African Capital Markets: Challenges and Opportunities



Karim Hajji
President, ASEA

The critical role of stock exchanges in the global economy cannot be overemphasized. Not only do exchange businesses contribute to the economic objectives of their jurisdictions—raising money and investing—but they also have a social responsibility to, for example, prudently allocate resources and create employment, among other obligations.
The origin of exchanges can be traced as far back as the 14th and 15th centuries—trading of commodities by merchants in Venice and, soon after, by voyagers sailing to the East Indies. Although the infrastructure and institutions back then did not resemble today’s stock markets, they laid the groundwork for the present-day stock exchanges by bringing together buyers, sellers, and borrowers to trade among themselves while hedging against the risks of investment.
In the developed world, major stock markets emerged in the 19th and 20th centuries, led by the London Stock Exchange and New York Stock Exchange. Today, virtually every country or territory in the world has its own bourse. All of the world’s major economic powers have highly sophisticated stock markets that are active and considerably contributing to their national GDPs. There are approximately 48,000 companies listed on stock exchanges around the world, and nearly US $95 trillion trades across these exchange platforms.
In Africa, the first stock market was established in 1861, and 15 decades later, the region is now home to 36 stock exchanges serving 43 economies and representing 1,400 listed companies with a turnover of USD41.14 billion. These markets have grown steadily and demonstrated their capability to create prosperity on the continent. Successful fundraising initiatives by multilateral entities, such as the African Development Bank (AfDB) and the Trade and Development Bank, continue to borrow in domestic currencies from local capital markets, which demonstrates the growth and capacity of these exchanges. Proceeds of such fundraising are directed toward developmental projects in the respective jurisdictions. For instance, in 2014, the AfDB successfully raised NGN12.95 billion (approximately USD80 million) through its maiden local currency issuance in the Nigerian capital market. The proceeds of the successful NGN issuance went toward funding local small and medium enterprises (SMEs) and some infrastructure projects requiring local currency financing.
However, despite such encouraging success stories, African exchanges are still characterized as being illiquid and highly fragmented and as operating under weak regulatory environments. This categorization is supported by dismal activities on the stock exchanges and shrinking foreign investor participation across the markets. Conversely, the continent faces an infrastructure deficit of approximately USD108 billion, which could be easily accessed through the local capital markets.
It is with this background that the African Securities Exchanges Association (ASEA) was established in 1993 to provide a concerted effort in lobbying for and promoting the position of African stock exchanges as drivers of economic growth in the region.
ASEA hosts 26 exchanges in Africa and was established with the aim of developing member exchanges to be significant drivers of economic and societal transformation in Africa. ASEA works closely with its member exchanges to unlock the potential of the African capital markets and the African economies they serve. It does so by championing common areas of interests among the exchanges, such as capacity building, market development, and advocacy.

ASEA provides its members with

  • opportunities that can enhance their effectiveness through exchange integration efforts as a means of deepening the markets and enhancing their liquidity attributes;
  • capacity-building initiatives that equip members with the skills they need; and
  • close liaisons with market stakeholders to develop an investor-ready environment.

For African bourses to attain a desirable level of competitiveness and thereafter live up to their economic and social mandate, they must be strategically positioned to attract international inflows in a sustainable way.