African countries are making substantial progress in developing their financial markets on the back of new products, regulatory improvements and more responsive economic policy, according to new research from OMFIF (Official Monetary and Financial Institutions Forum).
The third iteration of the Absa Africa Financial Markets Index showed that 13 of 20 countries evaluated across the continent now score more than 50 out of 100 overall, compared to just three out of 20 in 2017. Botswana, Kenya and Namibia all joined these ranks over the 2018/19 financial year, indicating a quickening development of their respective capital markets.
Nations are measured on market depth, access to foreign exchange, market transparency, tax and regulatory environments, capacity of local investors, macroeconomic opportunity and adoption of international legal standards.
Jeff Gable, head of research at pan-African bank Absa, told reporters at a press briefing Monday that the index was beginning to foster a collaborative approach by policymakers across listed countries. The overall average score across all 20 nations climbed to 52.7 from 49.6 in 2017, with countries performing strongest on average in the ‘market transparency, tax and regulatory environment’ category.
“We’re starting to see those countries use it as a tool to have discussions within the country – the regulators, discussions with the index fund managers, politicians and so on — and between countries,” Gable said, adding that the goal of the index was to move away from the “traditional experience” of African nations looking outside the continent for economic and market guidance.
“Singapore’s financial markets developed in this way, what should that tell me about how my financial markets develop in Botswana? That’s not always obvious, but Botswana might be able to learn from South Africa, South Africa can learn from Kenya, Kenya can learn from Ghana,” he said.
