Twelve months ago, I announced the end to my series of annual posts focusing on investments on the Abidjan-based stock exchange. The posts seemed to be getting very similar – double digit growth reported, all in the (relative) safety of a currency tied to the Euro. Things hit a new high in 2015 with portfolio value growth of 44%. In that year the exchange, which covers countries in the West Africa CFA zone, but is dominated by Ivorian companies, was the fastest growing in Africa.
Well…skip forward 12 months and things aren’t so rosy, and so, in the interests of balance, I thought it best to write again and record that this year hasn’t been quite so good. After annual growth of 17.8%, 27.2%, 31.4%, 18.6% and 44.1%, 2016 saw growth of 4.4%. Looking more closely at 2016, I was basically up 20% in the first six months, and then falling back rapidly, roughly from the time of brexit (though I don’t think there’s much of a link). The downward trend doesn’t look to be abating – I’m down around 12% in the first 30 days of 2017. The overall figure of +4.4% for 2016 isn’t too bad on the surface, especially given the strengthening of the Euro against Sterling, but the downward trend does appear to be something new. This seems slightly at odds with the surface story of the country being one of the world’s fastest growing economies.
I’m no expert, but let me speculate on a few possible explanations, which have a bearing on the Ivorian economy. You can decide for yourself which you think holds the most water:
- The explanation when I asked at my investing bank in Abidjan was that new listings on the exchange in 2016 hadn’t attracted new funds, but simply led people to sell-to-buy the new stocks.
- Some World Bank analysis I read talked of the Ivorian economy ending the post-crisis dramatic growth phase, and moving to a more sustainable but lower level of growth. Growth remains high of course – by many accounts, the highest in Africa in 2016/17 and by some reports second only to Myanmar globally. A good proportion of this growth is through heavy public sector investment, so perhaps this doesn’t necessarily filter through to private sector stock value.
- Globally it’s been a pretty depressing economic year. Even in sub-Saharan Africa, growth fell to 1.6%, the lowest levels seen for many years and signalling for some the end of the Africa Rising story. A rebound to 2.8% is predicted for this year. Nevertheless, Ivory Coast and Senegal have been exceptions, and the vast majority of the BRVM companies come from these two countries – so why have stocks not done well?
- Given that Ivory Coast has a media profile as the economic success story at the moment, investors/new money gets drawn into the country, leading to lots of new start ups which make life more competitive for the established (and in some cases BRVM-listed) companies.
- There was some interesting data in the Fraternite Matin newspaper yesterday from a survey of Ivory Coast-based businesses by the Chambre de Commerce et d’Industrie France-Cote d’Ivoire. Here are some of the key findings from respondents (224 businesses, 80% small and medium-sized, 20% large):
- 75% had thought 2015 was a better year for their business than 2014, but only 18.48% thought that 2016 had been better than 2015.
- 20% had seen their workforce grow, 80% had seen a decline [not sure about those staying the same]
- A key difficulty seems to be relations with the public sector (getting access to the right officials, getting paid on time), though on the positive side, relations with banks had reportedly improved, and the new commercial tribunal seems to be appreciated.
- Perhaps the poor performance in January is a result of recent social unrest which signal bad news to some investors who might have thought there were no medium-term effects of coming out of a ten year crisis.
So, in summary, the Ivorian economic growth story needs nuance, and doesn’t necessarily transfer to the stock market or to major business growth. For my own part, I’ll continue investing in the BRVM, though I’m a little more wary and will look to see if the balance is tipping towards investing in housing, or keeping funds outside the country.
Yesterday I read in the Sierra Leone press that two new companies listed on the Sierra Leone stock exchange last week…bringing the total number to three.