RECENT DEVELOPMENTS IN AFRICAN CAPITAL

MARKETS

Ken Ofori-AttaExecutive Chairman

Databank Financial Services

Africa Stock Exchanges AssociationGhana Stock Exchange

27 – 30 October 2007ByBy

STRUCTURE OF PRESENTATION

• Recent Stock Market Developments

•Recent Credit Market Developments

•Future Challenges

STOCK MARKET DEVELOPMENTS

INSPIRING RETURNS

• Robust economic growth, falling interest rates, strong currencies etc have spurred robust returns in African stock markets in recent years.

•Only Latin America has outperformed Africa over the past 5 years

INSPIRING RETURNS

Regional Stock Market Returns in USD (5-Yr Annualised to Q3-07)

14%

19%23%

40%

50%

0%

10%

20%

30%

40%

50%

60%

N. America Asia Europe Africa Latam

Inde

x R

etur

n

Sources: MSCI, ABRI

Regional Stock Market Returns in USD (YTD to Q3-07)

9%12%

14%

35%38%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

N. America Europe Asia Africa Latam

Inde

x R

etur

n

LIQUIDITY ON THE RISE

• Increased local private and institutional participation in stock markets and new issues have improved liquidity significantly.

•The value of trade outside South Africa has risen consistently from just US$2bn 5 years ago to US$46bn last year

•Nevertheless, liquidity remains a big risk in Africa due to small floats and the small size of many listed equities.

•The turnover ratio has also improved from an estimated 2.8% 5 years ago to 14.8% last year.

LIQUIDITY ON THE RISE

Africa (Excluding South Africa) Stock Market Turnover

$2.26$3.74

$6.80

$21.77

$45.79$43.01

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50

2002 2003 2004 2005 2006 Yr to Q3-07

Billio

ns

LIQUIDITY ON THE RISEStock Market Turnover Ratio

(Africa Excluding South Africa)

2.8%3.5%

4.9%

15.3% 14.8%

7.9%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

2002 2003 2004 2005 2006 2007

Tu

rno

ver

Rati

o

MARKET BREADTH AND SIZE ON THE RISE

• Markets are growing in size due to new issues and improved valuations

•Valuations have risen from single earnings multiples a few years ago to an average of 17.4x currently reflecting declining risk in Africa and higher growth prospects

Market capitalisation outside South Africa has risen from US$48bn five years ago to US$479bn currently

MARKET BREADTH AND SIZE ON THE RISE

2001 2002 2003 2004 2005 2006 2007

Africa (Excluding S.Africa)Africa

195 247344

552616

11581256

48 66 83 10967

485 479

0

200

400

600

800

1000

1200

1400

US$Billions

Stock Market Capitalisation

Africa (Excluding S.Africa)

Africa

GLOBAL APPETITE FOR AFRICAN ASSETS ON THE RISE Strong economic recovery and improving political

stability has spurred global interest in Africa’s financial markets recently

Africa (excluding South Africa and Egypt) is now being recognised as an asset class

Consequently, new public equity pan-African Fund managers are springing up alongside the traditional managers such Databank, Emerging Markets Management LLC and Blakeney Management

GLOBAL APPETITE FOR AFRICAN ASSETS ON THE RISE

Fund ManagerInception

Date Status Size (US$'m)

Frontier Africa EMM- USA Nov-93 Closed 1,166

Investec Africa Fund Investec S.AFRICA Nov-05 Open 38

Epack Investment Fund Databank-GHANA Oct-96 Open 80

Africa Opportunity Fund Imara-ZIMBABWE Jun-05 Open 122

Africa Pioneer Fund   n/a Open 26

Africa Emerging Markets Fund 'A'Emerging Markets Investment Corp-

USA n/a n/a 1,150

Africa Opportunity Fund Africa Opportunity Partners-CAYMAN Jul-07 Closed 121

PME Infrastructure Fund PME Infrastructure Managers-CAYMAN Jul-07 Closed 173

Rencap Africa Fund Renaissance Asset Management-UK Jul-07 Open 350

Magna Africa Fund Charlemagne Asset Management-UK Mar-07 Open 118

Africa Value Fund Databank-GHANA In progress Open  

Heart of Africa Fund New Star Asset Management-UK In progress Open  

Central & East Africa Property Fund Rutley Capital-UK In progress Open  

Standard Africa Equity Fund Stanlib Asset Management-S.AFRICA Jul-07 Open  

Total       3,344

Old and New Pan African Funds

GLOBAL APPETITE FOR AFRICAN ASSETS ON THE RISE

 Fund

Return Since Inception

(in USD)

AnnualisedReturn (In USD)

YTD Return (In USD)

Databank Epack Investment Fund (1996) 1283% 27% 37%

EMM Frontier Africa Fund (1993) 947% 19% 35%

Investec Africa Fund (2005) 76% 36% 37%

Imara Africa Opportunity Fund (2005) 74% 28% 28%

Magna Africa Fund (2007) 9% 24% 9%

•Existing Africa Funds have performed strongly and this partly explains the rising appetite for African assets

GLOBAL APPETITE FOR AFRICAN ASSETS ON THE RISE Ghana became first post HIPC country and sub-

Saharan African country outside S.A to issue a sovereign bond of US$750m on the international capital markets. Bond was oversubscribed by 660% for original issue target of US$500million

Other African countries are expected to follow suit including Kenya and Nigeria

Nigerian banks have sold GDRs on the London stock exchange successfully

Foreign appetite partly accounts for hugely successful public equity issues in Nigeria, Ghana, Uganda and Kenya

LOCAL APPETITE ON THE RISE

The strong performance of African markets has also ignited significant local interest.

Several country specific local mutual funds have sprung up in recent years in a number of countries

Local appetite has also reflected in strong participation in IPO subscriptions in the markets

CREDIT MARKETS

YIELD CURVES HAVE BEEN EXTENDED Yield curves in several countries have extended in

recent years following improved economic stability and the desire to create benchmarks for private sector issuers

This has laid some foundation for the private sector to access long-term debt capital

With the exception of Nigeria, the private sector has not taken enough advantage of the extended yield curves to access debt capital markets

YIELD CURVES HAVE BEEN EXTENDED Debt capital markets have generally not been

liquid in Africa probably due to the absence of local credit rating, lack of trading expertise and poor marketing habits

NEW PAYMENT SYSTEMS ARE EMERGING Africa is waking up to using new technologies

for transaction processing

Mobile phone banking is growing fast in several African countries for making payments, deposits, checking balances, transfers etc

Some countries are implementing switching technologies to allow for e-card transactions

ACCESS TO CREDIT ON THE RISE

Micro Finance banks are springing up and providing access to small businesses

Some SSA countries have started implementing credit referencing platforms which will eventually transform credit from being collateralised-based to history-based

Banks have started issuing credits cards for the first time in some SSA countries such as Ghana and Nigeria and this is promising to change the entire consumer culture

BANKS ARE IN BETTER SHAPE

Macroeconomic developments and better governance structures have improved the quality of banks balance sheets across Africa

Nigeria style reforms are rubbing off other countries. Higher minimum capital requirements are being implemented or about to be implemented in several SSA countries

Several banks are transforming themselves into regional institutions, especially the Nigerian banks

CHALLENGES AHEAD

CHALLENGES

• The need for national social security funds to become Pan-African institutional investors. This will require regulatory changes in several countries but will give a big boost to markets

•The need to create a strong Africa domiciled investment banking industry to ensure rewards stay in Africa. E.g National pension funds outsourcing investment management services to Africa domiciled fund managers

•How do we harness new technologies such as the mobile phone to improve access to capital market products to ordinary people?

CHALLENGES

• How do we create a true Pan African Capital market?

•Integration, cross-border listing, cross border electronic trading, African Depository Receipts?

• Harmonise rules across the continent?