African Stock Markets and the Executive Branch: Who GETS it and who LOST it?

Dear Readers: 

                        Stock Markets are a reflection of investors' near-term perception of the country's economy and business environment.  The business environment encompasses holistic corporate health and availability of tangible, viable business opportunities across multiple sectors in the country.  A stock market can be equated to the 'pulse' of a human being; a very silent messenger with a very loud message.  Every living human being has a pulse; this is typically the first thing checked to determine if someone is still alive.  A pulse is an afterthought until it gets weak and then it becomes the most important vital sign.  A stock market's daily index movement is an afterthought to a President/Head of State until it points in the downward direction on a recurring basis in excess of three months.  A persistently downward stock market index speaks loudly about a country's economic fortunes, business environment and corporate health and also an indicator of their performance as a leader and dwindling potential for reelection where applicable.  Some African presidents realize this and take action while others treat the silent messenger (stock market performance) with silence and deem their actions and inactions as mutually exclusive from stock market performance as they focus on strengthening their grip on power over the vulnerable citizenry they govern.  South Africa, Kenya, Nigeria and Morocco are in the spotlight.  There will be some other worthy mentions.  

South Africa's President recently met with an Africa/Frontier market fund manager (not based in South Africa) for a sit down face to face meeting about the South African economy and business environment just before his reelection date.  This is the kind of action that  shouts loud and clear to investors that a country's president understands the importance of having a developed and viable  stock market and information from the top is critical to achieving this.  You cannot get more 'macro' than speaking about a country's economy and business environment/potential with the president of a country.  The JSE ALSI is up 2% YTD.  The reelection of Cyril Ramaphosa as the President of South Africa has been seen as a positive for reform continuity and instilling/strengthening of investor confidence leading to an increase in foreign direct and consequently portfolio investment. 

Kenya's Vice President (William Ruto) in April 2018 strongly criticized the Nairobi Stock Exchange's leadership for failing to bring more private sector companies to list on the Nairobi Stock Exchange.  The Vice President did not hide his displeasure:  The Nairobi Stock Exchange “was supposed to help us support more companies, especially the big companies, [to] package them so they can go to the stock exchange.”  “Unfortunately, good people, we are not there yet."  The Chief Executive of the Nairobi Stock Exchange: Geoffrey Odundo responded and used the opportunity to express reservation about the reintroduction of capital gains tax in 2015 as one of the challenges negatively impacting investor sentiment from a listing and investor appetite perspective.  Once again, we see an African leader that understands the importance of having a growing stock market through new listings and upward price trajectory for already listed companies.  The NSE 20 Index is down 12.5% YTD.  The year 2015: reintroduction of capital gains tax, 2016: cap on lending rates of commercial banks to 4% above the central bank's policy rate by the legislative branch, 2017: prolonged political crisis due to cancellation of the presidential election by the Supreme Court and on January 15, 2019, a terrorist attack in Kenya.  Kudos to the judges on Kenya's Supreme Court who stood up for what is RIGHT in 2017 based on the facts and cancelled the country's election.  Moving the country forward was paramount over moving themselves forward (or avoid going backward) through SELF PRESERVATION as they refused cower to the influence of powerful interests already holding the reigns of power.  Nigeria's day of reckoning is coming soon; do not hold your breath...      

Morocco's King Mohammed approximately a year ago in early August 2018 sacked the Minister for the Economy & Finance three (3) days after speaking publicly urging action to tackle social and economic problems besetting the Moroccan people while acknowledging openly that the government needs to do more to boost investment.  I love this quote: "This Royal decision is part of the implementation of the principle of accountability which His Majesty is keen to apply to all officials, whatever their ranks or affiliations."  As of August 2018, four ministers had been sacked for non-performance.  The MASI Index of Morocco is up 2.3% YTD.  Buhari's ministers for his second term are now in place as rewards to varied interests and loyalists.  Incompetence is not a basis for removal in this government if his first four years are to be assessed.  

Nigeria's President Buhari has not spoken publicly about the Nigerian Stock Market that has continually endeared itself to the law of gravity and headed south. Stocks that have dividend yields of 10% and P/Es less then 10 times are now the norm instead of the exception across a good number of the familiar stocks on Nigeria's stock exchange.  May I remind you that the NSE ASI index was up 4% on a YTD basis and 0.57% up for the day, as at the close of the first trading day (February 25, 2019) after the election was concluded.  As at February 25, 2019, stories were rife that challenger Atiku would win and the excitement in the air and markets was palpable.  By February 26, 2019 it was clear the unpopular president was set for a second-term and the NSE ASI declined 0.69%; the next day, on Wednesday, February 27, 2019 the result of the election was formally announced and the market declined further by 0.71%.  The NSE ASI is now down 11.9% YTD despite President Buhari being in a second term like Cyril Ramaphosa of South Africa which is supposed to be a positive catalyst and a confidence booster. 

Ghana's Stock Exchange is down 11.8% YTD as the market grapples with the banking reforms that took place in December 2018 and led to the closure of nine banks and some other mergers resulting in a reduction of banks in Ghana from 34 to 23.  The NSE ASI index is pretty much at par (in terms of poor index performance for 2019) with the GSE Index despite the latter still reeling from a comprehensive banking reform.          

Cote D' Ivoire's President is focused on seeking a third (and maybe fourth after that) term in 2020 after getting the constitution of the country changed in 2016 which now gives him the right to seek a third term in 2020 at which time he would have spent ten years in office.  He has not formally expressed his intent to seek reelection or not ; but, will have to do so by the beginning of 2020 latest as the electoral calendar dictates.  As the uncertainty builds, the Bourse Régionale des Valeurs Mobilières (BRVM) based in Abidjan, is down 10.6% YTD.  

Nigeria's executive is focused on what to take away from the stock market and not what to provide to it.  As at July 25, 2019, Buhari's presidency reinstituted the collection of Value Added Tax (VAT) on stock market transactions.  This totally negated why this tax was suspended in 2014 during the tenure of his predecessor with the aim of reducing transaction costs and boosting investor interest in the stock market.  The Buhari presidency has removed this protection at a time when the market is at a LOW and requires positive catalysts.  The stock market is a source of revenue for Buhari's government and not a score card on his poor handling of the economy as far as he is concerned.  The Nigerian market lost approximately 21% of its value during the start of Buhari's first tenure in May 2015 till the end of 2015.  During the first half of January 2016, roughly the same value was lost.  

Buhari's four years rule thus far has clearly been an anathema to the Nigerian stock market which is sending him and his team a loud message that he is failing thus far in driving actionable policies that will harness Nigeria's strengths and weaken the weaknesses.  As with many African presidents: Ouattara of Cote D' Ivoire, Museveni of Uganda and Biya of Cameroon, Buhari is more concerned with consolidating his hold on power and rewarding his loyalists while the masses look up to him for succor that is easier spelt than felt.  The Nigerian stock market declined 17.8% in 2018 and GDP growth was 1.8%.  In 2007, GDP growth was 6.8% and the Nigerian stock market rose 74.7%.  Like it or not, the stock market (when not manipulated) reflects confidence in government economic policies going forward and the results of policies already yielding tangible results.  

South Africa's President GETS it; Kenya's Vice President GETS it; Morocco's Monarch GETS it and Nigeria's President thus far, has LOST it.  Evidence also points to a level 1 of knowledge by the executive branch defined as You do not know that you do not know.  Realistically, the NSE All Share Index is expected to continue its downward journey until the executive branch listens to the message the stock market is telling them for quite awhile now: you have lost the plot to improve the Nigerian economy.    Hopefully, this article will get the executive branch to move to level 2 of knowledge defined as You know that you do not know which is also the beginning of positive transformations.  The Executive branch needs to GET IT quickly or Nigerians will tell them to get GET LOST and not through the ballot box.  He who has ears let him hear.   

                             The TRUTH will set us FREE; I will keep telling it     

                                            Dialecticafricaanalyst@gmail.com