Investors are hungry for food stocks

Investors are grabbing African food producer stocks. There are several examples of this: The share price of the brewer Guinness Nigeria (ISIN: NGGUINNESS07) is up 132% to NGN 90.50 (EUR 0.2122) since January. Hosken Consolidated Investments (ISIN: ZAE000003257), a big South African investor in consumer goods, is also up 107% to ZAR 153.41 (EUR 8.98) in the same period. The same is true for Nigerian palm oil producer Presco (ISIN: NGPRESCO0005), whose stock has gained 80% to NGN 158.40 (EUR 0.37) and also for Ivorian sugar producer Palmci (ISIN: CI0000000592), whose stock is up 76% zo XOF 12,295 (EUR 18.74)-

But the list doesn’t end there. Chocolate maker Cadbury Nigeria (ISIN: NGCADBURY001), Illovo Sugar (Malawi) (ISIN: MWILLV010032) and Moroccan beverage company Eaux Minérales d’Oulmès (ISIN: MA0000010415) have also bucked the downward trend on international stock markets that began in January.

Part of the explanation has been the relative robustness of the African economy amid the recent slowdown of the global economy. The IMF puts African economic growth at 3.6% in 2022. By comparison, the global economy is expected to expand by 3.2%.

In addition to the positive economic outlook for Africa, companies on the continent are posting strong profits after the disruption caused by the Covid pandemic. For example, Guinness Nigeria said on 28 July that for the financial year ended on 30 June, net income rose to NGN 15.7 billion (EUR 37 million) from NGN 1.3 billion (EUR 3 million) the year before. This corresponds to a twelve-fold increase. These factors reflect that the investors’ grabbing of African food stocks will continue in the short term.

Lots of digital currency projects

The Central Bank of Nigeria holds the distinction of being the first African central bank that launched a digital currency, namely the e-naira. The e-naira is a central bank digital currency (CBDC), which, like all legal tender, is a claim that holders have against the central bank. Cryptocurrencies like Bitcoin and Ethereum, on the other hand, are privately held currencies whose value can be completely wiped out. Indeed, this happened in the case of Get Gems, Space BIT, Pay Coin, Dogecoin and Ethereum’s DAO.

As they are less risky than cryptos, can be used for online payments and do not require an account with private banks, CBDCs are ideal for the hundreds of millions of unbanked Africans. Indeed, as the IMF pointed out in a report, a digital currency increases financial inclusion, facilitates payments and reduces informality.

In recent months, we have seen the launch of other CBDCs in Africa. These include:

  • Ghana is testing the e-cedi that can be used with a digital wallet on the smartphone or with a smart card for offline payments.
  • In South Africa, the central bank plans to launch a digital currency that would be used solely for interbank transfers. This would be part of Project Khoka 2 – a strategy for introducing a digital currency in the country as a whole.
  • Many other African countries are considering launching digital currencies, including: Kenya, Uganda, Rwanda, Tanzania, Mauritius, Zambia, Zimbabwe, Namibia and Madagascar.

These examples reflect that digital currencies are much farther along in Africa than in Europe, where the European Central Bank is still mulling over the possible launch of a digital euro.


Label Vie thrives despite capital hike

Shareholders do not like capital increases. This is because they either force them to invest more money or accept a dilution of their stake. At Moroccan retail group Label Vie (ISIN: MA0000011801), the announcement of a capital increase was, to our surprise, accompanied by a jump in its share price. Starting from a cyclical high of MAD 5389 (EUR 511.93) on 20 January, Label Vie shed 18.5% to trade at MAD 4390 (EUR 417.03) on 8 July. But since then, the share has recovered somewhat, rising 4.8% to MAD 4600 (EUR 436.98).

The stock’s rebound happened despite Label Vie’s planned capital increase of MAD 180 million (EUR 17.1 million). The new shares will only be issued to Label Vie’s employees and the move would bring Label Vie’s total market cap to MAD 13 billion (EUR 1.2 billion). An extraordinary general meeting will take place on 9 September to finalise the transaction. Meanwhile, Label Vie’s strong results are buoying its stock price. In 2021, the retail group’s net income increased 23.3% to MAD 407.24 million (EUR 38.7 million).


Tractafric ends its downtrend

For months, the share price of Ivorian car importer Tractafric Motors Côte d’Ivoire (ISIN: CI0000000055) followed the general downtrend on equities markets. But now the stock seems to have found its floor. Since mid-July, Tractafric is up to XOF 3750 (EUR 5.72) – a gain of more than 16% in a bit more than two weeks. This cuts the loss in the stock’s value since January to 10.7%. Indeed, Tractafric is now the top winner on the BRVM, the stock exchange in Ivory Coast’s capital city Abidjan.

Its stock has been lifted by better results. In 2021, Tractafric’s earnings per share (EPS) grew by 65% to XOF 299.50 (EUR 0.46). The company specialises in importing cars, especially from the brands BMW, Mini Cooper, Hyundai, Ford and Mazda. Tractafric also imports industrial vehicles from Hyundai, Ford and Jac as well as Michelin tyres. On the BRVM, Tractafric is one of the heavyweights with a market cap of XOF 38,400 million (EUR 58.5 million).


We wish you a good start to the new week.

Christian Hiller von Gaertringen