Pan-African Exchange likely to remain a concept for the foreseeable future

  

The African Securities Exchanges Association (ASEA) recently held its 14th conference, this one hosted by the Lusaka Stock Exchange in Livingstone, Zambia.

ASEA is a non-profit organisation that was founded in Kenya on the 13th of November 1993, with the aim of establishing systematic mutual cooperation and exchange of information among its members. The association started with the Nairobi Stock Exchange as the first member in 1993, followed by Mauritius, Uganda and Dar es Salaam Stock Exchanges in the nineties. The association is currently represented by 22 exchanges in 27 African countries.

The theme of the conference this year was, The Integration of African Markets Through Technology, although the programme looked at various topics beyond that theme, looking at diverse issues such as financial literacy and the impact on economic development, carbon credits, corporate governance, the relevance of sovereign ratings, private equity and asset management in emerging markets, amongst others.

Looking at the central theme, however, the debate was very active around immigration of the markets, whether this is a priority at this point in the evolution of Africa’s frontier markets or whether they should be allowed to develop further before looking at a Pan-African integration.

What was clear was that there were still many issues that would need to be tackled before any real progress could be made, as aside from the cost issues involved, regulatory concerns around for example exchange controls, foreign ownership rules and cross border settlement, practical issues for example the fact that different countries run different trading platforms and the usual political concerns around countries treating their exchanges as “national assets” and thus not really being willing to be swallowed in a Pan-African style exchange.

The potential benefits of creating a single exchange were not ignored, with the obvious advantages that would come with potentially more liquidity and easier accessibility for investors of a single point of entry, but it was clear this vision remains a long term one. We may see the creation of a platform that allows for virtual integration that as was shown in a presentation done by MillenniumIT, part of the London Stock Exchange group, but again this would be subject to the buy-in of exchanges in the various countries.

I think we can safely say Africa’s exchanges will continue to operate on a stand-alone basis for a while, (notwithstanding the BRVM has been in existence for a while, and the progress made by the east African region), with regional integration the first step, then perhaps much later a formal pan-African exchange.

Article produced by the Imara Africa Securities team. Imara is an investment banking and asset management group renowned for its knowledge of African markets.



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