Sub-Saharan Africa’s relative insulation from the downturn in global stock markets provided a safety net for strategic investors. By international standards, fledgling markets of SSA are ‘semi-detached’ from the main Western (OECD) markets.
Today, north of Johannesburg, there are 15 bourses, the most recently inaugurated being Mozambique. Only seven exchanges - Nigeria, Zimbabwe, Kenya, Ghana, Botswana, Mauritius and the Abidjan-based Bourse Regionale des Valeurs Mobilieres (BRVM) - offer reasonable investment outlets for fund managers.
The Johannesburg Stock Exchange (JSE) All Share index on December 20 hit record highs of almost 11,000 points (it started the year 8,100), fuelled mainly by booming share prices of resources stocks. But the JSE’s spectacular rise is due chiefly to the rand’s free-fall. Rand-hedged stocks, the likes of AngloGold, BHP Billiton, Gold Fields, Impala Platinum, AngloAmerican, Harmony and Sasol, with revenues in US dollars and local labour/capital costs in rands, are benefiting from a depreciating currency. The anticipation is of record earnings in rand terms for the fourth-quarter.
As Jonathan Best, AngloGold’s chief financial officer told the Financial Times of London: “The weakening currency has a huge effect on the rand gold price. The profits for the quarter will be high across the board.”
The Information Tech and Industrial indices have also performed quite strongly, underpinned by stocks which have substantial overseas businesses - such as Dimension Data and Richemont. But recently, the Financial index has fallen because of the poorer outlook for banking stocks, as expectations for interest rates cuts are fading, at least in the short-term.
The frail rand was the world’s worst-performing currency, measured against the dollar, falling by 40% during 2001. At one stage in late December, it plunged to new lows of 13.47:$1, hit by aggressive speculative ‘short-selling’.

Rand is evidently under-valued

However, some analysts still maintain that on a purchasing power parity basis, the rand is evidently under-valued versus the major hard currencies, such as the US dollar, sterling and euro. But it’s difficult to say when the currency will recover. (Please refer to separate story on the rand in this issue). Despite its strong performance however, there was a marked lack of jubilation among traders and investors at the JSE. David Shapiro, managing director of SG Securities in Johannesburg remarked: “Nobody is rejoicing.”

Read the full story in the February 2002 edition of African Business Magazine

Copyright © IC Publications Limited 2001. All rights reserved. No part of this site may be reproduced or transmitted in any form by any means or used for any business purpose without the written consent of the publisher. Whilst every effort has been made to ensure that the information contained herein is as accurate as possible, the publisher cannot accept responsibility for any consequences arising from its use.

Back to the top
Contents