do not.  I will have to end this here as it is getting too long.

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