Introduction: Stock Market Development in Sub-Saharan Africa
Introduction: Stock Market Development in Sub-Saharan Africa
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
Introduction Stock Market Development in SubSaharan Africa - To learn more about this author, visit International Monetary Fund's Website.
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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
Introduction Stock Market Development in SubSaharan Africa - To learn more about this author, visit International Monetary Fund's Website.
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John BrennanJohn Brennan Ed.D. Dr. Brennan is President of Interpersonal Development, LLC, a training and development firm. Interpersonal Development has provided sales training and coaching to more than 3,000 sales reps from over 100 companies. A native of Australia, Dr. Brennan received his doctorate from the University of Rochester. His dissertation researched the effectiveness of Behavioral Modeling Technology in training people in interpersonal skills. While he has spent most of his career designing or delivering training, he was also a Vice-President of Sales of a training and development franchise with operations in 25 markets. Dr. Brennan has designed and delivered sales training in North America, Asia, Europe, Australia and the Middle East. He has been a guest speaker at numerous national and regional professional conferences. When Microsoft wanted Best Practices articles on sales for their web site, they called Dr. Brennan. The results are at http://office.microsoft.com/en-us/FX011387391033.aspx His firm’s clients have included Volvo, The Prudential, Merrill Lynch, Eastman Kodak, Gannett, Equifax Europe, the Economist Group and countless small businesses. - Visit John Brennan's Website |
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Dave KurlanDave Kurlan is the founder and CEO of Objective Management Group, Inc., the industry leader in sales assessments and sales force evaluations, and the CEO of David Kurlan & Associates, Inc., a consulting firm specializing in sales force development. Dave has been a top rated speaker at Inc. Magazine's Conference on Growing the Company, the Sales & Marketing Management Conference and the Gazelles Sales & Marketing Summit. He has been featured on radio and TV, including World Business Review with General Norman Schwarzkopf, in Inc. Magazine, Selling Power Magazine, Sales & Marketing Management Magazine and Incentive Magazine. He is the author of Mindless Selling and Baseline Selling – How to Become a Sales Superstar by Using What You Already Know about the Game of Baseball. He created and wrote STAR, a proprietary recruiting process for hiring great salespeople, and he writes Understanding the Sales Force, a popular business Blog and is a contributing author to The Death of 20th Century Selling and 101 Great Ways to Improve Your Life, Volume 2. - Visit Dave Kurlan's Website |
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John PowerJohn Power, founder of Biltmore Franchise Consulting, has extensive experience developing and marketing franchises and business opportunities. He has been in and around franchising for over twenty years. From 1980 through 1990 he conceptualized, organized, and developed the American Video Association. He grew AVA to 2,000 national members, before selling the company it 1990. It was later merged into another home video marketing company. From 2000 to 2005 he worked as a contract marketing and human resources consultant to several local and national companies. In 2005 Mr. Power began working as a franchise development consultant on a full-time basis. Since that time he has helped more than three dozen companies initiate and develop their franchising program. He notes that there are many companies interested in developing a franchise program, and who need his specialized assistance. Mr. Power is a “hands-on” franchise consultant. He said, “I am the ‘nuts and bolts’ person who tends to the details for my clients.” Mr. Power holds a B.S. degree with a major in Marketing. See: www.biltmorefranchise.com You may contact Mr. Power at: jpower@biltmorefranchise.co - Visit John Power's Website |
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David AchesonDavid Acheson is the founder of DCJA Consultancy. DCJA Consultancy is a management consultancy business specialising in B2B sales consultancy. They offer bespoke and packaged sales consultancy including Sales Optimisation Review, Interim Sales Management, Sales & Marketing Review, 1:1 Sales & Management Staff Analysis, Management Training, Solution Sales Training, Creation of New Pay Plan, KPI's, run Customer Feedback Campaigns, assist with Recruitment, Coaching, Appraisals and set up Strategic Marketing Campaigns. David spent his early career in accountancy and then moved into sales in 1982, working in Office Equipment, IT, Advertising, Training, Outsourcing and Consultancy. He has held many Senior Positions in SMBs and Global Organisations including Head of Sales Operations & Head of Business Development. His knowledge, skills and great experience of the Sales Industry has led to David making keynote speeches and running educational sessions to key businesses through organisations including The Chamber of Commerce and Business Link. - Visit David Acheson's Website |
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Linda RichardsonLinda Richardson is the Founder and Executive Chairwoman of Richardson, a global sales training and performance improvement company. As a recognized leader in the industry, she has won the coveted Stevie Award for Lifetime Achievement in Sales Excellence and she was identified by Training Industry, Inc. as one of the “Top 20 Most Influential Training Professionals.” Ms. Richardson is credited with the movement to Consultative Selling and is the author of ten books on selling and sales management, including Sales Coaching — Making the Great Leap from Sales Manager to Sales Coach, and Stop Telling, Start Selling. She teaches sales and management at the Wharton Graduate School of the University of Pennsylvania and the Wharton Executive Development Center. Linda is a frequent speaker at industry and client conferences, has been published extensively in industry and training journals, and has been featured in numerous publications, including The Wall Street Journal, Forbes, Nation’s Business, Selling Power, Success, and The Conference Board Magazine. Learn more about Richardson's sales training and performance improvement solutions at http://www.richardson.com web - Visit Linda Richardson's Website |
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