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Four factors influencing development of Africa’s securities markets

This year’s ASEA Conference, now in its 18th year, brings together members of 23 African securities exchanges as well as investors from the United States, Europe, the Middle East and Asia to discuss the evolving role of the capital markets in driving Africa’s growth potential.
Kenya’s Deputy President William Ruto, in his opening speech, challenged African countries to develop their capital markets. This he believes will enable them provide alternative sources of finance for long-term productive investments. Ruto said the development of regional markets will expand intra-Africa trade, which is currently at paltry levels compared to that of other continents.
Data from Society for Worldwide Interbank Financial Telecommunication (SWIFT) reveals that African capital markets still have some way to go if they are to support this aim. “There has been a significant increase in securities-related SWIFT traffic in Africa, with growth here outpacing growth rates in the rest of the world. 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,” says Ian Bessarabia, Head of Business Development, Sub-Saharan Africa, SWIFT.
Bessarabia, who joined a panel discussion today focused on Enabling African Capital Markets Through Technology, pinpointed the four key factors that he believes will fundamentally change African financial markets and help to drive up levels of intra-African investment.
Financial market infrastructure: The right financial market infrastructure ensures that access to financial markets is easy, transparent and robust while poor infrastructure acts as a constraint on the growth and vitality of capital markets and inhibits liquidity due to the heightened levels of operational risk. Many investors argue that it will be the ability to trade in and out of securities easily and not stock valuations and economic climate that are likely to shape Africa’s equity prospects in the coming years.
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