Evan Carmichael Top Header about About About facebook Twitter YouTube Google+

Introduction: Stock Market Development in Sub-Saharan Africa



Free PDF Download
References: Stock Market Development in Sub-Saharan Africa - By International Monetary Fund

Name: Email:


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 macroeconomic perspectives. It also discusses policy
options for promoting the development of the stock market in Africa.
Over the past few decades, the world stock markets have surged, and emerging markets have
accounted for a large amount of this boom. In Africa, new stock markets have been
established in Ghana, Malawi, Swaziland, Uganda, and Zambia. Prior to 1989 there were just
five stock markets in sub-Saharan Africa and three in North Africa. Today there are 19 stock
exchanges. Stock market development has been central to the domestic financial
liberalization programs of most African countries. It seems any program of financial
liberalization in Africa is incomplete without the establishment and development of stock
markets.
The drive towards the establishment of stock markets in African countries during the last few
decades may be linked to other important developments in the global economy. The financial
markets of many advanced countries have undergone tremendous changes and become
increasingly integrated. These changes have resulted from the operation of a number of
interrelated factors (Cosh, Hughes, and Singh, 1992):
• the progressive deregulation of financial markets both internally and externally in leading
economies;
• the internationalization of these markets;
• the introduction of a number of financial products allowing riskier and bigger financial
investments; and
• the emergence and the increasing role of new actors in the financial markets particularly,
institutional investors.
These developments in the financial systems of advanced countries have led them to seek
liberalization in the international trade and exchange of services in world trade negotiations.
The establishment of stock markets in African countries and the liberalization of capital
accounts can be seen as parts of this global liberalization trend.
The establishment of stock markets in Africa is expected to boost domestic savings and
increase the quantity and quality of investment. More generally, stock markets are seen as
enhancing the operations of the domestic financial system in general and the capital market
in particular (Kenny and Moss, 1998). Critics, however, argue that the stock market might
not perform efficiently in developing countries and that it may not be feasible for all African
markets to promote stock markets given the huge costs and the poor financial structures
(Singh, 1999).

The large amount of academic and policy interest shown over the past decade in promoting
stock market development in African countries raises a number of policy questions. What
benefits does a country gain from having a stock market? Are they playing an important role
in allocating capital to industry? What is the relationship between stock market development
and economic growth? What determines stock market development? How do you make the
stock market more functional to African countries? These are the types of questions
addressed in this paper.
The rest of the paper is structured as follows. The theoretical underpinnings of stock markets
and growth are discussed in the next section. Section III is an empirical study on the trends
and characteristics of African stock markets. The role of stock markets in financing corporate
growth is examined in Section IV. Section V analyzes the effect of stock markets on
economic growth in Africa. The determinants of stock market development in Africa are
examined in Section VI. Section VII discusses policy options for promoting stock market
development in Africa. Section VIII presents the summary and conclusions of the paper.

IMF Working Paper
African Department
Stock Market Development in Sub-Saharan Africa: Critical Issues and Challenges
Prepared by Charles Amo Yartey and Charles Komla Adjasi
August 2007


Related Articles

  VI. B. Banking Sector Development: WHAT DETERMINES STOCK MARKET DEVELOPMENT IN AFRICA?
  VI. A. Macroeconomic Stability: WHAT DETERMINES STOCK MARKET DEVELOPMENT IN AFRICA?
  VII G. Strengthen Education: PROMOTING STOCK MARKET DEVELOPMENT IN AFRICA
  Local Entrepreneurship in Southeast Asia and Subsaharan Africa: Networks and Linkages to the Global Economy
  VI. C. Institutional Quality: WHAT DETERMINES STOCK MARKET DEVELOPMENT IN AFRICA?
  III. STOCK MARKET DEVELOPMENT IN SUB SAHARAN AFRICA:TRENDS AND CHARACTERISTICS
  PROPOSITIONS, HYPOTHESES, AND CONCLUSIONS
  VI. D. Shareholder Protection: WHAT DETERMINES STOCK MARKET DEVELOPMENT IN AFRICA?
  VII. A. Automation: PROMOTING STOCK MARKET DEVELOPMENT IN AFRICA
  VIII. SUMMARY AND CONCLUSION: Stock Market Development in Sub-Saharan Africa
  Introduction: Human Capital and Economic Development
  Wall Street, “Africa is Investing’s Final Frontier”
  VII F. Attract Capital Flows and Encourage Foreign Participation: PROMOTING STOCK MARKET DEVELOPMENT IN AFRICA
  4.4 References: Economic Report on Africa 2007
  4.0 Diversification trends in Africa: Economic Report on Africa 2007
  VII D. Promote Institutional Investors: PROMOTING STOCK MARKET DEVELOPMENT IN AFRICA
  New Partnership for Africa’s Development
  V. STOCK MARKETS AND ECONOMIC GROWTH: THE MACRO CHANNEL
  Quick Mobile Hits Around Africa
  What's your Africa strategy?

Home > African-Accounts > International Monetary Fund > Introduction Stock Market Development in SubSaharan Africa >

Free PDF Download
References: Stock Market Development in Sub-Saharan Africa - By International Monetary Fund

Name: Email:

About the Author: International Monetary Fund

RSS for International's articles - Visit International's website
The IMF is an international organization of 185 member countries. It was established to promote international monetary cooperation, exchange stability, and orderly exchange arrangements; to foster economic growth and high levels of employment; and to provide temporary financial assistance to countries to help ease balance of payments adjustment. Since the IMF was established its purposes have remained unchanged but its operations—which involve surveillance, financial assistance, and technical assistance—have developed to meet the changing needs of its member countries in an evolving world economy.
Click here to visit International's website.
Dashed Line

More from International Monetary Fund
VII E Strengthen Regulation and Supervision PROMOTING STOCK MARKET DEVELOPMENT IN AFRICA
References What Drives Chinas Growing Role in Africa
IIa Merchandise Trade TRADE AND CAPITAL FLOWS BETWEEN CHINA AND AFRICA
43 Accompanying Measures Microfinance in Africa Experience and Lessons from Selected African Countries
60 References Microfinance in Africa Experience and Lessons from Selected African Countries

Related Forum Posts

Re: Do Women Play the Stock Market? Re: Do Women Play the Stock Market?
Re: need advice Re: need advice
Re: what position to request? Re: what position to request?
Re: Do Women Play the Stock Market? Re: Do Women Play the Stock Market?
Re: Newbie from Africa Re: Newbie from Africa

Share this article. Fund someone's dream.

Share this post and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.
Share for a Cause
Featured Blog



Worksheets
By: Evan Carmichael

Do you have what it takes to be an entrepreneur?

8 Powerful Steps to Finding Your Passion

Does your pitch suck?

Create a plan of attach to launch your new business.

8-Cover

Like this page? PLEASE +1 it! Evan Signature
Bottom Footer



Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!
Name:
Email:
Popular Articles

Help, My House is On Fire!

How Do You Read Profit And Loss

A Little Thing Called Trust

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.