AfriStock Monthly Snapshot:

February 2010 Picture of African Stock Markets

This article is the inaugural edition of our new monthly snapshot of African stock markets
called "AfriStock Snapshot." It also introduces a new contributor to the Afribiz family,
Hartmut Sieper. Hartmut Sieper is an investment banker and Director of Trans Africa
Invest.

Africa is a fascinating and colorful continent, full of exciting business and investment opportunities.
Investors should keep in mind that Africa is not one country like China, India, Brazil or Russia. It is rather
a diversified continent with 53 nations.

While many global investors like the BRICs and have invested heavily in their stock markets, Africa is
lagging behind. Few emerging market funds recognize Africa as “the next big thing”. Many of the 22 stock
exchanges are still tiny, dormant markets with market capitalization under $10 billion and low liquidity.
Besides South Africa, which is by far the biggest market, three more stock exchanges are already attracting
global emerging market investors - Egypt, Morocco, and Nigeria.

Africa is much better than its reputation. In the Western mass media, negative headlines about Africa
have been the norm. On the other hand, positive news and encouraging stories are still rare to find. This
explains why many potential investors are burdened with fear and prejudices. Only few understand that
Africa offers many business and investment opportunities.

The good news is this is subject to change. The FIFA World Soccer Championship offers a huge marketing
window of opportunity that will draw much attention from all over the world, not only to South Africa but
to the whole continent.

International investors are beginning to explore Africa, mainly because of the richness of natural
resources. We are in a secular bull market (a rising long-term trend of investor confidence) in
commodities. Rising commodity prices will allow the region to improve its fundamental profile.

The main driver for economic development and foreign direct investment (FDI) in Africa is the
commodities sector. The abundance of natural resources in Africa has attracted some multinational
companies, as well as Asian countries especially China.

Africa is the second fastest growing region in the world. The impressive annual GDP growth of 5.3% in
this decade, as well as favorable demographics, has attracted many foreign direct investments. It will also
attract portfolio investments from global investors.

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Many African countries have shown robustness against the world financial and economic crisis, because
of their low financial inclusion into the world financial system. What once had been considered a curse is
now seen as a blessing.

The growth rates in various African countries are very different. South Africa, which has recorded the
longest upswing in its history, had growth rates of about 5%. The oil rich country of Angola had growth
rates of around 20 % in three consecutive years.

On the other extreme, Zimbabwe’s national economy has contracted by 70 % over the last decade. This
country has hit rock bottom and might perform very well in the coming years. However, we should have in
mind that countries like Zimbabwe and Ethiopia are starting from a low economic base.

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The performance of African stock markets in 2009 was ranging from + 85 % to – 52 %. Ghana and
Nigeria were the worst performing stock markets in 2009. These markets have huge upside potential.
Some stocks are incredibly cheap, with price earnings valuations well below 5.

The situation of the Nigerian Stock Exchange All Share Index is very interesting. It looks like the market
completed a major double bottom and is now rising. A down trend line has been broken as well. In
January alone, Nigerian stocks gained more than 10%.

Smart portfolio investors should not primarily focus on the major stock exchanges of South Africa and
Egypt, and the commodity stocks that are traded in Canada, Australia and the UK. Instead, they might
consider it better to invest into the “real Africa”. Markets like Nigeria, Zimbabwe and Kenya might offer
superior returns to bold investors.

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