Addis Ababa — Africa, buffeted by fiscal, environmental and political risks, urgently needs to develop vibrant capital markets to bolster its economic growth and accelerate sustainable development, financial experts have argued.
Participants at the 27th African Securities Exchanges Association (ASEA) Conference, hosted in Gaborone, Botswana from 26-27 November 2024 underscored that Africa can benefit from viable capital markets through the mobilisation of domestic resources at a time the continent is facing high indebtedness and the lack of affordable finance.
"Access to finance is a major constraint to African development and capital markets are a key player to overcome this constraint," said Jean-Marc Kilolo, Economic Affairs Officer, with the Economic Commission for Africa (ECA), speaking at the opening of the conference.
Organized by the African Securities Exchanges Association (ASEA), the African Securities Dealers Association (ASSDA), African Exchange Linkage Project (AELP) and the Economic Commission for Africa (ECA), the two-day conference aims at exploring the theme, "Enhancing Africa's Capital Markets Collaboration and Integration through the AELP."
ECA is supporting the deepening financial markets in Africa through technical assistance. For example, ECA has assisted the Ethiopian Stock Exchange and the Uganda Stock Exchange in crafting its strategic document on the local currency bonds market.
Besides, ECA provides capacity building support to member States to ensure there are more African sovereigns that are investment grade, in order to reduce risk perception on the continent.
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ECA has been pushing for the reform of the global financial architecture with a key aim to reform sovereign credit rating in order to reduce the perceived risk of African and get an accurate assessment of creditworthiness. Currently there is a gap between the perceived risk and the real risk that hinders long term investment.
African countries are paying more in debt payments than the amount they are getting from concessional funding and foreign aid.
Participants discussed ways to strengthen African capital markets through integration and cooperation, paving the way for increased liquidity and cross-border trading.
The call for deeper financial market development is urgent. Africa's reliance on foreign capital exposes economies to exchange rate risks and global financial shocks.
African Exchange Linkage Project fosters market connectivity by linking stock exchanges, and enabling brokers to execute trades directly across participating markets.
Through a single, connected investment space, the African Exchange Linkage Project helps African markets grow more competitive globally and offers new opportunities to both local and international investors.
Strong local financial systems can support long-term investments, improve economic resilience, and enhance economic sovereignty, participants, the conference heard.
It was discussed that by developing domestic financial markets, African countries can reduce dependence on volatile foreign capital and manages capital flows more effectively.
