Rebecca Hampson 04 Jun 201

Africa is fast becoming a hotspot for the exchange-traded fund market, with South Africa in particular driving growth.The total value of the ETF market on South Africa’s national bourse, the Johannesburg Stock Exchange, grew 60% to R4.8bn ($622m) at the end of 2011 compared with the same period a year before.

Meanwhile, the number of ETF products listed on the exchange has also risen sharply, from 31 at the end of 2010 to 46 at the end of 2011, according to data from the JSE.

Such growth has prompted other national bourses on the continent to begin listing the products, or seek regulatory approval to do so, including those in Botswana, Nigeria, Ghana and Kenya.

Deborah Fuhr, managing partner at ETF consultancy ETFGI, said: “The growth in South Africa is driving the other African markets to enter into the ETF market. There have been more ETFs launched in Africa this year than in all of last year; it is truly booming.”

ETFs allow investors to simplify their investment portfolio strategies by giving them exposure to a specific sector or asset class and, notably, commodities. The African versions of the product appear to have appealed to a wide range of users, including private investors and institutions.

The authorities believe that the drive to promote ETFs and list them on national exchanges is a good way of attracting liquidity to the markets as a whole.

Damilola Ajayi, managing director at asset management house Vetiva Capital, said: “The introduction of ETFs has deepened African markets, especially in South Africa. For other markets, such as Nigeria, the recent introduction of ETFs has served to broaden the asset classes available to investors.”

Vetiva Capital launched its NewGold ETF in Nigeria last December. The product has seen its assets under management, based on investor inflows, grow nearly 45,000% albeit from an extremely low base. Continue reading →