THERE was much fanfare around the Ghana listing of UK oil and gas company Tullow Oil recently. Not only was it the first listing since 2008 on the Ghana Stock Exchange, it was also the biggest, more than doubling the market capitalisation of the bourse overnight. It was also the first listing of an international oil and gas company on an African exchange.
Tullow is the operator in Ghana of the large oilfield discovered in 2007, and others, with recoverable reserves of up to 1-billion barrels. Given the money it stands to make from its Ghana operations, its listing is timely and positive. Next year, it plans to cross-list in Uganda, where it is gearing up for oil production in the Lake Albertine Rift basin.
But the Ghana event also prompted comments from the stock exchange and the government that the country should consider following the example set by Tanzania to force foreign companies in certain sectors to list on local exchanges to ensure locals reap benefits from corporate profits.
Last year, the Tanzanian government passed a law making it mandatory for foreign telecoms investors to list their companies from 2013. Analysts warn the law could affect new investment. The exchange is against the law, saying it raises the spectre of nationalisation, which left the Tanzanian economy in tatters before. The Dar es Salaam exchange, like many in Africa, is small and illiquid with minimal trading, making it unattractive to large foreign-listed global players.
Africa currently has little by way of resources listings. Companies are listed primarily in Canada and London. According to figures compiled by the JSE’s Africa Board, there are at least 80 resources companies listed on the Toronto Stock Exchange that are operating in Africa. Many listed oil companies on these exchanges have upstream assets in Africa.
Forcing foreign companies to list on African exchanges on the basis that they need to contribute more to local economies is misplaced. Multinationals in Africa are already contributing. They pay taxes, create jobs, develop skills, contribute to investment inflows, and help to build local supply chains. On the whole, the investments are for the long term.
In the oil and gas industry, the state “take” of contracts — a combination of taxes due, royalties, payments and related corporate obligations to governments over the life cycle of projects — is rising and in Uganda is currently at 80%. But this has not stopped Uganda imposing further taxes on asset sales in the industry, which Ghana is also considering.
The continual milking of the corporate cow acts as a disincentive to capital inflows and is likely to affect future investments. State meddling with exchanges would be another nail in the coffin. Nevertheless, secondary listings by foreign multinationals have many advantages for the continent and should be encouraged.
Resource companies need to consider the business case for doing so, given the more assertive messages coming from Africans about getting greater benefits from their resources. Many African exchanges would find it difficult to absorb large global companies and creative thinking would need to be applied. For example, in Uganda, a new, separate index is being created for Tullow, as it is worth four times the value of all 11 companies listed on the stock market.
There is already some movement by resource companies in other African markets. For example, the London-listed African Barrick Gold is finalising a listing on the Tanzanian exchange and Canada’s First Quantum is to list its depositary receipts on the Zambian exchange.
Whether Tanzania has overstepped the mark remains to be seen but it would be unfortunate if its actions were the start of such a trend in other countries. Governments should be doing more to create broad- based growth in their countries instead of focusing their efforts on punitive measures against private enterprise.
Many investors in Africa have global operations. Pushed too far, they may simply write off the opportunity.