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Economy

Sustaining Positive Growth Trajectories of African Exchanges

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Africa

This conference, themed “Africa Evermore”, is an opportune time for us to engage with one another in open and constructive dialogue about our current operating environment, and how to go about closing the gaps in our journey to attain the full promise of Africa’s economic potential.

Compared to this year’s performance, growth in sub-Saharan Africa is projected to pick up in 2016 by 0.5 percentage points to 4.3 per cent according to the IMF’s World Economic Outlook.  This growth is expected to be supported by moderate global recovery, and growth in low-income developing countries which compared to this year are projected to grow by one more percentage point to 5.8 per cent in 2016.  Africa’s positive outlook is just one of the many opportunities that if well harnessed could seriously position the continent for greater heights.

Our markets currently cover multiple asset classes from equities and bonds to ETFs and derivatives.  In 2015 year to date, African exchanges collectively have traded over $325.0 billion in equities, $1.2 trillion in bonds, and $438.0 billion in ETFs & Others, representing a market capitalization of over $1.3 trillion.  In terms of governance and ownership structure, several of our exchanges are demutualized, while others are in the process of demutualizing.  Today, our exchanges are becoming active players in the global exchange business, and the conference theme “Evermore” is about sustaining that growth position, and becoming a real platform for growth in the African economy.

The role of the capital market remains a critical one and I believe that it is time to ask the tough question of how we can sustain the positive growth trajectories of our performances as African exchanges, given the globalization of the securities business.  It is my strong belief that one of the things that Africa needs to sustain its growth, is a solid capital markets ecosystem that will attract investment and unlock the potential that exists on the continent.

How do we, as capital market businesses, operate and grow in a sustainable and socially responsible way?  What I would like this conference to deliver is a better understanding of: 1) how best to pursue social values, without losing sight of the traditional financial objectives of our businesses; and 2) the correlation between the health of our economies, and the value of our capital markets, bearing in mind peculiar strengths, that individually and collectively we could leverage as we press forward.

One of Africa’s greatest strengths is its population of 1.1 billion people, 200 million of whom are aged between 15 and 24, making Africa the continent with the youngest population in the world.  The current trend indicates that this figure will double by 2045.  Similarly, Africa’s middle class has tripled in size to 313 million people or roughly 30% of the population over the last 30 years, and it is projected that this figure will reach 1.1 billion by 2060.

We anticipate a positive shift in demand as a result of this statistic, and African exchanges are already positioning themselves to do a lot more to service the increasingly sophisticated needs of our growing middle class.  Our customers will be looking to sustain and grow their wealth, and will be looking to work with us in preparation for the transfer of that wealth.  Therefore I encourage all of us as capital market players to ramp up on our efforts, as we prepare ourselves to meet our clients at their points of need.

Furthermore, among the 23 nations that make up ASEA, we have a combined total of just-over 1,600 listed companies, this number is negligible compared to the actual number of successful companies operating on the continent, or the over 1.5 million businesses registered in Africa.  I propose we find new ways to engage with business leaders in order to communicate more clearly the vital role we play in facilitating long-term financing, mobilizing resources, and directing the flow of savings and investments efficiently within our economies.

An even more incredible potential, one which I am particularly passionate about is the exponential benefits that accrue from risk-sharing initiatives.  Internationally, integrated stock markets improve resource allocation and accelerate growth by facilitating liquidity.  Although profitable investments sometimes require long-run commitments to capital, savers prefer not to relinquish control of their savings, and preferably not for long periods of time.

This is where liquidity comes in to ease the investor’s tension.  It does this by providing investors with assets that are easily liquidated at any time, while simultaneously allowing firms permanent access to capital that is raised through equity issues.  In this regard, I believe that there is no better time than now to intensify our efforts in ongoing initiatives that foster the advancement of regional integration and cooperation.

These sub-regional integration efforts such as WACMI in West Africa, CoSSE in Southern Africa, and EAC in East Africa must be encouraged.  We must also begin to study how to effectively link the entire region.  Hence, the African Exchanges Linkage Project (AELP) which is a jointly owned mandate between ASEA and the Africa Development Bank (AfDB), is a step in the right direction.  It is aimed at addressing the lack of liquidity in African capital markets by creating linkages across key regional markets to reduce fragmentation and information asymmetry.

All of these efforts to deepen the continent’s markets will aid in pushing Africa’s economic transformation, and enhancing national competitiveness.  But we must be careful to never lose sight of the real objective of these initiatives, which is to stimulate opportunities for the investment community, and expose issuers to deeper pools of capital, and a wider community of analysts and investors pools.

Weak corporate governance is often found responsible for many of the corporate failures in Africa.  However, as securities exchanges, we operate powerful platforms through which we can influence and promote sustainable business practices.  Accordingly, we must increase our contribution and participation in developing our national codes of corporate governance, by setting strong listing and maintenance requirements, and ensuring adequate disclosure of listed companies’ corporate governance arrangements.

Africa is becoming known as the continent that leapfrogs traditional stages of growth or development.  We have seen this in the telecommunications industry where despite insurmountable challenges with communications infrastructure, the impact of mobile phone technology in Africa has been phenomenal, and is now revolutionizing many other sectors of our economy.  When it comes to mobile phone technology, Africans are doing great things and leapfrogging the West, ironically driven by a lack of infrastructure.

Mobile payment systems experienced phenomenal growth in Kenya because many Kenyans did not have bank accounts, but they had mobile phones.  Here in South Africa, the innovation of mobile commerce where you can order something on your phone and pick up from a locker is growing in popularity, and the driver for this is the limited number of physical malls.  As a result of poor infrastructure in the health space, Africans are yet again turning to mobile technology for health information on platforms such as Mobile Alliance for Maternal Action (MAMA).

This trend is no different in how quickly the continent has embraced innovations in renewable sources of energy.  Between 2010-2012, Nigeria’s renewable power production posted the world’s fastest growth, at more than 15% a year, according the World Bank.  I therefore call on my colleagues in the capital market space to do no less in the capital market.  Let us be aware of our opportunities and tremendous capabilities and get involved in understanding what emerging technology can do for our sector, from blockchain technology to advancements in cyber security.

I have no doubt that the programme at this year’s conference will surely drive the level of engagement and idea generation that will solidify and strengthen our association’s strategic resolve.  But more importantly, I believe that the learnings from our interactions will elevate our business strategies to ride out the headwinds that our markets have experienced this year.  In the end, I sincerely hope that we are better positioned to unlock our continent’s growth potential, and empowered to advance the development of our capital markets.

Thank you for your attention and for your anticipated contributions to the dialog during this conference.  Once more, I welcome you all to the ASEA Conference 2015, and I wish us all fruitful deliberations.

•Oscar, President, African Securities Exchanges Association (ASEA) presented the speech at the associaton’s 19th annual conference in South Africa, last week.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Economy

NNPC To Resume Oil Exploration In Sokoto Basin

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NNPC

The Nigerian National Petroleum Corporation on Thursday announced plans to resume active oil exploration in Sokoto Basin.

A statement issued in Abuja on Thursday by NNPC spokesperson, Kennie Obateru, said the corporation’s Group Managing Director, Mele Kyari, said exploration for crude would resume in the Sokoto Basin.

The statement read in part, “Kyari also hinted of plans for the corporation to resume active exploration activities in the Sokoto Basin.”

The NNPC boss disclosed this while receiving the Governor of Kebbi State, Atiku Bagudu, who paid Kyari a courtesy visit in his office on Thursday.

In October 2019, the President, Major General Muhammadu Buhari (retd.), had during the spud-in ceremony of Kolmani River II Well on the Upper Benue Trough, Gongola Basin, in the North-East, said the government would explore for oil and gas in the frontier basins across the country.

He outlined the basins to include the Benue Trough, Chad Basin, Sokoto and Bida Basins.

Buhari had also stated that attention would be given to the Dahomey and Anambra Basins which had already witnessed oil and gas discoveries.

Kyari restated NNPC’s commitment to the partnership with Kebbi State for the production of biofuels, describing the project as viable and in tandem with the global transition to renewable energy.

He said the rice production programme in the state was a definite boost to the biofuels project.

Kyari said the linkage of the agricultural sector with the energy sector would facilitate economic growth and bring prosperity to the citizens.

He was quoted as saying, “We will go ahead and renew the Memorandum of Understanding and bring in any necessary amendment that is required to make this business run faster.”

The Kebbi State governor expressed appreciation to the NNPC for its cooperation on the biofuel project.

Bagudu said the cassava programme was well on course but the same could not be said of the sugarcane programme as the targeted milestone was yet to be attained.

Kebbi state is one of the states that the NNPC is in partnership with for the development of renewable energy.

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Economy

Nigeria To Benefit As G-20 Approves Extension Of Debt Relief Till December

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Finance ministers of G-20 countries have approved an extension of debt relief for the world’s poorest nations till December 2021.

David Malpass, World Bank president, made the announcement at the virtual spring meeting, on Wednesday.

TheCable had earlier reported that the G-20 countries will meet this week to consider an extension of the debt freeze.

The G-20, is a group of finance ministers and central bank governors from 19 of the world’s largest economies, including those of many developing nations, along with the European Union.

G-20 countries had established a debt service suspension initiative (DSSI) which took effect in May 2020.

Nigeria had benefited from the initiative which delivered about $5 billion in relief to more than 40 eligible countries.

The suspension period which was originally set to end on December 31, 2020 was extended to June 2021.

Malpass said the extension to December 2021 will boost economic recovery and promote job creation in low income countries.

He urged countries to be transparent in their approach to the debt service payment extension.

“On debt, we welcome a decision by the G20 to extend the DSSI through 2021. The World Bank is also working closely with the IMF to support the implementation of the G20 Common Framework,” he said.

“In both these debt efforts, greater transparency is an important element: I urge all G20 countries to disclose the terms of their financing contracts, including rescheduling, and to support the World Bank’s efforts to reconcile borrower’s debt data more fully with that of creditors.

“Participation by commercial creditors and fuller participation by official bilateral creditors will be vital. I urge all G20 countries to instruct and create incentives for all their public bilateral creditors to participate in debt relief efforts, including national policy banks. I also urge G20 countries to act decisively to incentivize the private creditors under their jurisdiction to participate fully in sovereign debt relief efforts for low-income countries.

“Debt relief efforts are providing some welcome fiscal space, but IDA countries need major new resources too, including grants and highly concessional resources. From April to December 2020, the first DSSI period, our net transfers to IDA and LDC countries were close to $17 billion, of which $5.8 billion were on grant terms.

“Our new commitments were almost $30 billion, making IDA19 the single largest source of concessional resources for the poorest countries and the key multilateral platform for support. To recover from COVID, much more is needed, and we welcome the G20’s support for advancing IDA20 by one year.”

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Economy

IMF / Fiscal Monitor Report April 2021 Forecast

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IMF 1

Unprecedented fiscal support by governments during the pandemic has prevented more severe economic contractions and larger job losses, but risks remain of long-term scarring the International Monetary Fund says in its Fiscal Monitor report released on Wednesday (April 7) in Washington, DC.

Meanwhile, such support, along with drops in revenues, has raised government deficits and debt to unprecedented levels across all country income groups, said Vitor Gaspar, Director of the Fiscal Affairs Department at the IMF.

The first lesson one year into COVID-19 is that fiscal policy can act timely and decisively. The fiscal policy response was unprecedented in speed and size looking across countries. We also learned that countries with easier access to finance or stronger buffers were able to give more fiscal support. They’re also projected to recover faster,” said Gaspar.

Average overall deficits as a share of GDP in 2020 reached 11.7 percent for advanced economies, 9.8 percent for emerging market economies, and 5.5 percent for low-income developing countries. Countries’ ability to scale up spending has diverged.

“So, what have we learned? We’ve learned that fiscal policy is powerful and that sound public finances are crucial in order to enable that power to be used to the fullest,” stressed Gaspar.

Gaspar urged policy makers to balance the risks from large and growing public and private debt with the risks from premature withdrawal of fiscal support, which could slow the recovery.

“In the spring 2021, we emphasize differentiation across countries. Moreover, COVID-19 is fast evolving, as are the consequences from COVID-19. The fiscal policy must stay agile and flexible to respond to this fast-evolving situation.” Said Gaspar.

He also warned that the targeting of measures must be improved and tailored to countries’ administrative capacity so that fiscal support can be maintained for the duration of the crisis—considering an uncertain and uneven recovery

“Moreover, countries are very different in their structures, in their institutions, in their financial capacity and much else. Therefore, policies and policy advice have to be tailored to fit.” Said Gaspar

Gaspar concluded his remarks by emphasizing that global vaccination is urgently needed, and that global inoculation would pay for itself with stronger employment and economic activity, leading to increased tax revenues and sizable savings in fiscal support.

“A fair shot, a vaccination for everybody in the world may well be the highest return global investment ever. But the Fiscal Monitor also emphasizes the importance of giving a fair shot at life success for everyone. It documents that preexisting inequalities made COVID-19 worse and that COVID-19 in turn made inequalities worse. There is here a vicious cycle that threatens trust and social cohesion. Therefore, we recommend stronger redistributive policies and universal access to basic public services like health, education, and social security,” said Gaspar.

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