Abuja — Securities quoted on African stock markets now have a smoother path to cross-border listing on other stock exchanges on the continent, as stock exchange executives this weekend adopted common listing requirements for all African stock exchanges.
Adoption of the continent-wide listing requirements was one of the high points of a three-day conference on Africa's capital markets, organised by the African Stock Exchanges Association, which ended here over the weekend.
"This is very monumental because it's not easy for 21 countries to sit down for a few hours and agree on a number of issues," Dr. Ndidi Okereke-Onyiuke, Director General of the Nigerian Stock Exchange, and First Vice-President of ASEA, said Saturday at a post-conference press briefing here.
The requirements cover the disclosure standards that are applicable to advanced capital markets, Okereke-Onyiuke explained. She explained however that the adoption of the requirements comes with "minor adjustments for political laws" that ASEA cannot change.
An example, she said, is the case of South Africa, which, despite its level of development, "still has exchange control laws."
Adoption of the common listing requirements is part of ASEA's programme to nurture Africa's fledgling stock markets into institutions capable of playing effective roles in the process of capital formation in the continent.
"Stock markets in Africa are yet to become dynamic institutions of financial intermediation. They are still constrained by outdated practices, difficult trading mechanisms, and product marketing strategy that inhibits delivery," ASEA noted in a communiqué issued at the end of the conference.
Three stock exchanges also signed Memoranda of Understanding to facilitate cross-border listing of securities quoted on their markets. The Nigerian Stock Exchange signed an MOU with the Nairobi Stock Exchange (in Kenya), while the Nairobi Stock Exchange also signed a similar agreement with the Ghana Stock Exchange.
The Nigerian Stock Exchange had previously signed a similar agreement with the Ghana Stock Exchange and the Johannesburg Stock Exchange in South Africa.
Under the agreement between the Nigerian Stock Exchange and the JSE, shares of M-Net, the South Africa-based pay-TV and its sister company, Super Sport, were listed on the Nigerian market in November 1999. M-Net, which covers 44 African countries, is also listed on the JSE.
These steps are the building blocks in an integration process that is expected to culminate in the establishment of a pan-African Stock Exchange. The MOUs, said Okereke-Onyiuke, "will be very beneficial to the integration and co-operation we are looking forward to within Africa."
Besides, she said, the process of nurturing new exchanges in Africa will give the continents' capital market operators "a strong voice" at the meetings of the International Federation of Stock Exchanges (better known by its French name, Federation Internationale Des Bourses De Valeurs, FIBV).
Many of the exchanges currently do not comply with the G-30 recommendations on clearing and settlement of trades, and therefore are not qualified for admission into the FIBV. "With this co-operation, we will be able to assist our brothers to attain the criteria," Okereke-Onyiuke said.
Formed seven years ago, ASEA says its primary objective is to encourage the development of stock exchanges in all African countries, and ultimately integrate these through technology into a supra-national institution that recognises no borders or boundaries.
Speakers at the conference identified cross-border listing of securities as a requirement for the attainment of regionalisaton of Africa's stock exchanges, most of which currently have low capitalisation values and a narrow product range.
The simplicity of the African markets, said Geoff Mhlanga, from Zimbabwe, who was elected new Chairman of ASEA, "is a reflection of the stage of the markets."
According to Mengistu Alemayehu, Principal Investment Officer with the International Finance Corporation, and one of the speakers, "most of these markets and their economies are very small and would be very difficult for them to become serious financial intermediators locally or attracting foreign investment by themselves."
In 1994, when Ashanti Goldfields Company, the leading Ghanaian gold producer was privatised, its shares were listed simultaneously on the Ghana Stock Exchange and the London Stock Exchange. The company was subsequently listed on exchanges in USA (NYSE), Canada, Australia and Zimbabwe.
"Regional integration of African stock markets will enable African stock markets to take advantage of associated economies of scale to improve on their liquidity, expand product range, create liquidity and attract more foreign investment," the communiqué noted.
This role will become significant in the privatisation programmes which most African countries are currently implementing. The programmes involve the divestiture all or part of governments' interests in state-owned enterprises, sometimes through the stock exchange. In some cases, however, a substantial part of the shares on sale is reserved for foreign investors, largely because the domestic capital market is said to be unable to absorb all the shares on sale.
The integration process is beginning on sub-regional level. In the east, three countries - Kenya, Tanzania and Uganda - have signed an agreement for the integration of the markets next year. They signed the agreement with EF Software Services, the Canadian company that installed the Automated Trading System (ATS) and the Central Securities Depository Clearing and Settlement Systems at the Nigerian Stock Exchange.
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Kibuga Kariithi, Chief Executive of the Nairobi Stock Exchange, told AllAfrica that the project would take off next year March, with the automation of the Kenyan market. Subsequently, the three markets in that region would be integrated.
In West Africa, eight French-speaking countries - within the West African Economic and Monetary Union - have promoted the first regional stock exchange in Abidjan, capital of Cote d'Ivoire. The new bourse has replaced the former Abidjan Stock Exchange, which was established in 1974.
Representatives of the regional stock exchange failed to attend the Abuja conference, at which the new exchange was expected to apply to ASEA for membership. Their absence was blamed on the turmoil in Cote d'Ivoire, following the violence over presidential election.
The integration process in West Africa will be complemented by the MOU signed by Ghana and Nigeria, which provides, among other things, for the cross-border listing of securities on both exchanges. Adoption of the common listing requirements is expected to make this work faster.
ASEA noted that the measures it adopted require for their effectiveness the complementary actions of African governments. "African leaders must demonstrate their political commitment to economic integration efforts by implementing all integration decisions faithfully," it said in its communiqué.
