The emergence of the stock exchange, bond markets, and equity markets have caused a revolution in the African financial markets industry.
In recent years, Africa has been harnessing its own potential and improving the state of the continent’s economy. Its financial markets have gained more access to the global standards of service. However, a lot of reforms are still needed in order to improve their competitiveness.
6 pillars to improve infrastructure
Absa Africa Financial Markets index highlights six pillars that need progress to help individual African countries improve their financial infrastructure. They are:
- access to foreign exchange
- market transparency
- tax and regulatory environment
- macroeconomic opportunity
- enforceability of financial contracts, collateral positions, and insolvency frameworks.
In 2018, Kenya was ranked third by the Absa Africa financial markets index. Kenya came after South Africa and Botswana in terms of attractive financial markets in Africa. Stronger policies and new products were among the pillars that anchored Kenya’s success.
Africa’s market integration faces several obstacles. Low liquidity, lack of product diversity, excessive controls and administrative procedures in the forex market. Limited prospects for new listings also hamper African capital markets.
Good market capitalization
Weak policies have for a long time hampered investors, both local and international, from participating in the capital markets.
African countries need to facilitate liquidity in the markets through policy initiatives that attract local investors. From this point, it can enable development in financial products and increased asset acquisition. Ultimately, it will lead to market capitalization.
South Africa is home to the Johannesburg Stock Exchange (JSE), which ranks top on the Absa index with a total listed equities value worth $1.1 trillion. Its financial market is credited for the country’s currently strong GDP. Market capitalization is relatively higher, at more than 100% of the GDP.
For the weak performing African financial markets like Cameroon and Mozambique, the market cap is less than 5% of GDP.
Regulatory frameworks should enhance good investment opportunities through policies. Couple this with scaled-up access to foreign markets to bring in more foreign exchange. Strong legal and enforcement frameworks supporting financial agreements can attract international investors.
A well-regulated market will also have measures that facilitate transparency. Transparency in financial markets builds investors’ confidence.
No losers in the market, only gainers
The success seen in South Africa’s JSE should spread to the rest of the continent. Africa needs to focus on improving the trade and settlement infrastructure, to facilitate growth in the financial markets and to achieve economic liberation in the long-term.
A strong financial market will also help African countries access the funding needed for elevating the continent’s status. Through bond markets, locals can fund their economy and reduce the amount of money acquired through foreign funds.
Africa’s financial market is set to reach global standards if every nation in the continent sets a competitive attitude in the industry.
Junior Miner Rockridge Resources Untouched By China Copper Price War as Green Energy Transition Heats Up
The green energy transition is driving copper demand, prompting China to make threats to release some of its reserves to...
Entrepreneurship: the Region Laâyoune-Sakia El Hamra Launches the Program RIYADA
RIYADA, the integrated program of support for project leaders who can benefit from PIAFE funding comes to promote the entrepreneurial...
Finlombarda Invests 1.5 Million in a Fund Promoted by P2P Lending October to Finance SMEs in Lombardy
In May 2020, the fintech company October launched a new direct lending fund dedicated exclusively to investments in loans to...
DeFi Projects Raised $200 Million in 2020 and $1 Billion since 2017
Geographically, between 2018 and Q1 2021, the largest funding to DeFi came from North America and Apac (80% of the...
Dirham Project: the World’s First Regulated Stable Currency
The team behind the project has implemented the dirham as a stable currency, the terms of the DAH protocol are...
Crypto7 days ago
Stablecoins: The New Kid On The Crypto Block
Cannabis7 days ago
Bill Authorizing Medical Cannabis Cultivation Advances in Brazilian Congress
Biotech7 days ago
Investing in Respiratory Therapies: Saving 30 Million Euros per Year
Crypto7 days ago
Bitcoin Mining Banned, Search Engines Ban Exchanges: China Cracks Down