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Todd Moss, Vijaya Ramachandran, and Scott Standley

Explore the challenges hindering portfolio investment in Africa. Analyze frontier equity markets, firm sizes, and asset allocations of global emerging market funds, with a focus on South Africa. Learn how to target regional funds, leverage the JSE, and address supply constraints to promote firm entry and growth.

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Todd Moss, Vijaya Ramachandran, and Scott Standley

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  1. Todd Moss, Vijaya Ramachandran, and Scott Standley Why Doesn’t Africa get More Portfolio Investment? Frontier Stock Markets, Firm Size, and Asset Allocations of Global Emerging Market Funds

  2. Frontier equity markets • 15 mkts • SA dominates • Others small, low liquidity • Few large blocks available • But not unusual

  3. Log market capitalization vs. Log GDP

  4. Log value traded vs. Log market capitalization

  5. Regional Funds

  6. GEM fund investment, 1995-2005

  7. South Africa GEM investment, 1996-2004 (3 year moving averages)

  8. GEM investment in Frontier SSA (1996-2004, 3yr moving averages)

  9. Share of GEM investment vs. Log market capitalization No country with market cap under $50 bn receives more than 1% of total GEM investment Market cap = $50 bn

  10. Share of GEM investment vs. Log value traded No country with value traded under $10 bn receives more than 1% of total GEM investment Value traded = $10 bn

  11. Log GEM investment vs. Log market capitalization

  12. Log GEM investment vs. Log value traded

  13. Share of GEM funds vs. Log market capitalization

  14. Share of GEM funds vs. Log market capitalization >90% of funds and >$150 bn market cap <10% of funds and <$20 bn market cap Outgrown asset class

  15. Share of GEM funds vs. Log value traded

  16. Share of GEM funds vs. Log value traded >90% of funds and >$75-100 bn value traded <10% of funds and <$2 bn value traded Outgrown asset class

  17. Why are SSA firms small? Cost Structures, Firm-Level Average by Country (Eifert, Gelb and Ramachandran, 2005)

  18. Why are SSA firms small? Gross and Net Value Added per Worker, $ Adjusted(Eifert, Gelb and Ramachandran, 2005)

  19. Why are SSA firms small? Percentage of Annual Revenues Lost in Unofficial Payments (World Bank Investment Climate Assessments, various)

  20. Conclusions • Target regional funds • Leverage JSE • Focus on supply constraints/barriers to firm entry and growth • Privatization? • Private equity? • SME finance?

  21. END • END

  22. Log GEM investment vs. Log market capitalization

  23. Share of GEM investment vs. Log market capitalization No country with market cap under $50 bn receives more than 1% of total GEM investment Market cap = $50 bn

  24. Log GEM investment vs. Log GDP

  25. Share of GEM funds vs. Log GDP

  26. Share of GEM funds vs. Log GDP >90% of funds and >$200 bn GDP 10%-90% of funds and $60-$200 bn GDP <10% of funds and <$60 bn GDP Outgrown asset class

  27. Share of GEM investment vs. Log GDP No country with GDP under $100 bn receives more than 1% of total GEM investment GDP = $100 bn

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