Developing African Capital Markets

12.06.2003 Africa Economic Summit 2003 In his introductory remarks, moderator John Hanson, Managing Editor, Business & Financial Times, Ghana, noted that African development needed capital, yet capital is very scarce. The answer is for the continent to develop well functioning capital markets. There has been some progress, but not enough, due to many barriers.

Expanding on the theme, Ronald T. Gault, Managing Director, J.P. Morgan Bank, South Africa listed some of the barriers to the growth of capital markets in Africa. These include a lack of sound fiscal management and unstable national governments. Part of the solution lies in greater transparency, a clear understanding of issues, and an ability to articulate these to foreign investors. International ratings too are very important.

Tom Plaistowe, Portfolio Manager, Development Assets, Old Mutual Asset Managers, South Africa, said that the market is the issue. Many African countries lack such a market, which under other circumstances would reflect a desire to invest. Additionally, there is little or no long term savings industry which is essential for long term markets to emerge. Consequently, many investors see African markets as liquid markets only.

Nicolas Biekpe, Head, Africa Centre for Investment Analysis, Stellenbosch University, South Africa, opened the report back session observing that the biggest barrier to the development of African capital markets is the information gap. Other barriers include discriminatory laws against foreign investors, poor or absent enforcement of legal requirements, problems of scale, and weak physical and electronic infrastructures.

Gault, adding to his previous comments, emphasized the need for sound governance and transparency. Investors need "clear rules for the game". Procedural steps in the local market must be clearly understood by all involved. It is critical to have a strong focus on economies of scale, perhaps with the consolidation of smaller exchanges. Issues like these are best acted on by the NEPAD.

Plaistowe noted that there are many opportunities in Africa, but a lack of the right type of capital. There is a need to redirect the banking focus towards having a long term asset base. This however, demands security of tenure and ownership. Africans tend to save outside Africa. This trend could profitably be reversed.

Adam Horowitz, Chief Executive Officer, Merrill Lynch, South Africa, proposed a collection of solutions. International banks should not impose a global platform onto African markets. A pan African exchange is required, taking further the existing lead of the Johannesburg Stock Exchange in this regard. The development of an African capital market would benefit from the inclusion of strategists and stakeholders in the design.

Papa M. Ndiaye, Director, Emerging Markets Partnership, USA produced a "not enough" list, including macro support, liquidity, size, product and information.

Solutions, summarized from closing observations from the floor, included among others promotion of quality information, liberalization of the existing capital markets, proactive development of local business assisted by the transfer of knowledge.

To learn more about this author, visit World Economic Forum's Website.

Like this article? Share it with your friends

E-Mail | Print | More

Related Articles
VII F. Attract Capital Flows and Encourage Foreign Participation: PROMOTING STOCK MARKET DEVELOPMENT IN AFRICA
	Private capitals flows—foreign direct investment, remittances and portfolio investment and are an important for stock market development.
Why should Venture Capitalists invest in SME's in Africa?
	Africa is at the dawn of a new renaissance, if you want a high return on your capital, you should include Africa in your portfolio. I'm not only going to invest in Africa because I'm African, but because this is the...
Introduction: Stock Market Development in Sub-Saharan Africa
	This paper examines the economic importance and the future of African stock markets. It seeks to shed light on the controversial link between stock market and economic growth— from both corporate finance and macro...
SMEs - opportunities in Africa
	An overview of opportunities in Africa for SMEs
Developing African Capital Markets
	In his introductory remarks, moderator John Hanson, Managing Editor, Business & Financial Times, Ghana, noted that African development needed capital, yet capital is very scarce. The answer is for the continent to d...

---

Related Forum Posts
	Raising $5-$10 Million
	What do you do to give back?
	Hello from Virginia
	Del Castienne - International Business and Project Brokers
	Re: Small Business grant listings and other grant listings
	Walmart
	Re: Businesses by black businesswomen prolifierating
	Top 50 Lists