{"id":2502,"date":"2015-02-11T14:15:57","date_gmt":"2015-02-11T14:15:57","guid":{"rendered":"http:\/\/oilnewskenya.com\/?p=2502"},"modified":"2015-02-11T14:18:10","modified_gmt":"2015-02-11T14:18:10","slug":"africas-extractive-industries-offer-investors-kpmg","status":"publish","type":"post","link":"https:\/\/www.oilnewskenya.com\/index.php\/africas-extractive-industries-offer-investors-kpmg\/","title":{"rendered":"Africa\u2019s extractive industries have more to offer investors – KPMG"},"content":{"rendered":"

Improvements in political and macroeconomic stability, policy certainty and legal systems in many African countries, as well as Africa\u2019s growing middle class and rise in consumption, continue to raise the bar on foreign interest in Africa as an investment destination \u2013 as GDP growth (as a whole) averages at six percent for three consecutive years*. Yet, Africa hasn\u2019t reached its potential share of investment in extractive service.<\/p>\n

In fact, the UNCTAD has revealed that although the share of the extractive industry in the cumulative value of announced cross-border Greenfield Investment projects is still significant for Africa – at twenty six percent – the extractive industries share of the total number of projects has dropped to eight percent.<\/p>\n

According to Robbie Cheadle, Associate Director: Mergers and Acquisitions Advisory Services, KPMG in South Africa: \u201cThis is in line with a world-wide reduction in investments into the extractive industries. Despite the rosy picture that is repeatedly painted of foreign interest and investments in Africa, investors often still have many unanswered questions when looking to invest in Africa\u2019s extractive industries, which are often flagged as having higher risks potential relating to policy uncertainty or market instability.\u201d<\/p>\n

For instance, where an increase in foreign direct investment (FDI) inflows should naturally lead to an increase in listings, in Africa currently this isn\u2019t the case.<\/p>\n

\u201cAn analysis of the number of listed companies between 2010 and June 2014 across various Africa-based stock exchanges indicated that the number of listed companies on these exchanges has either remained static or increased marginally and, in some cases have declined slightly despite strong growth in the total market capitalisation of most of these stock exchanges,\u201d add Cheadle.<\/p>\n

Added to this, generally African stock exchanges lack liquidity, which may be due to a number of factors, including; the limited number of listed companies on the stock exchanges, the limited free float, the low numbers of retail investors, the significant and long-term holdings by pension funds and the high transaction costs.<\/p>\n

Furthermore, prospective foreign investors also have difficulty in finding a counterpart who is willing to sell their shares \u2013 and it is difficult for prospective institutional investors to secure large enough quantities of the target securities to meet their investment criteria.<\/p>\n

However, Cheadle believes that deepening the African markets through attracting more listings to the various bourses will go a long way to solving the illiquidity of the various African exchanges.<\/p>\n

In a new publication, entitled\u00a0Listing in the Africa Extractive Industries, KPMG indicates that this may be achieved through any of four approaches, including;<\/p>\n