African DRs: listen and learn
BNY Mellon aims to educate the market with a new addition to its African depositary receipts team.
A massive market share and the opportunity to win more still – BNY Mellon’s depositary receipts (DRs) team in Africa has much to be optimistic about, and the investment services firm is hiring accordingly.
In September it named Lauren Czepek as a relationship manager in its DR business. She joined from the Johannesburg Stock Exchange (JSE), where she was business development manager for five years.
BNY Mellon has an 84% market share of JSE-listed companies with DR programmes, which allow foreign investors to buy and trade in their locally listed shares – “it makes sense to have somebody on the ground to look after those clients”, Czepek reasons. Furthermore, she adds, there are plenty of listed companies that have yet to issue DRs, and the BNY Mellon team can help to convince them of the benefits that come with establishing a programme.
Those benefits aren’t always understood by South African companies, Czepek says – DRs are established to let foreign investors invest in local companies, and so the product itself is often unknown to corporates until they consider it for their own business. Czepek believes one of her key tasks is “to educate issuers and the local financial markets about DRs”.
The bank’s existing clients, meanwhile, gain in Czepek a local BNY Mellon representative who can handle the day-to-day running of their programme as well as more complex projects such as tapping into the bank’s network to arrange US investor roadshows.
First and foremost
Czepek’s time at the JSE helps her here, she says. At the exchange she was tasked with managing relationships with listed companies while hunting out new businesses that could float. In doing so she built bonds with corporates, investment banks and other market service providers – all relationships that will continue in her role at BNY Mellon.
The bank itself has made impressive strides in developing Africa’s DR market. Earlier this year it acted as the depositary bank for Toronto and London-listed First Quantum Minerals’ DR programme, the first Zambian depositary receipt.
“That’s a trend we will see continuing – companies not listed on the local exchanges in the countries in which they operate, making a listing by way of the DR mechanism to establish a local presence and bring the local community in,” Czepek says. “I think that’s something we’ll see specifically for mining companies.”
Namibia and Botswana could soon introduce their own DR frameworks – Czepek says BNY Mellon is talking to both exchanges and various players in their respective markets about establishing new products.
“African exchanges are hungry for products and are looking to grow the investor basket,” Czepek says. “It will bring liquidity to the companies that are listed there, which tend to be quite tightly held because of a lack of choice – as an institutional investor, if you sell out of one of your existing investments in Namibia, for example, where are you going to put your money? Choices are limited and illiquid.
“But if you increase the basket over time, it should bring liquidity as well. I really believe it will be a win-win all around.”
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