136 SECTOR-BY-SECTOR OPPORTUNITIES
The growth of capital markets across the continent has
been a particularly exciting development. Deep, liquid and transparent capital markets play a crucial role in oiling the wheels of an economy and providing access to competitively priced capital. Over the past 20 years the number of African stock exchanges has grown from five to 22. This includes two regional stock exchanges, La Bourse Régionale des Valeurs Mobilières (BRVM) in West Africa and La Bourse des Valeurs Mobilières de l’Afrique Centrale (BVMAC) in Central Africa. While many of the stock exchanges on the continent are characterized by relatively low capitalization and low numbers of listed stocks, there are signs that the industry is maturing relatively quickly. Firstly, in recognition of the uneven development of
capital markets across various African countries, there are ongoing discussions around consolidation. In particular, West Africa is considering establishing a single regional stock exchange to cover the entire region. Secondly, the past decade has seen the development of specialized trading exchanges, such as a proposed commodities and derivatives exchange in Egypt, the Ethiopian Commodities Exchange trading agricultural produce, a proposed exchange for commodities in Ghana, a multi-asset derivatives exchange in Mauritius, as well as the existence of agricultural commodities exchanges in Zambia, Malawi and Zimbabwe. Thirdly, both domestic and international companies are
increasingly viewing domestic African capital markets as an effective and efficient method of raising capital. The issuance
of corporate bonds, local currency bonds and initial public offerings are becoming increasingly common. In 2010, there was a 406 percent jump in total IPO proceeds from listings on African exchanges, according to Ernst & Young. Increased issuances of both debt and equity on
exchanges in turn foster more liquid and disciplined markets – as evidenced by the rapid development of Nairobi as a capital markets hub – while giving local citizens a stake in the development of companies operating in Africa and, consequently, the wider economy.
Need for infrastructure finance
Despite the growing interest in the African financial sector from international and domestic investors, the continent is still struggling to address the daunting gap in infrastructure finance. The development of infrastructure and the promotion of
regional integration are two of the continent’s most pressing needs. United Nations experts estimate that the funding gap for infrastructure finance over the next 10 years is in the region of US$50 billion. The experts at the African Development Bank suggest that this figure is actually closer to $90 billion. What everyone does agree on, however, is that the funding gap is substantial and the plug to fill it remains elusive. The AU has risen to the challenge of addressing the
funding gap for development on the continent with ambition and dynamism. It has been open and frank in its acknowledgement that the funding gap for Africa is too
Counting notes of the new Sudanese currency, launched by the country’s central bank in July
INVEST IN AFRICA 2011
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