Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Capital Flows and Development of African Economies: Towards ...

515 views

Published on

Published in: Business, Economy & Finance
  • Be the first to comment

  • Be the first to like this

Capital Flows and Development of African Economies: Towards ...

  1. 1. Capital Flows and Development of African Economies: Towards an Action Plan for Financing Investment in Africa Zanzibar, Tanzania 24-25 April 2007
  2. 2. Objective of the meeting <ul><li>Come up with concrete proposals and recommendations to promote financing of investment in Africa </li></ul>
  3. 3. Summary of issues - background <ul><li>The mobilization of domestic and external resources is fundamental to meet the MDGs </li></ul><ul><li>Despite some improvements in ODA and FDI, domestic resource mobilization is still too low </li></ul><ul><li>In response, need to </li></ul><ul><ul><li>Improve governance and public financial management </li></ul></ul><ul><ul><li>Expand & improve the efficiency of the financial system and dissemination of information </li></ul></ul><ul><ul><li>Undertake pension reform </li></ul></ul><ul><ul><li>Develop capital markets including stock exchanges and bond markets </li></ul></ul>
  4. 4. Summary of issues - background <ul><li>Recalled Nairobi </li></ul><ul><ul><li>Most African capital markets are small and shallow. One solution to this situation is the regional integration </li></ul></ul><ul><ul><li>There are various approaches to regional integration </li></ul></ul><ul><ul><li>Information dissemination and education campaigns are essential & must be underpinned by research </li></ul></ul><ul><ul><li>All partners have a role to play in pushing the agenda forward </li></ul></ul>
  5. 5. Overview of presentations <ul><li>Financing Development in Africa: Review of Progress and Challenges </li></ul><ul><li>Capital market development </li></ul><ul><ul><li>Regional integration </li></ul></ul><ul><li>Supporting investment </li></ul><ul><ul><li>Information and awareness </li></ul></ul><ul><ul><li>International initiatives – APF process </li></ul></ul><ul><li>Trends in other forms of financing investment </li></ul><ul><ul><li>Venture capital/private equity </li></ul></ul><ul><ul><li>Financing SMEs </li></ul></ul><ul><ul><li>Microfinance </li></ul></ul><ul><ul><li>Pension reform (in absentia) </li></ul></ul>
  6. 6. Financing Development in Africa - Presentation <ul><li>Key declarations and commitments </li></ul><ul><li>The Monterrey Consensus </li></ul><ul><li>Key policy challenges </li></ul><ul><li>Finding an solution to the external debt crisis </li></ul><ul><li>How is ECA organized to respond to these challenges </li></ul>
  7. 7. Financing Development in Africa - Discussion <ul><li>The impact of transaction costs </li></ul><ul><li>Importance of remittances </li></ul><ul><li>Problems of utlizing existing resources & how to ensure that the resources are used productively to finance investment </li></ul><ul><li>The need for the media to raise awareness </li></ul><ul><li>Identifying the agents of change </li></ul><ul><li>To attract investment, infrastructure and the right regulatory/institutional frameworks are key </li></ul>
  8. 8. Capital market development – Regional integration <ul><li>Different approaches to regional integration </li></ul><ul><li>Capital market integration in Africa </li></ul><ul><li>A practical approach to capital market integration in Africa </li></ul><ul><li>Action plan for committee at the REC level </li></ul>
  9. 9. Capital market development - Regional integration <ul><li>RECOMMENDATION 1: </li></ul><ul><ul><li>Bring the RECs on board </li></ul></ul><ul><ul><li>Stock exchanges, market operators, regulators, and policy makers in RECs must come together under a committee or working group to deliberate on options for integration and the way forward </li></ul></ul><ul><ul><li>The establishment of committees/task forces at the REC level would build on the work of EASRA and SADC Committee of Stock Exchanges </li></ul></ul>
  10. 10. Capital market development - Regional integration <ul><li>RECOMMENDATION 2: </li></ul><ul><ul><li>ECA should </li></ul></ul><ul><ul><ul><li>Call for status reports on regional integration </li></ul></ul></ul><ul><ul><ul><li>Involve policymakers in discussion </li></ul></ul></ul><ul><ul><ul><li>Meet with the RECs and support them in terms of capacity and coordination </li></ul></ul></ul><ul><li>RECOMMENDATION 3: </li></ul><ul><ul><li>ASEA to monitor ongoing regional integration initiatives </li></ul></ul>
  11. 11. Capital market development – Internet trading <ul><li>Stock exchange of Mauritius - internet based trading system (i-net) </li></ul><ul><li>Proposed model </li></ul><ul><li>Essential set up and requirements </li></ul><ul><li>Costs and benefits </li></ul>
  12. 12. Capital market development – Discussion <ul><li>Regional integration should be seen as an ends not a means and be business friendly </li></ul><ul><li>Stock exchanges are businesses </li></ul><ul><li>Regional integration must address the need of countries </li></ul><ul><li>The impact of demutualization on regional integration </li></ul><ul><li>The goal should be a pan-African stock exchange – faces difficulties </li></ul><ul><ul><li>Start at </li></ul></ul><ul><li>Sovereignity issues </li></ul>
  13. 13. Supporting investment – Africa Investor <ul><li>Africa Investor activities and products </li></ul><ul><li>The need to change the image of Africa as an investment location </li></ul><ul><li>Africa’s stock markets are among the best performers in the world </li></ul><ul><li>Emerging market investment funds are mainly investing in South Africa </li></ul><ul><li>There are signs that interest in Africa regional equity funds is reviving </li></ul>
  14. 14. Supporting investment – Africa Investor <ul><li>Challenges for frontier markets </li></ul><ul><ul><li>Markets are too small and illiquid </li></ul></ul><ul><ul><li>Lack of assets </li></ul></ul><ul><ul><li>Investing is not easy </li></ul></ul><ul><ul><li>Currency risk </li></ul></ul><ul><ul><li>Access to information </li></ul></ul>
  15. 15. Supporting investment – Africa Investor <ul><li>RECOMMENDATIONS: We need to improve the effectiveness of investor communications in Africa </li></ul><ul><ul><li>With the assistance of partners, we should establish a programme to raise the profile of African stock exchanges </li></ul></ul><ul><ul><li>Programme should include capacity building for communications/investor relations expertise in exchanges and listed companies </li></ul></ul><ul><ul><li>Stock exchanges should encourage increase frequency and quality of reporting </li></ul></ul><ul><ul><li>Programme should also address issues around data and sharing of information </li></ul></ul>
  16. 16. Supporting investment – APF paper <ul><li>APF process and development of joint NEPAD/APF Support Unit paper on investment in Africa </li></ul><ul><li>Recommendations in paper </li></ul><ul><ul><li>Develop financial markets </li></ul></ul><ul><ul><ul><li>Efficient financial sectors and broadening access for SMEs is key </li></ul></ul></ul><ul><ul><ul><li>Emphasis must be on poverty reduction </li></ul></ul></ul><ul><ul><ul><li>New financing facility to address this gap and more resources for ICF </li></ul></ul></ul><ul><ul><li>Invest in infrastructure </li></ul></ul><ul><ul><ul><li>Financing facility to build capacity in RECs </li></ul></ul></ul><ul><ul><ul><li>Support developing project development documents/proposals </li></ul></ul></ul><ul><ul><ul><li>Need to reinforce investment promotion at the REC level </li></ul></ul></ul>
  17. 17. Supporting investment – APF paper <ul><ul><li>Improve economic governance </li></ul></ul><ul><ul><ul><li>Need good regulatory environment and fight corruption </li></ul></ul></ul><ul><ul><ul><li>Symmetric responsibilities </li></ul></ul></ul><ul><ul><ul><li>Use African Peer Review Mechanism </li></ul></ul></ul>
  18. 18. Supporting investment – Discussion <ul><li>Also improve information flows for local investors not just foreign ones </li></ul><ul><li>Problem of remuneration for provision of information </li></ul><ul><li>How to deal with uncertainty </li></ul><ul><li>RECOMMENDATIONS: </li></ul><ul><ul><li>Donors to finance stock exchanges to provide investors with information </li></ul></ul><ul><ul><li>Stock exchanges, organizations (ASEA, AVCA) need to compile information </li></ul></ul>
  19. 19. Trends in alternative sources of financing – venture capital - AVCA <ul><li>What is venture capital </li></ul><ul><li>The role of VC in development </li></ul><ul><li>Overview of African venture capital industry </li></ul><ul><li>The dynamics of VC industry </li></ul><ul><li>Key requirements for growth and success of VC </li></ul><ul><li>UNIDO/AVCA Technical Assistance Fund </li></ul>
  20. 20. Venture capital - AVCA <ul><li>Need to develop </li></ul><ul><ul><li>African Fund of Funds targeting local and international investors </li></ul></ul><ul><ul><li>Technical Assistance Fund for SMEs </li></ul></ul><ul><ul><li>Tax and regulatory incentives </li></ul></ul><ul><ul><li>Financial support for industry association </li></ul></ul>
  21. 21. Venture capital - AVCA <ul><li>RECOMMENDATIONS: </li></ul><ul><ul><li>Active interaction between capital markets and VC/PE industry </li></ul></ul><ul><ul><ul><li>Attend and speak at conferences </li></ul></ul></ul><ul><ul><ul><li>SE’s actively encourage VC/PE portfolio companies Seek financial support from governments </li></ul></ul></ul><ul><ul><li>Hold forums for continued engagement between public sector, private sector and civil society (through media) </li></ul></ul>
  22. 22. Trends in alternative sources of financing – SMEs financing <ul><li>Strategic overview and investment guidelines </li></ul><ul><li>Key issues in financing SMEs </li></ul><ul><ul><li>Access to capital not a problem, rather lack of projects </li></ul></ul><ul><ul><li>Lack of proper financial records </li></ul></ul><ul><ul><li>Inadequate business plan </li></ul></ul><ul><ul><li>Insufficient management capacity/skills </li></ul></ul><ul><ul><li>Poor management of funds </li></ul></ul><ul><ul><li>Under capitalization </li></ul></ul><ul><ul><li>Insufficient assets for security/collateral </li></ul></ul><ul><ul><li>No corporate governance structures </li></ul></ul>
  23. 23. Trends in alternative sources of financing – SME financing <ul><li>Advantages and disadvantages of private equity </li></ul><ul><li>SSA private equity industry </li></ul><ul><li>SSA governments and private equity </li></ul><ul><li>Potholes </li></ul><ul><li>Case studies </li></ul><ul><li>Recommendations: </li></ul><ul><ul><li>Use partnerships to enable financing – governments and international partners </li></ul></ul><ul><ul><ul><li>Financial support, technical assistance funds, tax breaks </li></ul></ul></ul>
  24. 24. Trends in alternative sources of financing – Microfinance <ul><li>Role of Micro-finance in investment </li></ul><ul><li>MF role in savings mobilization </li></ul><ul><li>Challenges facing micro finance in Africa </li></ul><ul><li>Accelerating MF for investment and savings: recommendations </li></ul><ul><li>Way forward </li></ul>
  25. 25. Trends in alternative sources of financing – Microfinance <ul><li>Recommendations: </li></ul><ul><ul><li>Governments should                  </li></ul></ul><ul><ul><ul><li>Deepen and integrate the financial sector </li></ul></ul></ul><ul><ul><ul><li>Review the existing legal and regulatory framework to mainstream microfinance into the country’s financial system </li></ul></ul></ul><ul><ul><ul><li>Provide incentives for MFIs to target the poor </li></ul></ul></ul><ul><ul><ul><li>Build institutional capacity for supervision and monitoring and e nforcement of microfinance regulations </li></ul></ul></ul><ul><ul><ul><li>Invest in rural infrastructure </li></ul></ul></ul>
  26. 26. Trends in alternative sources of financing – Microfinance <ul><li>Recommendations: </li></ul><ul><ul><li>MFIs should                  </li></ul></ul><ul><ul><ul><li>Develop and match the products and delivery methodologies to the diverse needs of different clients </li></ul></ul></ul><ul><ul><ul><li>Enhance networking & development of strategic alliances and information sharing and transparency </li></ul></ul></ul><ul><ul><ul><li>Bigger MFIs to support and build the capacity of the young upcoming ones </li></ul></ul></ul><ul><ul><ul><li>Broaden the range of their products, services and delivery systems </li></ul></ul></ul>
  27. 27. Trends in alternative sources of financing – Microfinance <ul><li>Recommendations: </li></ul><ul><ul><li>AU/ECA/AfDB should: </li></ul></ul><ul><ul><ul><li>Fully integrate microfinance in their programmes including the NEPAD </li></ul></ul></ul><ul><ul><ul><li>Review the policies, strategies and legal frameworks of member countries with a view to harmonization in collaboration with RECs </li></ul></ul></ul><ul><ul><ul><li>Encourage the adoption of best practice in microfinance services and systems by member countries of the AU </li></ul></ul></ul><ul><ul><ul><li>Work towards the development and integration of microfinance infrastructure in Africa </li></ul></ul></ul><ul><ul><ul><li>Carry out an assessment of the UN 2005 Year for Microcredit - What measures were taken and what are the outcomes? </li></ul></ul></ul>
  28. 28. Trends in alternative sources of financing – Discussion <ul><li>Do venture capital funds exist for agriculture? </li></ul><ul><li>Role of development banks – AfDB and sub-regional banks </li></ul><ul><li>Absorptive capacity – come to Central Africa region </li></ul><ul><li>Problem of IPOs and small stock exchanges </li></ul><ul><li>Encourage pension funds to invest in other instruments besides treasury bills </li></ul><ul><li>Need to fund to assist and educate entrepreneurs </li></ul><ul><li>How South Africa can support other countries </li></ul><ul><li>Must have a clear message: </li></ul><ul><ul><li>Lack of funds and lack of bankable projects </li></ul></ul>
  29. 29. Summary of recommendations <ul><li>Promote regional integration </li></ul><ul><ul><li>Set up committee at REC level </li></ul></ul><ul><ul><li>ASEA to monitor ongoing regional integration initiatives </li></ul></ul><ul><ul><li>ECA to call for status reports on regional integration; involve policymakers in discussion; and support RECs </li></ul></ul>
  30. 30. Summary of recommendations <ul><li>Improve collection and dissemination of information and capacity </li></ul><ul><ul><li>Seek donor support to finance stock exchanges to provide investors with information and establish a programme to raise the profile of African stock exchanges </li></ul></ul><ul><ul><li>Stock exchanges and organizations (ASEA, AVCA) need to compile information & increase frequency and quality of reporting </li></ul></ul><ul><ul><li>Capacity building for communications/investor relations expertise in exchanges and listed companies </li></ul></ul>
  31. 31. Summary of recommendations <ul><li>Support development of VC and financing of SMEs </li></ul><ul><ul><li>Promote interaction between capital markets and VC/PE industry </li></ul></ul><ul><ul><li>Hold forums for continued engagement between public sector, private sector and civil society (through media) </li></ul></ul><ul><ul><li>Use partnerships to enable financing – governments and international partners </li></ul></ul><ul><ul><ul><li>Financial support, technical assistance funds, tax breaks </li></ul></ul></ul>
  32. 32. Summary of recommendations <ul><li>Expand access to microfinance </li></ul><ul><ul><li>Role of governments and MFIs </li></ul></ul><ul><ul><li>AUC/ECA/AfDB collaborate to support the development of microfinance </li></ul></ul>
  33. 33. Way forward <ul><li>Forum on Financing Development in Africa </li></ul><ul><ul><li>A joint initiative of ECA, AUC, AfDB, NEPAD, OECD, RECs together with Africa Investor, ICF </li></ul></ul><ul><ul><li>Meet 1-2 per year </li></ul></ul><ul><ul><li>Expand constituency to include policymakers, central bankers, regulators – but remain at the expert level </li></ul></ul><ul><ul><li>Advocacy tool - feed into high-level fora such as AU/ECA ministerial meetings and G8/OECD gatherings </li></ul></ul>

×