A good week for African stocks

Tensions on global markets eased this week amid signs of a slowdown in US inflation. The increased risk appetite for stocks also boosted African equity markets. All big bourses on the continent were up for the week. Namibian investment company Trustco Group Holdings (ISIN: NA000A0RF067), listed on the exchanges in Windhoek and in Johannesburg, was a particular favourite among investors, gaining more than 33% to ZAR 0.60 (EUR 0.04). Trustco specialises in insurance, banking and microfinance and has a market cap of NAD 965 million (EUR 58 million).

Beyond Trustco, there were other winners on the Johannesburg Stock Exchange (JSE) like retail giant Massmart Holdings (ISIN: ZAE000152617), which gained 16.5%. In Kenya, stocks on the Nairobi Securities Exchange (NSE) also were up sharply. Crown Paints Kenya (ISIN: KE0000000141) was the top gainer on the NSE with a 11.9% increase. In Nigeria, NEM Insurance (ISIN: NGNEM0000005) was last week’s favourite with a 29.7% higher valuation. But another major African stock exchange, namely Casablanca, lagged behind. While real estate developer Résidences Dar Saada (ISIN: MA0000012239) put on 10.7%, gains for other winners in Casablanca were limited to 2% and below.

Notably, investors are buying riskier stocks that would benefit from an easing of economic tensions. Such stocks include both financial stocks and consumer companies like Massmart in South Africa, PZ Cussons Nigeria (ISIN: NGPZ00000005) and BUA Foods (ISIN: NGBUAFOODS04) in Nigeria.


Ghana falls below investment grade

Ghana is popular among international donors, and we too feel that there are many things that recommend this beautiful West-African country. Ghana has a stable, pluralistic democracy and never makes news headlines due to internal unrest. We also consider President Nana Akufo-Addo to be one of Africa’s most capable heads of state.

Unfortunately, however, the country is losing the trust of the financial sector. US credit rating agency S&P Global Ratings last week lowered Ghana’s credit rating to CCC+ with a negative outlook. This means that, according to S&P, Ghana’s sovereign bonds have gone from being “highly speculative” to having “substantial risks.” Rating agency Fitch soon followed S&P and downgraded Ghana’s credit rating for a second time this year. Fitch now rates Ghana’s debt at CCC, or eight notches below investment grade. Meanwhile, a Bloomberg study ranks Ghana second among countries with the highest risk of debt default currently.

Ghana has USD 1.25 billion worth of international bonds called Eurobond outstanding, maturing in 2032. Due to the concerns about Ghana’s ability to honour its debt, the yield on these bonds now stands at 20.4%.

President Akufo-Addo has inherited quite a difficult financial situation from his predecessor John Dramani Mahama. During the latter’s presidency, Ghana accumulated a huge amount of debt and quarrelled with the International Monetary Fund (IMF). By the end of this year, Ghana’s public debt will surpass GHS 400 billion (EUR 43.7 billion) – or 84.6% of gross domestic product (GDP).

Despite all this, Akufo-Addo has asked the IMF for an additional loan totalling USD 1.5 billion. It seems that the IMF trusts Ghana’s new government in that it is ready to double the loan amount to USD 3 billion for three years. The IMF's cash injection will help, but given the total debt, it may be too small to convince international lenders.


A mysterious investor in Grindrod

South African logistics company Grindrod (ISIN: ZAE000072328) is one of the hottest stocks on African markets this year. The share has skyrocketed since January, gaining 108.5% to ZAR 10.32 (EUR 0.62). Grindrod specialises in management of container terminals, warehouses and transport services.

On 22 July, Grindrod announced that Xolani Mbambo had succeeded Andrew Waller as the CEO of the company. Mbambo was previously an executive director of Grindrod. That same day, another bit of interesting news happened: “An unknown buyer has acquired an unknown stake in Grindrod Limited,” S&P Capital IQ said in a statement.

As Grindrod currently has a market cap of ZAR 6.9 billion (EUR 415 million), the anonymous investor would likely have paid a large sum for his investment to be noticed. We do not yet know how to assess this information, but we will definitely keep our readers posted.


An unclear situation at Fenie Brossette

A 23% gain in the share price this month should be enough to silence critics. Indeed, the gain cuts the share’s loss so far this year to 0.7%. We are talking about Fenie Brossette (ISIN: MA0000011587), a Moroccan metal processing firm whose share now trades at MAD 135 (EUR 12.74). But in the case of Fenie Brossette, we cannot be silent, as its governance raises serious questions.

First, we do not like that the company never disclosed why Abdelmounaim Faouzi recently quit as chairman and CEO, but remained a member of the board. We in any case regret Faouzi’s departure. He holds an engineer degree from Ecole supérieure des mines in the Moroccan capital city Rabat and is an experienced entrepreneur. During his three years as chairman and CEO of Fenie Brossette, its share price went up by 107%.

Second, we would like to know what strategy Faouzi’s successor Jamal Benyahia intends to pursue. This is because the work at Fenie Brossette is not done yet. Indeed, the company’s market cap has plummeted to MAD 194 million (EUR 18.3 million) from MAD 234 million (EUR 22.2 million) in 2017. The share price suffered a painful decline in 2018 and 2019, shareholders would not like to suffer a second time. The way back to former strength will be long.