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Attractiveness of African stock markets for foreign investors : An analytical perspective
Journal of Securities Operations & Custody,
16
(4),
385-395
(2024)
Abstract
Africa appears to be an appealing investment destination, with African stock markets offering foreign investors the gateway to tap into the continent’s potential growth opportunities. Despite the significant growth and development of stock markets on the continent in recent decades, however, there remain some obstacles to overcome. This paper aims to examine the challenges faced by African stock markets which diminish their appeal to foreign investors and assess regional integration as a potential solution. Key takeaways: (1) African stock markets are often inadequately regulated and exhibit limited size, depth and liquidity, compounded by high currency volatility, prohibitive trading costs and macroeconomic and political instability, making them less attractive to foreign investors; (2) policy makers and regulators in developing countries should focus on fostering the development of vibrant and liquid public equity markets that are well regulated by creating a favourable market ecosystem through legislation, tax incentives and other measures to encourage listings; (3) for financial markets to operate effectively, they must exist within a comprehensive supportive framework encompassing legal, economic and political elements and coordinated monetary policies, potentially through currency zones; (4) the regional integration of stock exchanges can facilitate global integration, and some progress has been made in this regard. African stock markets remain weakly integrated, however, and economic integration initiatives are still hampered by low intra-African trade and inadequate infrastructure; (5) while the African Continental Free Trade Area (AfCFTA) lays a solid foundation for economic integration, African countries should allocate additional resources to implement the AfCFTA and ensure increased intra-Africa trade to assist in making its stock markets more attractive to foreign investors and potentially launching a continental exchange in the future.
Keywords: Africa; intra-African trade; liquidity; operational inefficiencies; macroeconomic and political instability; regional integration; regulatory control; stock market; vulnerability extreme events
The full article is available to subscribers to the journal.
Author's Biography
Celia Becker is an Africa Regulatory and Business Intelligence Executive at ENS, a law company with more than 600 lawyers and offices in seven African jurisdictions providing tax and legal services across Sub-Saharan Africa. She specialises in advising large multinationals expanding into the region on the tax-efficient structuring of investments, country risk profiles and tax and regulatory compliance requirements of countries throughout the region. She travels extensively on the continent and has practical experience advising in respect of 26 African jurisdictions. Celia is a South African qualified chartered accountant with a Master’s degree in international tax. She started her career as an international tax adviser at a Big 4 accounting company and spent six years at a multinational construction company as Country Risk Director. She is a member of the South African Institute of Chartered Accountants (SAICA) and is a regular contributor of African jurisdictional content to various publications. Celia has lived and worked in Luxembourg, Mauritius and Rwanda. She is currently based in Johannesburg (South Africa).
