African Capital Markets: Challenges and Opportunities



Adrian Saville
Chief Executive, Cannon Asset Managers and Professor of Economics and Finance, Gordon Institute of Business Science


Ronak Gopaldas
Director, Signal Risk

South Africa

The second-largest economy in Africa (after Nigeria), South Africa has considerably higher GDP than its sub-Saharan neighbours. 
The Johannesburg Stock Exchange (JSE) is 132 years old and is the largest stock market in Africa with a capitalisation of more than USD1 trillion. But the JSE faces significant headwinds. 
The JSE is a sophisticated and modern exchange, providing full electronic trading, clearing, and settlement in equities, bonds, and interest rate products, as well as financial, commodity, and currency derivatives. There are about 350 companies listed on the JSE, of which the largest grouping is industrials, followed by resources companies such as mining and oil companies. 
Having faced no competition for decades, the JSE is now challenged by smaller rivals such as ZAR X, a low-cost model created in 2016 to provide lower-income individuals with access to stocks. Since then, other competitors have joined the fray, including A2X, 4AX, and the black economic empowerment-focused Equity Express Securities Exchange. 
Current market focus is on the recently introduced “twin peaks” model of regulation, which responds to poor practices in the financial sector and inadequate regulatory oversight. As in Australia, where the model debuted, it is designed to foster trust among investors and spur capital formation. 


The Namibian Stock Exchange (NSX) was originally created in 1904 to fund the country’s diamond rush. By 1910, the rush was over and the exchange abruptly closed. It wasn’t until 1992, some 82 years later, that the NSX reopened with start-up capital from 36 Namibian businesses. 

Today, the NSX has 424 listed companies, which is a fair achievement considering Namibia has the second-lowest population density of any sovereign country and counts just 2.6 million citizens.

Although agriculture and tourism are important elements of the economy, the biggest stock market listings are dominated by other sectors. In fact, three sectors make up half the listings on the NSX: banking (4 companies), mining (7 companies), and finance (11 companies). 
The issuance and listing of debt is a more recent development. Until 2011, Namibia had almost no public debt. In fact, at just 16% of GDP, the country had one of the lowest debt-to-GDP ratios in the world. By 2017, however, the rapid rise in public debt led the country to be downgraded to a sub-investment rating by international ratings agencies. 
The NSX has attracted interest from Namibian state-owned enterprises and private companies that have floated bonds worth over NAD33 billion. In the near future, more Namibian companies are expected to issue bonds as conventional funding dries up. Banks’ balance sheets and loan-to-deposit ratios have become stretched because of the economic downturn, and they are less willing to lend to corporates.
For local companies, the withdrawal of conventional funding represents an opportunity to source capital through balance sheets, collateralised or government-guaranteed debt instruments, or through equity raising on the local exchange.




Do you know....?


Answer: Johannesburg. The Johannesburg Stock Exchange was established even earlier, in 1887. A stock exchange was formed in Cape Town in 1901 and in Namibia in 1904.


Answer: Johannesburg. The Johannesburg Stock Exchange was established even earlier, in 1887. A stock exchange was formed in Cape Town in 1901 and in Namibia in 1904.