Making the African Dream a Reality
By Roz Thomas, Corporate Communications Consultants
SOUTH AFRICA | Tue Oct 12, 2010
With the growing international realisation about Africa’s prospects, now is the
time to invest in the continent, says Sunil Benimadhu, newly appointed President
of the African Stock Exchange Association (ASEA) and CEO of the Stock
Exchange of Mauritius. “It has become clear that perceptions are changing,” says
Benimadhu. “The African continent is now being seen as presenting
In the first six months of 2010, African regional funds attracted inflows of $484
million, and total investment fund allocation to Africa was a record $1.39 billion
according to investment research firm EPFR. ASEA, comprised of 20 exchanges
in 27 African countries, aims to foster financial integration on the continent to
mobilise capital to accelerate economic development of Africa. The organisation
holds its 14th Conference in Zambia next month.
“With 80 per cent of African exports consisting of oil, mineral and agricultural
commodities, the resources of the continent have been Africa’s most attractive
feature in bringing more investment to the continent from a number of
countries,” says JSE director Geoff Rothschild, who has been elected ASEA’s
“However as a continent, we should be asking ourselves how we can take charge
of increasing interest on all fronts, not only from an acquisition perspective but
also a portfolio investment perspective. Attracting foreign investment should take
into account avenues that benefit Africa not just in the short but in the long term
also. We would be undermining our potential for growth if we did not do this,”
Benimahdu and Rothschild believe that the window for taking advantage of
increased interest in Africa won’t last forever.
“Several markets in developed economies are currently unattractive to global
investors due to low returns. In contrast, financial markets in Africa are showing
promise. However this is an opportunity for a limited period,” says Benimahdu.
“The factors that catalyse such investment are what our financial and political
leaders should be considering as being of paramount importance. The time has
come to demonstrate through making the required changes rather than continue
to talk about what needs to be done.”
Though the continent needs capital inflows to develop, institutional investors will
only invest in markets they are comfortable with and that are liquid. The JSE’s
market capitalisation makes up over two thirds of the market capitalisation of the
continent’s exchanges. The combined trade on all African exchanges excluding
the JSE is valued at less than US$2,4bn monthly whereas trade on the JSE is
valued at about $3,2bn a month according to Nedbank Capital’s Nerina Visser.
For obvious reasons, those countries that have supportive regulatory
environments, strong financial markets and a zero tolerance for corruption will be
popular choices amongst foreign investors. Several countries on the continent are
tightening up regulation of the financial markets. The World Economic Forum
recently announced that South Africa had the best regulated securities exchange
in the world. And at the recent Africa Investor award ceremony in New York, the
Financial Services Commission Mauritius was awarded the “Most Innovative
Capital Market Regulator of the Year Award”.
“These are positive steps to encouraging investment but unless each country does
the same, these steps will only benefit a few on the continent,” says Rothschild.
It’s in this context that the new leadership team of ASEA is focusing on seven
defined areas that revolve around the betterment of Africa as a region, comments
The areas include ASEA’s interaction with other key organisations such as the
World Federation of Exchanges and Nepad, areas of operational importance such
as trading, clearing and settlement developments, data capturing, distribution
and use, as well as the identification and exploitation of market opportunities.
“Notably, the Mo Ibrahim Index released on Monday confirmed the need to focus
on one of the areas we had identified, namely the paucity of information/data
about Africa. How can we expect investors – whether local or international – to
invest if they don’t have information with which to make decisions? The same is
true for issuers,” adds Benimadhu.
In the eyes of ASEA’s new leadership, the key to sustaining interest in the
continent’s investment opportunities will be to commit to an African vision that
involves continued growth. “There are 53 countries and 24 stock exchanges
within the region. Every one has a role to play in making the African Dream a
reality and a defined time in which to do it,” concludes Rothschild.
Word Count: 696
Corporate Communications Consultants
Ground Floor, Firwood House
Ballywoods Office Park, Ballyclare Drive
Bryanston, Gauteng 2191