When Zambian farming firm Zambeef Products began considering a dual listing of its stock, it looked at both the Johannesburg exchange and London's AIM market.

Although Johannesburg was closer to home for Lusaka-based Zambeef, the London Stock Exchange's higher profile won in the end, and in June the company became the first Zambian firm to list on the AIM, a market for smaller companies.

It was a tough decision, said Zambeef executive director Yusuf Koya, taken after plenty of internal debate.

A key factor in the decision process was London's reputation as the world's financial centre, which allows us to access a potentially wider range of investors and liquidity.

As African companies increasingly look to do dual listings, many, like Zambeef, opt for London over Johannesburg, challenging the Johannesburg Stock Exchange's aim to become the gateway to Africa's capital markets.

A total of 104 African companies are listed on the London exchange, with the majority on AIM. The combined market value of African companies listed in London is now bigger than every African exchange except Johannesburg.

Just under $2.1 billion was raised by African companies on the London bourse in 19 transactions in 2010, representing about 90 percent of all equity capital raised by Africa-focussed companies in 2010, said Ibukun Adebayo, the LSE's head of equity primary markets

Dual listings are critical for companies that outgrow their home exchanges, where thin liquidity keeps large investors out.

Big bourses such as London and Johannesburg also boast tougher disclosure requirements, reassuring investors concerned about Africa's corporate governance.

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For a GRAPHIC on Africa stocks: http://link.reuters.com/haf74s

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LONDON CALLING

London-based investors tend to have a bigger appetite for emerging market assets than their South African counterparts, bankers say.

South African investors don't understand Africa risk in the same way UK investors do, said one pan-Africa private equity banker.

London-listed companies may also be easier to sell, especially to investors in Asia or North America, who are not as familiar with the Johannesburg exchange.

London has built a status for itself. When you're going to market a company listed in London versus a company listed on the JSE, people understand London, despite whatever jurisdiction you're going to, said one veteran capital markets banker based in Johannesburg.

Smaller companies, especially those with a niche focus, are more likely to have more industry peers on the AIM, making valuations more accurate, the banker said.

People understand valuation of medium-sized, growing companies on AIM. They get more fairly analysed if they go to AIM. Their peer group is a bigger peer group on AIM.

Nicky Newton-King, the incoming CEO of exchange operator JSE Ltd, recognises that Johannesburg faces a tough challenge from London. However, she points out that Johannesburg offers a world-class standard of disclosure for a lower price and less hassle than its rival.

You can come to the JSE, you can raise the money here, and your shares will be traded in a very liquid environment, a very respected environment. Without going through the costs and the hoops of listing in London, but with exactly the same standards, she said.

With about 30 to 40 percent of trade on the Johannesburg exchange done by foreign investors, African firms should have no problem reaching overseas investors from Johannesburg, she said.

NOT A BACKWATER

While not as high-profile as London, the Johannesburg exchange is hardly a backwater: the bourse is one of the world's 20 largest by market value, and was ranked No.1 for regulation in 2010 by the World Economic Forum, beating global heavyweights including London.

About 20 African companies are listed on the exchange, excluding South African firms. The JSE's Africa board has managed to attract just two listings since its 2009 launch.

Newton-King is optimistic that a regulatory change this month allowing foreign firms to be included in tracking funds should help draw more overseas companies.

It may be that Johannesburg's biggest hurdle is something hard to quantify: prestige.

It's far more prestigious as a company to have a London listing than a JSE listing, said the private equity banker.

Nigeria's Guaranty Trust Bank became the first Nigerian company and the first African bank to be listed on the London Stock Exchange when it issued $750 million worth of global depositary receipts in July 2007.

With most of the customers back home it gives you an edge to know that we have international standards. When we go marketing offshore it also pays, said Ade Adebiyi, the bank's managing director in the UK.

(Erica Billingham)