Business
Harnessing stock exchanges in Africa to promote growth
Regional integration is slow
But so far, there has been little progress on regional integration. Cooperation among exchanges is still limited to technical and regulatory issues. The modest market value and size of Africa’s two regional stock exchanges — one made up of five countries in Central Africa and the other representing eight in West Africa, with both sharing common currencies, limit their attraction to investors.
The most recent attempt towards regional integration is last year’s partnership agreement between FTSE, the British stock market index, and 16 of the 22 members of the African Securities Exchanges Association (ASEA) to launch the FTSE-ASEA Pan Africa Index in 2012. “The index will help to improve the visibility of African stocks and also provides an opportunity for investors to access African equities,” Siobhan Cleary, the JSE director of strategy and public policy, said in response to questions from Africa Renewal.
Early this year, the JSE unveiled a new strategy designed to improve relations with several stock exchanges in Africa through the ASEA and the Committee of Southern African Development Community Stock Exchanges (CoSSE). The JSE has offered CoSSE members the use of its advanced trading system at less than market cost. Except for Namibia, there have been no takers, “though discussions with other exchanges are ongoing,” says Cleary.
Even with obvious rewards such as a bigger market size, low costs and more liquidity, the conditions for regional integration are yet to mature. According to financial experts, progress would require African countries to harmonize their trading laws and accounting standards, set up convertible currencies and establish free trade among members. Also, nationalism still plays a part: countries tend to treat stock markets as national symbols and therefore are not rushing to relinquish control.
True, stock exchanges are not the only entry for investors to buy into African companies, nor are they so far fully up to the task. Yet with the right policies and incentives, African countries can encourage the growth of their stock exchanges to become important vehicles for future Facebooks to raise capital for business expansion.
This article was first published in Africa Renewal.
