LUSAKA, Zambia — Tucked away on the third floor of a modern office building in downtown Lusaka, Zambia's tiny stock market has only
16 listed companies. Clerks write orders in a logbook, only later entering them into a computer, as street vendors eke out a living outside selling mangoes and bootleg Chinese DVDs.
In short, it's a long way from Wall Street. But these days, that's not such a bad thing.
While the U.S. stock market falters, the Lusaka Stock Exchange is growing by more than 40 percent and racking up a market return of 102 percent in 2007. That makes it one of Africa's top-performing stock markets on a continent where Western investors are increasingly bullish.
Thanks in part to high commodity prices, economic growth, debt relief initiatives and recent market-friendly economic policies, "frontier" markets throughout Africa, from bigger players like Nigeria to Ghana and tiny Malawi, have been yielding big gains for investors.
The Nigerian Stock Exchange posted some of the highest gains in the world in 2007, its all-share index growing by nearly 75 percent that year, propelled by banking stocks that tripled or quadrupled in just six months — rare good economic news in a country plagued by graft, poverty and lack of development despite its oil wealth.
"Even the dead can hear the sound of something happening in this market," said Kene Okafor, the Nigerian Stock Exchange's head of research and information technology.
The continent's bull market is being driven in part by a growing African middle class seeking new investment opportunities. And with the U.S. economy wobbling, American and European investment funds are taking an increased interest in Africa, buying bargain-priced shares of undiscovered companies.
Only five sub-Saharan African countries had stock markets in 1989, according to the International Monetary Fund. Now, the number has risen to 16. The Johannesburg Stock Exchange is the largest and most developed. Swaziland has the smallest, with only eight companies. Ethiopia just opened a commodity exchange in Addis Ababa.
In Kenya, long lines formed outside brokerages after the government announced plans to sell almost half of its shares in the country's largest mobile phone service company, Safaricom Ltd. Coming in the wake of Kenya's postelection violence, it will be the largest share offer in the history of the 54-year-old Nairobi Stock Exchange.
Brad Durham, managing director of EPFR Global, a Boston company that tracks frontier and emerging markets, says the African funds EPFR follows saw a net inflow of $256-million in the first 11 weeks of 2008.
Still, Durham notes, African stock markets remain tiny in global terms, making up less than 1 percent of most Western investment funds' portfolios. Market capitalizations are modest, according to Databank Group, a Ghanaian investment services firm that covers Africa: Kenya's market is worth $14.05-billion, Malawi's $1.38-billion and Uganda $16.32-billion.
Foreign investment firms still rank most African markets as "high-risk." T. Rowe Price's Rohm says that political instability remains the top risk for investing in African markets, despite recent democratic trends.
While owning stock is still a luxury for most Zambians, it's catching on with a growing group of entrepreneurs and middle-class professionals.
Across Africa, according to Durham of EPFR Global, the trend is positive.
"I think it's for real, and I think it's long-term," he said.