KENYA, APR 19 — Stock exchanges in Africa are set for a major transformation in a planned linkage expected to deepen capital markets and position them as platforms for private economic growth.
Led by the African Securities Exchanges Association (ASEA), the continent is pushing to interlink exchanges by next year.
The move will allow investors to easily put in investments in the 28 exchanges which cover 32 African states.
This will among other benefits, diversify risk in a wider market, give access to more efficient and competitive markets, lower costs, offer higher returns and increased cross-border capital flows.
It is expected to increase cross-listing by companies on foreign stock exchanges, allowing them a diverse market to raise capital funds from foreign investors.
Speaking during the 7th Building African Financial Markets (BAFM) seminar in Nairobi, Kenya, ASEA President Oscar Onyema said the association is working with key stakeholders, including the African Development Bank, on the final details of the integration plan.
The linkage will begin with exchanges in Lagos (Nigeria), Nairobi (Kenya), Casablanca (Morocco), Abidjan ( Côte d’Ivoire) Johannesburg (South Africa) and Mauritius, Onyema confirmed in Thursday.
“We believe that with the continental free trade agreement that was signed, the Africa exchanges linkage project will make a lot of sense. These developments will catalize the ability to do cross border trade, cross border movement of goods and services and therefore cross border trading of securities,” Onyema said.
Current structures being put in place include payment systems to allow a seamless movement of funds, securities clearing guidelines and a trading formula.
Entities involved in the process include AfDB, CFA Institute, the Chartered Institute for Securities and Investment (CISI) and the FSD Network.
“We have working groups that are focused on commercial issues and the legal and regulatory issues and there is a steering committee that is making sure that we keep to our timelines. We hope that by the end of this year, we should have made significant progress and perhaps seen the first trade go through from one country to another,” said Onyema who is also the chief executive officer of the Nigerian Stock Exchange.
The initiative has received the backing of the Kenyan government, the Nairobi Securities Exchange and the Capital Markets Authorities.
Kenya’s Deputy President William Ruto who officially opened the two days conference called on capital markets in Africa to leverage on innovation, cross listing and consolidated actions to guarantee development of the continent.
“Efficient financial markets are diversified, resilient and a barometer of a country’s economic mood. They must demonstrate a capacity for adaptive innovation to remain competitive,” Ruto said, “Africa’s stock exchange is a manifestation of the continent’s promise.”
He noted that Kenya’s mobile revolution through mobile money platform-Mpesa and the M-Akiba bond is an example of how financial innovation could change the continent’s prospects.
By pooling resources of the different capital markets, the continent stands a chance to boost liquidity and the ability to mobilize local and international capital for private-sector and infrastructural development.
Nairobi Securities Exchange chief executive Geoffrey Odundo said the bourse is working closely with the Capital Markets Authority to strengthen governance structures and accelerate capital markets, as the country settles back from last year’s prolonged general elections.
CMA chief executive Paul Muthaura said: “If we are to deliver robust African capital markets we must deepen the capacity of the complementary professionals, support independent auditor oversight, robust corporate governance and globally benchmarked certification standards.”
According to Muthaura, the continent stands to benefit from a diversified market noting that over $1 trillion in assets are currently held by pension, insurance and collective investment vehicles across sub-Saharan Africa.
The Nairobi Securities Exchange, a member of ASEA, is hosting the seventh BAFM conference in Nairobi with this years’ forum unpacking how to leverage on technology in the effective risk management and regulation of African capital markets.
It also covers issues around FinTech as enabler for sustainable development, Blockchain and disruptive technologies.