Africa Can Do Better Without Fragmented Stock Exchanges

Richard Branson, founder of Virgin Galactic poses before ringing the First Trade Bell to commemorate the company’s first day of trading on the New York Stock Exchange (NYSE) on Monday in New York City. AFP PHOTO

By Rufus Mwanyasi

The Absa Africa Financial Markets Index is out and is packed with valuable insights. The OMFIF-Absa report is slowly becoming a staple within the investment community.

Africa capital markets made big leaps – overall score settled at 52.7 (out of 100), up from 49.6 in 2017 – with Kenya ranking third (out of 20 countries scored). More importantly, this year’s edition (just like the previous two) confirms a couple of observations.

One, Africa needs a single exchange (not shallow and illiquid fragmentation of markets). This is easily seen from the scores on market depth, which shows only seven countries above average.

Africa does not need 30 stock exchanges when half of these have equity market turnover of less than 10 percent of market capitalization (and 10 with less than 10 percent turnover rates of outstanding bonds).

Nonetheless, it’s worth noting that several exchanges are moving the consolidation way. In West Africa, the BRVM is the regional stock exchange representing eight member states of the West African Economic and Monetary Union. Further, Ghana, Nigeria, Sierra Leone, Cape Verde and the BRVM could soon become a single exchange…

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