The development of financial markets in Africa: trends, challenges and prospects
Abstract
This paper explores trends and challenges in the development of African financial markets over the past two decades. Access to capital is essential for government to finance its budget and the performance of government policies is in part evaluated through how financial asset prices respond to the policy choices. Erratic security issuance, thin trading, low turnover ratios and lack of market depth has characterised African financial markets as inefficient. Applying a descriptive research model on key data from international think tanks to observe the behaviour of financial markets data in African countries, the study finds that African financial markets still face the traditional challenge of lack of market depth relative to other regions in other continents due to their limit size and very low market capitalisation. This is a key factor holding back the ability of investors to exploit expansion opportunities. This paper recommends that, part of the solution to challenges faced by African financial markets is for governments to assist in set-up electronic trading platforms, improve trading and settlement infrastructure.
Downloads
References
Africa Capital Markets Report, P. (2017). Africa Capital Markets Watch. Africa Capital Markets Watch, Accessed 2(March).
Africa Financial Markets Initiative, A. (2018). Africa financial markets initiative annual conference theme: “ enhancing transparency in African bond markets ,” (October).
African Development Bank Group, (AfDB). (2018). African Statistical Yearbook.
African Securities Exchange Association, A. (2017). Annual Report. Forensic Science Regulator, (January), 46.
Bank for International Settlements. (2017). 87th Annual Report. BIS Annual Economic Report.
Bernhard, W., & Leblang, D. (2006). Democratic processes and financial markets: Pricing politics. Cambridge University Press.
Centre for Affordable Housing Finance in Africa (CAHFA). (2017). Residential reits and their potential to increase investment in and access to affordable housing in Africa main report, (February).
Demirguc-Kunt, A., Klapper, L., Singer, D., Ansar, S., & Hess, J. (2018). The Global Findex Database 2017: Measuring Financial Inclusion and the Fintech Revolution. The Global Findex Database 2017: Measuring Financial Inclusion and the Fintech Revolution. https://doi.org/10.1596/978-1-4648-1259-0
Desjardins, J. (2016). All of the World’s Stock Exchanges by Size. The Money Project. Evans, A. (2019). Overcoming the global despondency trap: strengthening corporate accountability in supply chains. Review of International Political Economy, 2(1), 1-28.
Fama, E. F. (1976). Efficient capital markets: reply. The Journal of Finance, 31(1), 143-145.
Ferrara, F. M. and Sattler, T. (2018). The Political Economy of Financial Markets. Oxford Research Encyclopedia of Politics, DOI: 10.1093/acrefore/9780190228637.013.628. Available at SSRN: https://ssrn.com/abstract=3289339
Global Standards Proportionally Working Group Survey Report. (2019). Survey report on the implementation of the Basel framework, Available at: https://www.afi-global.org/sites/def.
Governance Across Borders. (2015). Why should Africa adopt IFRSs? Adoption is less of the story.. not practicing what you preach is the bigger evil. January 11, 2012.
Hrnjic, E., Reeb, D. M., & Yeung, B. (2019). Financial Decisions, Behavioral Biases, and Governance in Emerging Markets. In The Oxford Handbook of Management in Emerging Markets (p. 161). Oxford University Press, New York.
In On Africa (IOA). (2017). Africa Country Benchmark Report.
International Centre for Tax & Development (ICTD). (2019). Taxing Africa?: Coercion , Reform and Development Abstract?: International Centre for Tax & Development (ICTD).
International Financial Reporting Standards (IFRS). (2019). Who uses IFRS Standards?? International Financial Reporting Standards, Accessed 1, 23235.
International Monetary Fund, I. (2018). Exchange Rate Regimes in Sub-Saharan Africa?: Experiences and Lessons. Regional Economic Outlook: Sub-Saharan Africa 32, 31–60.
Ivashina, V., & Lerner, J. (2019). Patient Capital: The Challenges and Promises of Long-Term Investing. Princeton University Press, New York.
Karlsson, C., & Tavassoli, S. (2019). Policy evaluation in competitiveness: towards more results-oriented industrial policies: Smart, Sustainable and Inclusive Growth. Edward Elgar Publishing, Northampton.
London Stock Exchange. (2019). Fees for companies and nominated advisers, (April).
Matewos, K. R., Navkiranjit, K. D., & Jasmindeep, K. (2016). Financial literacy for developing countries in Africa: A review of concept, significance and research opportunities. Journal of African Studies and Development, 8(1), 1–12. https://doi.org/10.5897/jasd2015.0331
Messy, F.-A., & Monticone, C. (2012). The Status of Financial Education in Africa OECD working papers on finance, insurance and private pensions. OECD Development Policy Papers, (No. 25). https://doi.org/10.1787/5k94cqqx90wl-en
Mutize, M. & Gossel S.J. (2017). Corrupt state owned enterprises lie at the heart of South Africa’s economic woes. The Conversation, June 19, 2017. Retrieved from http://theconversation.com/corrupt-state-owned-enterprises-lie-at-the-heart-of-south-africas-economic-woes-79135
Newell, G. D. (2019). Capital Flow Dynamics: Theory and Evidence. PhD Thesis and Florida State University, Tallahassee. Retrieved from http://purl.flvc.org/fsu/fd/2019_Spring_Newell_fsu_0071E_15058
OECD. (2015). New Approaches to SME and Entrepreneurship Financing: Broadening the Range of Instruments. Oecd, 119. Retrieved from https://www.oecd.org/cfe/smes/New-Approaches-SME-full-report.pdf
Official Monetary and Financial Institutions Forum. (2017). Africa Financial Markets Index, 1–35. Retrieved from https://www.barclaysafrica.com/content/dam/barclays-africa/bagl/pdf/news/2017/barclays-africa-financial-markets-index-2017.pdf
Organisation for Economic Co-operation and Development, O. (2018). Development aid at a glance statistics by region. Official Development Assistance. Retrieved from http://www.oecd.org/dac/financing-sustainable-development/
Price Water Cooper, P. (2018). Africa Capital Markets Watch 2018, (February 2017), 26. Retrieved from https://www.pwc.co.za/en/assets/pdf/africa-capital-markets-watch-2016.pdf
Standard Bank Stockbrokers. (2019). Fees and costs: Online trading, 123–134.
United Nations Conference on Trade and Development (UNCTAD). (2018). World Investment Report: Investment and New Industrial policies. https://doi.org/10.18356/a1e0466b-en
World Economic Forum, 2018. (2018). The Global Competitiveness Report 2018. World Economic Forum Reports 2018. https://doi.org/ISBN-13: 978-92-95044-73-9
Copyright (c) 2020 Misheck Mutize, Ejigayhu Tefera, McBride Nkhalamba
This work is licensed under a Creative Commons Attribution 4.0 International License.
Author (s) should affirm that the material has not been published previously. It has not been submitted and it is not under consideration by any other journal. At the same time author (s) need to execute a publication permission agreement to assume the responsibility of the submitted content and any omissions and errors therein. After submission of a revised paper in the light of suggestions of the reviewers, editorial team edits and formats manuscripts to bring uniformity and standardization in published material.
This work will be licensed under Creative Commons Attribution 4.0 International (CC BY 4.0) and under condition of the license, users are free to read, copy, remix, transform, redistribute, download, print, search or link to the full texts of articles and even build upon their work as long as they credit the author for the original work. Moreover, as per journal policy author (s) hold and retain copyrights without any restrictions.
