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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. Frontier equity markets. 15 mkts SA dominates Others small, low liquidity
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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
Frontier equity markets • 15 mkts • SA dominates • Others small, low liquidity • Few large blocks available • But not unusual
South Africa GEM investment, 1996-2004 (3 year moving averages)
GEM investment in Frontier SSA (1996-2004, 3yr moving averages)
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
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
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
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
Why are SSA firms small? Cost Structures, Firm-Level Average by Country (Eifert, Gelb and Ramachandran, 2005)
Why are SSA firms small? Gross and Net Value Added per Worker, $ Adjusted(Eifert, Gelb and Ramachandran, 2005)
Why are SSA firms small? Percentage of Annual Revenues Lost in Unofficial Payments (World Bank Investment Climate Assessments, various)
Conclusions • Target regional funds • Leverage JSE • Focus on supply constraints/barriers to firm entry and growth • Privatization? • Private equity? • SME finance?
END • END
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
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
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