News

Standard Bank Africa Equity Index opens investment opportunities across Africa
19 May 2011

South African investors have direct access to investment opportunities in companies across the African continent. The Standard Bank Africa Equity Index offers investors access to listed companies active across Africa - excluding South Africa. 

The Standard Bank Africa Equity Index Exchange Traded Note (ETN), listed on the JSE tracks the performance of the Standard Bank Africa Equity Index. This ZAR total return index ETN presents a tradable liquid vehicle for both retail and institutional investors who would like to take advantage of Africa's growth story. Standard Bank commits to ensure ease of entry and exit into its ETN product range, providing comfort and security to investors. 

The Standard Bank Africa Equity Index gives investors exposure to companies across Africa and as of the last rebalancing date in April covers 179 listed stocks, and activities in 29 African counties. Stocks currently selected under the Index constitution include 103 stocks with their primary listing in Africa, and 76 stocks with their primary listing on major international exchanges where the majority of the businesses exposure is in Africa through revenue, profits and asset streams. 

The Index is a USD based index which rebalances every 6 months, the Index constitution being based on a set of rigid and transparent procedures, including stock selection, geographical allocation, type of stocks, liquidity and stock weight determination. It looks at the performance of individual counters, stock baskets and equity indices. 

Johann Erasmus, Director Global Structuring Group at Standard Bank Group, says: "Considering the rapid growth on the African continent, growing investor demand and Standard Bank Group's Africa footprint and focus, it was a natural progression to expand our current ETN offering to provide investors with a vehicle to share in the phenomenal growth story of Africa. The Standard Bank Africa Equity Index ETN provides cost effective access to often hard to reach stocks and countries via the local JSE. It is no secret that emerging markets generally, and Africa in particular have emerged as a favourable investment destination in relative terms to developed markets and the Standard Bank Africa Equity Index ETN provides investors access to such markets." 

Africa growth will outpace the growth of other developed economies. According to the IMF, Africa's GDP grew at an average rate in excess of 5% between 2000 and 2009, compared to the advanced world average of 1.7% during the same period. Looking ahead, Africa's trajectory looks remarkably robust, with sub-Saharan Africa's GDP expected to grow by an average rate of 4.9% in 2010 and 5.5% in 2011, compared to anaemic growth throughout the advanced world. 

"Africa as a choice investor destination has seen the continent house many of the world's fastest growing economies. Africa's economic and social progression has accelerated at a phenomenal pace over the past decade due to improvements in macroeconomic conditions, greater political stability and rising demand for Africa's untapped resources. While the resource boom has played a major role in Africa's leap into the 21st century, the continent's future growth is not solely reliant on the extractive industries. A number of other key sector industries are seen leading a wave for sustainable economic growth. These include financial services, telecommunications, information technology, oil and gas and infrastructure, supported by consumer-facing industries and agriculture," says Mr Erasmus. 

Potential for further growth in Africa is immense. Factors supporting this growth include rapid urbanisation on the continent with a workforce expanding at a greater rate than anywhere else in the world. Half of all people living on the continent will be urbanised by 2020. In the last 20 years, 75% of the GDP per capita increase has come from the expanding workforce, with the balance of the increase coming from increased productivity. 

Goolam Ballim, Standard Bank Group's Chief Economist, says: "The elements that typically help forge faster and enduring economic growth have coalesced to present Africa with its most promising future in decades. Moreover, the continent operates well below its efficiency frontier, suggesting that the growth supportive measures can have a disproportionately large impact. It has usually been the case that Africa's recovery lags that of the global economy following a recession. That the continent sprinted ahead in 2010 hints at the depth of constructive transformation." 

As a consequence of these growth areas, the Standard Bank Africa Equity Index has current sector allocation of: 

  • Basic materials: 34.7%
  • Financials: 34.2%
  • Oil and gas: 7.9%
  • Telecommunications: 8.1%
  • Consumer: 9.2%
  • Industrials: 5.1%
  • Utilities: 0.7%
  • Based on the simulated historic performance, returns are expected to stay strong on the Standard Bank Africa Equity Index on a relative basis. The Index currently has shown growth of 20.34 % in the past year, outperforming the S&P Africa Frontier by 16.2% on a price basis. 

    The Standard Bank Africa Equity Index will list on the JSE on 16 May 2011. For more information contact Standard Bank Group's Global Structuring team: +27 (0) 800 111 780, ETNS@standardbank.co.za

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