Tuesday, 27 November 2007

Africa Has Functioning Equity Markets

The Voice (Francistown)

27 November 2007
Posted to the web 27 November 2007

Chedza Simon

Sub Saharan Africa is said to be having excellent and functioning equity markets, which are an added and competitive advantage to investor confidence for the continent.

Stephen Jennings, CEO of the Renaissance Group said while doubters, investors and African continent observers claim that high commodity prices are alone propping up Africa's economic vitality, the continent has exciting and functioning equity markets.

"Prior to1989, there were only five (5) stock markets in Sub Sahara Africa. Today there are 16 countries with fully operational bourses. These exchanges have seen a dramatic growth in market capitalisation rising from $14,5 billion in 2002 to nearly $100 billion now, a compound annual growth of nearly 50 percent," he said.

Jennings said while liquidity is still limited, it is increasingly rapid. According to his company's finds, equity turnover in Sub Sahara Africa year to-date is $15,7 billion, a two-fold increase from all of 2006. "Thriving stock markets and robust capital markets officer considerable benefits. They prompt more robust financial disclosure, improved corporate governance, a focus on shareholding rights and regulatory best practices. They boost domestic savings and they increase the quantity and quality of investment and investors.

Renaissance Group was, this year, involved in two landmark $300million equity capital markets transactions, one for Access Bank and the other for Union Bank. There is at least $1 billion offering in the wings for early next year, said Jennings.

Domestic demands and investment are key drivers in Sub Sahara Africa's economic expansion. "There are pent up savings in both government and the private sector which when put to work will further increase the speed of economic growth of Africa. Many governments have saved rather than spent their commodity and debt relief windfalls. Companies are also ready to increase borrowing because the cost of debt has fallen below expected rates of return."

For economies to prosper, Jennings said, there is need to foster sustainable domestic private sector. He is confident that for Sub Sahara Africa to prospect, governments need to accelerate enactment of legislation and developing regulatory regimes to reduce the cost and barriers of doing business in Sub Sahara Africa. "Land ownership and reforms is one very important case which is crucial to creating a strong and flourishing domestic private sector. Lowering and creating a level playing field for foreign investors is also necessary because the participation of foreign investors in the region's capital markets will drive valuation to international levels," said Jennings.

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