African capital markets have grown significantly over the past decade, helping in no small way to strengthen economies across the continent. However, when compared with other emerging markets, the continent has a long way to go.
According to Ian Bessarabia, Business Development Manager, Sub-Sahara Africa, SWIFT, there has been a significant increase in securities-related SWIFT traffic in Africa, with growth outpacing rates seen in other regions. “Unfortunately, the lion’s share of this traffic is related to foreign investors’ transactions from offshore accounts into local custodian banks and does not reflect a growth of African investment into African markets. This means that off-shore investors, not African investors, are reaping the benefits of the continent’s growth story.”
The key, therefore, to growing African Capital Markets is based on three key elements: technology, innovation and robust infrastructure. Donna Oosthuyse and Ade Bajomo, who work for the two largest exchanges in Africa, the Johannesburg, Stock Exchange (JSE) and the Nigerian Stock Exchange (NSE) respectively, both share the same sentiment. They agree on the importance of technology in fostering the development of local stock markets. “There is a direct link between technology and levels of activity,”said Oosthuyse, Director of Capital Markets, Johannesburg, Stock Exchange. “When we implemented our new trading platforms, the value and volumes of trades multiplied significantly.”
Bajomo, Executive Director, Market Operations and Technology at the NSE, also supports the infusion of technology, describing it as a “game changer” for financial markets. “It has fundamentally changed the way business is done and requires significant investment, which we are putting in. The exchange world now measures performance in nanoseconds, so robustness and capacity are very important for us.”
The growth potential of African Capital Markets has been widely discussed, but the continent has to ensure the money made from it stays at home to ensure development. As Nerina Visser, Exchange Traded Funds Strategist and Advisor, ETF South Africa said, money made on the continent is being recycled back as aid. There is, therefore, a need to put the right infrastructure and products to encourage intra-African investment. “Capital markets have the potential to give everyone the opportunity to benefit from the growth of their own continent,” said Visser. “So, the big issue we have to address is how do we enable people to participate in that growth – what tools and products do we have to develop in order to empower investors?” Visser also makes a case for stakeholders in the financial markets to ensure they find the best means of communicating with the people. It is the only way to attract retail investors, Visser notes.
