Angola: New exchange faces liquidity question

Angola’s liquidity issues, amid its de-dollarization drive, may limit activity on the country’s fledgling stock exchange, its chief executive admits.

“We do have some concerns that this may not be the best time for the stock exchange as liquidity in Angola is tighter than it has been in recent years,” says Pedro Pitta Groz, CEO of Bolsa de Dívida e Valores de Angola (Bodiva). “For instance, when it comes to IPOs, some investors might feel that the prices are too high in the current context.”

Angola’s de-dollarization drive came into full swing last October following central bank regulation, which limited the transfer of foreign exchange from oil companies through the banking sector. 

Instead, corporates were directed to exchange foreign currency directly through the central bank to pay partners and contractors in local currency.

The central bank has also, over time, decreased the number of dollars available for auction. Monthly auctions by the central bank averaged $1.606 billion in 2013, $1.598 billion in 2014 and, so far this year, $1.577 billion. 

Angola is Africa’s second-largest oil producer after Nigeria and has proven oil reserves of 8,423 million barrels, according to OPEC. The near-halving of the global oil price from $98 a barrel has also limited dollar revenue to the country.

Combined, these factors have meant there has been a decrease in dollar liquidity in Angola, with a knock-on effect on the local currency. 

“Hopefully we will be able to avoid liquidity problems by rolling out products over time,” says Groz.

Angola’s new stock exchange was incorporated on the July 2 this year and currently has six members: Banco de Fomento de Angola, Banco Angolano de Investimentos, Banco Millennium Angola, Standard Bank, Banco de Negócios Internacional and Banco Privado Atlântico where the banks act as both settlement and trading agents. 

“In one respect this is the right time for us to create a bourse in Angola because we are reaching a point where bank savings are not enough to sustain the projected amount of investment the country needs,” says Groz. “Thus we have been working very closely with the Angolan central bank and the regulators to create a bourse and ensure that we roll out products in a sensible manner.”

So far, the bourse has only traded government debt in local and foreign currency, with a corporate debt market next on the agenda. 

“We already have a few of the larger banks, oil-related companies and construction firms all interested in listing corporate debt through the exchange and we will expect to see the beginnings of a corporate debt market towards the end of this year,” says Groz. 

One of the aims of the exchange is to provide a modern platform for trading bonds and stocks that meets international standards, says Groz. 

“To list on the exchange, corporates will need to show at least three years of audited results, thus the exchange is one way in which we are increasing due diligence of companies on the ground. Eventually, we will look to rate all companies listing corporate debt on the exchange, but for now this will not be a condition of listing,” he says. 

But one investment banker says: “A timeline for the opening of equity trading is highly uncertain. Recent comments made by the local authorities suggest that the opening could once again be delayed to 2017 because of liquidity issues.”