/ 19 September 2006

African stock markets seek to work in concert

Stock markets across Africa, beset by feeble volumes of trade and lack of liquidity, are trying to work closer together in a bid to increase transparency and attract more foreign investment. ''There has to be a change in the way international investors perceive Africa and its stock exchanges,'' according to Maged Shawky Sourail, chief executive of African Stock Exchanges Assocation.

Stock markets across Africa, beset by feeble volumes of trade and lack of liquidity, are trying to work closer together in a bid to increase transparency and attract more foreign investment.

”There has to be a change in the way international investors perceive Africa and its stock exchanges,” according to Maged Shawky Sourail, chief executive of African Stock Exchanges Assocation (ASEA).

”It’s a question of whether we want to survive or not,” added Sourail, who was attending ASEA’s annual conference in Johannesburg.

Sourail, chief executive of the Cairo and Alexandria stock markets, said that it was not a question of having a single pan-African market but rather strive for greater market harmonisation. ”It is a very long-term process,” he added.

Africa, the world’s poorest continent, has a a total of 18 stock exchanges.

However only three of them — Johannesburg, Cairo and Alexandria — belong to the world federation of exchanges, whose 57 members represent 97% of the world’s total market capitalisation.

”If we took every single stock exchange in Africa and merged them today, we still would not rank in the top 10 the world,” said Russell Loubser, chief executive officer of the Johannesburg Stock Exchange (JSE).

”That encapsulates the need for us to be talking to each other in order to survive.”

But differing exchange controls, fiscal policies and accounting practices have served to so far hinder efforts towards harmonisation.

Chris Mwebesa, head of the Nairobi stock exchange, said that although greater harmonisation appeared a ”great idea”, it was not that simple in reality.

”It’s not just up to the stock exchanges at the end of the day,” he told Agence France-Presse. ”There are political and sovereignty considerations.”

”Apart from being at different levels of development, we have very different structures. What we must try to do is move forward towards harmonisation of trading platforms and rules … to offer the rest of the world something standardised for Africa.”

Ekow Afedzie, general manager of Ghana’s stock exchange, agreed that there were major obstacles to market integration.

”If you ask African markets today to merge, politically it is going to be very difficult. We are so proud of our stock exchanges,” said Afedzie.

”I believe in mutual recognition. I believe accessibility to each others market for investors, brokers, etc …”

Differences of size and scale also pose major problems.

The 119-year-old JSE is not only Africa’s largest but is also ranked number 17 in the world in terms of market capitalisation of its listed companies. Since June, it has been listed as a public company in its own right.

At the other end of the scale, the stock market in Swaziland, a tiny kingdom landlocked between South Africa and Mozambique, is still looking to finance computerisation of its stock market.

With a market capitalisation of just $1,9-million and featuring a mere six companies, it is one of the smallest stock markets in the world.

”Sometimes we have just one transaction a week,” said one of its bosses, Sipho Dlamini.

”If we could open up our market through regional integration, we could have more investors coming to our country. But without the automation at the moment, how can we link” up with other exchanges? – Sapa-AFP