VII C Regional Integration :PROMOTING STOCK MARKET DEVELOPMENT IN AFRICA
VII C Regional Integration :PROMOTING STOCK MARKET DEVELOPMENT IN AFRICA
exchanges. Merging stock exchanges (the extreme form of integration) results in volumes
multiplying with potentially the same overhead costs (Claessens, Klingebiel and Schmukler,
2002). Merging African stock markets into a single regional exchange immediately is no
doubt an ambitious and daunting task, given the associated institutional and financial cost
complexities. Proponents of this proposition argue that a well integrated regional stock
exchange in Africa will be a powerful source and driver of capital flows to Africa. Such an
exchange will also, if well structured, solve the current problems of illiquidity, small size,
and fragmentation.
Integration is expected to solve the fragmentation problems of African stock exchanges since
the number of national exchanges in an integrated market reduces. This promotes cost
efficiency, and improves liquidity and price discovery. Investors can execute orders without
routing through brokers and there is only one payment of listing fees in an integrated
exchange. Integrated markets harness a pool of economic and human capital, the economic
and human capital skills of various markets are brought to play in one single market. The
market thus benefits from a rich and diverse pool of skills. Integration fosters synergies in
risk management. Risk management is spread thin across market segments, which prior to
integration, were national exchanges. Integration reduces complexities, since all trading,
operations clearing and settlement systems are harmonized. It also improves surveillance and
risk management, by enabling access to information in all market segments.
One problem that has hindered successful stock market integration is nationalistic politics.
African governments tend to view stock exchanges as national assets with pride just like
national airlines (Moss, 2003). As a result, they are uncomfortable with transformations
which lead to a reduction in the national touch. In addition, smaller economies tend to
perceive the bigger economies as being domineering and fear that their exchanges will be
overshadowed by the bigger exchanges with integration. These economies also fear that
capital may be diverted away from them to the bigger economies with integration. For
instance, Okeahalam (2001) reports that Botswana officials were uncomfortable with South
Africa’s virtual African exchange proposal due to the fear of capital flight towards JSE.
There are important preconditions for successful regional approaches such as the legal
harmonization (trading laws and accounting standards) and a liberalized trade regime.
Integration requires that there are harmonized legislation, rules, listings, trading days,
settlement, and reporting standards. This implies that for African stock markets to become
integrated, the various national exchanges must adopt and/or harmonize their existing rules
and systems. This can be potentially a long and arduous task for these exchanges. Even if
trading rules and listing requirements are harmonized there is the issue of accounting and
reporting standards. These standards tend to be based on national systems which in turn also
depend on the colonial history of the countries. For instance, the BRVM comprises of
countries which adopted common standards following their common colonial past.
Integration cannot also be successful in the absence of automated systems. Integration
requires investors and traders to be able to log on into trade from other stations and this
requires that systems be automated.
Currency convertibility is very important in an integrated exchange. An integrated exchange
with a multiplicity of inconvertible currencies only compounds the administrative costs
which integration itself seeks to remove. Here the advantages of having existing monetary
unions, like the WAEMU in the case of the BRVM preclude such problems. This is also a
reason why the SADC region is progressing quickly towards a regional stock exchange due
to the convertibility of most of the regions currencies. Africa has many currencies, few of
which are convertible within the continent. Indeed currency convertibility depends more on
trade density between two countries and cannot be forced. This thus places hurdles on the
way of regional exchange integration efforts.
The experience of BRVM (Box 1) can teach us a number of lessons on stock market
integration in Africa (Asea, 2004). First, it can take a very long time to build a regionally
integrated exchange. Second, the fact that a regionally integrated exchange is established
does not mean that it will be used effectively or that it will integrate the markets. The
sustainability and success of any regional project must be very carefully assessed before the
project is undertaken. Private sector participation, as opposed to just regulators, central banks
and other public institutions normally has the best incentive to determine whether the
expenditure on a particular integration scheme for market infrastructure is worthwhile.
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
VII C Regional Integration PROMOTING STOCK MARKET DEVELOPMENT IN AFRICA - To learn more about this author, visit International Monetary Fund's Website.
Like this article? Share it with your friends
Another proposed solution to problems faced by African stock markets is to integrate stock
exchanges. Merging stock exchanges (the extreme form of integration) results in volumes
multiplying with potentially the same overhead costs (Claessens, Klingebiel and Schmukler,
2002). Merging African stock markets into a single regional exchange immediately is no
doubt an ambitious and daunting task, given the associated institutional and financial cost
complexities. Proponents of this proposition argue that a well integrated regional stock
exchange in Africa will be a powerful source and driver of capital flows to Africa. Such an
exchange will also, if well structured, solve the current problems of illiquidity, small size,
and fragmentation.
Integration is expected to solve the fragmentation problems of African stock exchanges since
the number of national exchanges in an integrated market reduces. This promotes cost
efficiency, and improves liquidity and price discovery. Investors can execute orders without
routing through brokers and there is only one payment of listing fees in an integrated
exchange. Integrated markets harness a pool of economic and human capital, the economic
and human capital skills of various markets are brought to play in one single market. The
market thus benefits from a rich and diverse pool of skills. Integration fosters synergies in
risk management. Risk management is spread thin across market segments, which prior to
integration, were national exchanges. Integration reduces complexities, since all trading,
operations clearing and settlement systems are harmonized. It also improves surveillance and
risk management, by enabling access to information in all market segments.
One problem that has hindered successful stock market integration is nationalistic politics.
African governments tend to view stock exchanges as national assets with pride just like
national airlines (Moss, 2003). As a result, they are uncomfortable with transformations
which lead to a reduction in the national touch. In addition, smaller economies tend to
perceive the bigger economies as being domineering and fear that their exchanges will be
overshadowed by the bigger exchanges with integration. These economies also fear that
capital may be diverted away from them to the bigger economies with integration. For
instance, Okeahalam (2001) reports that Botswana officials were uncomfortable with South
Africa’s virtual African exchange proposal due to the fear of capital flight towards JSE.
There are important preconditions for successful regional approaches such as the legal
harmonization (trading laws and accounting standards) and a liberalized trade regime.
Integration requires that there are harmonized legislation, rules, listings, trading days,
settlement, and reporting standards. This implies that for African stock markets to become
integrated, the various national exchanges must adopt and/or harmonize their existing rules
and systems. This can be potentially a long and arduous task for these exchanges. Even if
trading rules and listing requirements are harmonized there is the issue of accounting and
reporting standards. These standards tend to be based on national systems which in turn also
depend on the colonial history of the countries. For instance, the BRVM comprises of
countries which adopted common standards following their common colonial past.
Integration cannot also be successful in the absence of automated systems. Integration
requires investors and traders to be able to log on into trade from other stations and this
requires that systems be automated.
Currency convertibility is very important in an integrated exchange. An integrated exchange
with a multiplicity of inconvertible currencies only compounds the administrative costs
which integration itself seeks to remove. Here the advantages of having existing monetary
unions, like the WAEMU in the case of the BRVM preclude such problems. This is also a
reason why the SADC region is progressing quickly towards a regional stock exchange due
to the convertibility of most of the regions currencies. Africa has many currencies, few of
which are convertible within the continent. Indeed currency convertibility depends more on
trade density between two countries and cannot be forced. This thus places hurdles on the
way of regional exchange integration efforts.
The experience of BRVM (Box 1) can teach us a number of lessons on stock market
integration in Africa (Asea, 2004). First, it can take a very long time to build a regionally
integrated exchange. Second, the fact that a regionally integrated exchange is established
does not mean that it will be used effectively or that it will integrate the markets. The
sustainability and success of any regional project must be very carefully assessed before the
project is undertaken. Private sector participation, as opposed to just regulators, central banks
and other public institutions normally has the best incentive to determine whether the
expenditure on a particular integration scheme for market infrastructure is worthwhile.
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
VII C Regional Integration PROMOTING STOCK MARKET DEVELOPMENT IN AFRICA - To learn more about this author, visit International Monetary Fund's Website.
Like this article? Share it with your friends
 | |
 |
No article feedback found. |
| |
Leave Your Feedback |
 | |
| |||
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 |
|||
Kim CastleWith nearly two decades in the advertising and design business, with clients like Domino's Pizza, General Motors, Direct TV, Pedigree, Wolfgang Puck, Higher Octave Music, Hollywood Celebrity Products, Disney, and Paramount, as well as thousands of entrepreneurs around the world define, structure, communicate, and position their business for greater profits, BrandU(R) co-creators Kim Castle and W. Vito Montone discovered that entrepreneurs could experience the same power that big brands command for a fraction of the cost with the world's only process-based results-drive Integral approach to business creation. BrandU(R) is helping entrepreneurs grow with the power of extreme clarity from idea...to brand...to market(TM) and helping one million entrepreneurs become successful and whole so that they can make a difference in the world. Are you one of them? If you want to experience clarity all the way to the bank(TM), get started now at http://www.brandu.com. - Visit Kim Castle's Website |
|||
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 |
|||
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 |
|||
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 |
|||
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 |
|||
|
To learn more about the Evan Elite Author Program please contact us. | |||
 | |
|  |
Subscribe to International's articles
 | |
|
|  |
 | |
|
| |
 | |||||||
|
 | ||
|
||
|
||
 |
||
|
| ||
 |
| Have you written articles that would be of value to entrepreneurs? Become an expert on our site by publishing them! Expose yourself to a wide audience, drive more traffic to your website and get more sales! Click Here for details. |
|
|
 |
| Modeling the Masters: Learn the true secrets behind Walt Disney's business success factors & grow your company! Video produced by Phanta Media |
|
|
 |
"Learn straight from Evan how you can Make a Full Time Income (And More) from a Website"
Click Here To Learn More |
|
|
|
|
Get advice & tips from famous business owners, new articles by entrepreneur experts, my latest website updates, & special sneak peaks at what's to come!
|
|
|
 Business Emotional Intelligence Entrepreneur Flight Manual Articles Drive Traffic Leadership Assessment Caprino Career Path Assessment |
|
 | ||
 |
Top 50 SEO Posts - 2007
Top SEO Posts of the Year | |
 |
Top 50 Blogs For Startups
Top Blogs To Watch In 2008 | |
| ||
 | ||||
| ||||
|
| ||||
| ||||
|
|
|
|
|
||||||
|
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 and Sean Combs!
|
|
|
