Yemisi Izuora/Agency Report
The Johannesburg Stock Exchange (JSE) said it is working with exchanges in Nigeria, Kenya, Mauritius and other parts of the continent to promote cross-listings and the issuance of index-based products like exchange-traded funds (ETFs) that would give investors an opportunity to diversify.
The JSE is happy with the level of regulatory framework already in place in Nigeria.
It noted that the number of equity exchanges in Africa has grown to 26, but many of these bourses are still in a developmental stage and hopes that increased regional integration will work to their advantage.
Donna Oosthuyse, head of capital markets at the JSE, said many of these exchanges are relatively young but have quite ambitious goals.
Outside of South Africa, the largest exchanges in Sub-Sahara-Africa are those of Nigeria and Kenya Moneyweb reported.
These countries have invested significantly to develop legal and regulatory infrastructure and to promote the development of their financial markets, Oosthuyse told Moneyweb during the 4th Annual Building African Financial Markets seminar.
In North Africa, the most prominent exchanges are those of Morocco and Egypt.
In South Africa, the JSE has an established track record (it was founded in 1887 and the first Financial Markets Act was passed in 1947), but there has also been considerable progress in developing other exchanges in Africa.
Continued growth and capacity building in financial markets across the continent will be an important enabler for economic development across the region, she said.
While the World Economic Forum’s Global Competitiveness Report has repeatedly ranked South Africa first for the regulation of securities exchanges and the JSE is in a class of its own amongst African exchanges, Oosthuyse said the development of financial markets in Africa would be positive for all participants.
“The issuers and investors across our region have a lot of interest in each others’ markets. There is a lot of integration among economies that operate across the region.”
But building capacity won’t be without challenges. One of the grievances often cited by investors is the lack of liquidity when investing on stock exchanges in Africa.
Oosthuyse said a lot of the challenges relate to the sequencing of the steps that need to be taken. Implementing state of the art technology won’t necessarily kick start a market.
Oosthuyse said one of the other most important steps would be to create an enabling environment to mobilise savings.
At the moment a lot of the development funding in Africa is international savings (sovereign bonds and other current account flows) and not generated by high savings rates.
“I think the mobilisation of domestic savings is very, very important and we’ve seen very important steps towards that across the continent with pension reform and things like that.”
Once the regulatory framework is in place and an organised and mobilised pool of savings exists, the next step is to ignite the market with the right type of equity and get issuance.
It is also important to ensure some sort of linkage between real economic growth opportunities and the deployment of savings through financial markets.
Oosthuyse said generally across Africa, the larger banks and breweries are listed, but often the core economic drivers aren’t.
In Zambia for example there are not a lot of copper companies listed and the same is true for oil and gas producers in Nigeria.
Previously there have been efforts to try and establish a single African or Sub-Saharan-African stock exchange, but the trend has reversed quite dramatically and more recently the focus has been on the development of individual country exchanges, but also having shared resources – for example in terms of technology and regulation.
Hence, if a company operates in a regional area and have received approval to list on one stock exchange the application would largely be transportable to the next country’s stock exchange without having to restart the entire approval process.