There are a number of stock exchanges in Africa, most of whom are very small by world standards. The JSE Securities Exchange South Africa (JSE) in South Africa is the largest and most developed bourse on the continent.
Regionalisation is considered by many to be inevitable for African stock markets as they struggle to consolidate in order to overcome poor liquidity and to attract more foreign investment.
During 1998, authorities in the Central African part of the franc zone consulted the Mauritian stock exchange on the potential for a regional stock market. At the same time, plans for a bourse in Gabon were reported to be proceeding under the aegis of the Finance Ministry. The Central African exchange would serve Cameroon, Central African Republic, Chad, Congo Republic, Equatorial Guinea and Gabon, which share a common currency, the CFA franc, and a common central bank.
A unified stock market for the east African region of Kenya, Tanzania and Uganda is planned and may be in place by the year 2000. The exchange could have trading floors in all three capitals in the region, with trading being functional between the three centres (while Nairobi already boasts a well established bourse, the other two countries in the region have only recently set up exchanges). A regional exchange would help companies tap into a wider capital base, encourage more to list on the exchange and improve liquidity for investors. The three exchanges have already agreed on the principles of cross border listing and are now focusing on developing regional products.
Francophone West Africa
A regional bourse based in Abidjan, started operating in 1998.
The path has been cleared for dual listings on southern Africa’s stock markets following several meetings of the regional stock exchanges.
During a meeting in Johannesburg in Q1 1999, stock exchange leaders in SADC resolved to speed up the linking of their trading, clearing and settlement systems with the ultimate aim of building the region’s market into a world contender. Two stock exchanges, the Namibian Stock Exchange and the JSE (South Africa), put links on line at the end of 1998, with wider investigations into linking their central depositories and other systems underway. Mauritius already has a central depository, while Johannesburg and Tanzania have plans to make theirs operational in 1999, thus achieving paperless trading in their markets. The Botswana, Lesotho, Malawi, Zimbabwe and Zambia exchanges hope to use the Mauritian central depository system. Regional exchanges which still use manual trading systems (eg the floor, call-over or central order matching office) all have plans to computerise their trading. The vision for the region is that, in time, the region’s markets will be accessible to traders through the same desktop screen. Investigations into connectivity for future automation of the individual exchanges have already started. The exchanges have made progress in harmonising listing requirements across the region. All exchanges have revised their regulations based on 13 agreed principles which conform with international requirements. There are also plans to ensure that all stockbroker staff in the region take the same entry-level examinations (set by the UK-based Securities Institute), and recommendations on developing bond markets across the region have also been prepared.
Emerging Market Funds
Worldwide, there are over 1300 equity funds which are invested in emerging markets.
Africa’s relative attractiveness as an emerging market has led to an improvement in foreign investment, with a concomitant increase in the number of bourses now operating on the continent. The number of Africa-specific funds has also increased.
Notable Africa orientated funds are:
· Calvert New Africa Fund, managed by New Africa Advisors (pan African)
· Foreign and Colonial Emerging Middle East Fund
· Framlington West Africa Growth Fund, formed in 1995 and managed by Framlington Asset Management W.A. (West Africa)
· Framlington Maghreb Fund, managed by Framlington Investment Management (North Africa)
· Genbel Investments
· GT All-Africa Fund, managed by GT Management Plc (pan African)
· HSBC’s Equator Bank’s Africa Growth Fund (AGF), the first African fund, set up in December 1990
· Mauritius Fund
· Mercy Asset Management Fund
· Modern Africa Growth and Investment, founded in 1997 to provide joint venture opportunities to SA, US and French companies seeking to expand into the continent
· Morgan Stanley African Investment Fund, probably the biggest dedicated fund, a closed-end equity and debt fund formed in early 1994 and managed by Morgan Stanley Asset Management (pan African)
· New South Africa Fund, managed by Fleming Investment Trust Management (Southern Africa)
· Regent Undervalued Assets Africa Fund, managed by Regent Fund Management (pan African)
· Save & Prosper Southern Africa Fund, managed by Save & Prosper (Southern Africa)
· Simba Fund , managed by Baring International Investment (pan African)
· South Africa Trust, managed by Old Mutual
· Southern Africa Fund, managed by Alliance Capital (Southern Africa)
· Southern Africa Investors Ltd (SAIL), managed by Mercury Asset Management (sub-Saharan Africa)
· The African Emerging Markets Fund, listed in Ireland, and managed in the USA by Emerging Markets Investors Corporation (pan African)