With a mandate to strengthen investment flows across African countries, a group of exchanges on the continent recently held a stakeholder engagement forum on the African Exchanges Linkage Project (AELP).
Launched in 2016, the AELP is a joint initiative between African exchanges, which requires them to harmonize rules, jurisdictional laws and trading in order to facilitate cross-border trading and settlement of securities across participating bourses. The ultimate objective is to enhance liquidity among capital markets in the region.
The project also involves developing a central trading platform linked to exchange trading systems, sharing of trading information between connected exchanges, broker access to the linked trading platform and creation of products based on securities from the linked exchanges.
“The AELP is a great addition to many collaborative initiatives around Africa,” said Anne Clayton, Head of Public Policy at the Johannesburg Stock Exchange (JSE), a major proponent of the exchange linkage programme.
As well as boosting liquidity among African bourses, the exchange linkage project also holds the potential to improve ease of business and drive further investment into the continent. Foreign direct investment (FDI) flows to Africa stood at $46 billion in 2018, an increase of 11 percent on the previous year, UNCTAD’s World Investment Report 2019 shows.
“There is great interest within Africa for investment and the AELP provides an opportunity for alignment of exchanges within the continent, therefore collaborations with key stakeholders will continue to be at the centre of ensuring and securing a growth path for Africa,” Clayton added.
Moreover, strengthening capital markets in the region is considered key to addressing the need for home-grown capital, the lack of depth and liquidity in Africa’s financial markets, as well as meeting the wider goals of poverty reduction and wealth creation.
The stakeholder forum was hosted in collaboration with the African Development Bank (AfDB) and the African Securities Exchanges Association (ASEA), both of which have a “long history and partnership” according to Emmanuel Diarra, AfDB’s Manager of Capital Markets and Development.
Diarra added that the Bank will “continue to enhance its work with regulatory institutions, institutional investors, stock exchanges and other capital market stakeholders to strengthen regulatory frameworks, broaden market participation and product offerings, as well as improve the dissemination of capital markets data for transparent pricing mechanisms.”
Presently, there are seven participating exchanges in the AELP including the JSE, the Nigerian Stock Exchange, the Egyptian Exchange, Stock Exchange of Mauritius, Casablanca Stock Exchange, and Nairobi Securities Exchange. The long-term goal is to bring on board all 27 member exchanges of the ASEA, thereby increasing Africa’s competitive advantage, compared to other emerging markets.