Saturday, October 20, 2012

Malawi Stock Exchange

I recently bought some shares on the Malawi Stock Exchange (MSE). I wanted to do a little research to see how it is regulated.  The MSE started in 1996. The MSE is regulated by the Capital Markets Development Act of 1990 (Cap 46.06). Some of the rules are available on the MSE website.  A Securities Act is also in the process of being formally passed.

In general, the laws are extensive enough to set up a functioning Exchange. 13 companies are currently listed. Malawi is still very poor. When I visited the MSE this past summer the CEO described it as a frontier exchange. That does seem accurate. As it grows it and the other financial infrastructure dose as well, there will need to be more regulation. 

Recently also, the International Bar Associations’ Human Rights Institute (IBAHRI) released a Rule of Law analysis of Malawi. The aim of the report was to assess the state of the rule of law in Malawi. Emphasis was placed on assessing the independence of the judiciary and the legal profession. I think that it is a positive that the IBA attempts these kinds of missions but the report did, as usual, seemed skewed to push the donor agenda of making African countries more Western. Part of the review was to criticize Malawi for its enactment of a law criminalizing homosexuality. I have been to several IBA meetings and it has always been my impression that it serves the interests of large well funded law firms and organizations. It always touts the standard line. The report did draw attention to the 2011 unrest in Malawi and the death of a student activist critical of the government.   

Malawi currently has some inflation and growth has slowed. The outlook is for continued slowing. I have always been a contrarian investor. I like buying equity which can perform well even in weak economic conditions.

CASE Handbook now online

The Central African Stock Exchange handbook is now available for download.
The website is nifty and full of interesting info.
The handbook can be downloaded for a fee.

Monday, October 1, 2012

Social impact investors and Boards

Social impact investors put their investment 'dollars' to work for an educational, environmental, social and essentially public good purpose. Social stock exchanges and boards brings those investors to socially conscious businesses that want to raise capital.

In addition to the recently started but not yet LIVE Social Stock Exchange in London, another social investment board has launched. In partnership with the Stock Exchange of Mauritius, the iX, or Impact Exchange has launched a board to help companies who have a social purpose, and not simply a profitable purpose, to raise cash.

All of this raises the issue of who qualifies as a social company and how do we know once we buy shares that they will remain social? Oh, they are waaaay ahead of us. There are verification agents and audits, as well as ongoing reporting requirements.

This is not a new concept. Companies can do green audits, why not social audits. Of course, these are an additional cost. We pay more for organic, locally grown, specially made healthy for us and society goods. Being socially, environmentally conscious costs more. Some companies can afford that additional cost to attract that impact investor. Some companies cannot.

Here is where I get stuck. Anecdotally, its the small to medium enterprise from the developing world who cannot afford those additional costs to be green and responsible. Here is the kicker, the founders of iX plan to ask development agencies to assist them in defraying the costs of some of these audits. What do the economists call seeking? I hope I got that right. It is just another layer of cost and bureaucracy, job security for some, and all acceptable because we are investing in a sustainable future.

These ideas and concepts are not harmless. Exchanges make money and impact investors cannot get around that. Also, impact investors should be responsible for the companies they put OUT of business in favor of others that can afford the audit, impact verification and reporting requirements.  

Any data driven researcher out there that wants to help me find the proof please call me!