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THE ROAD AHEAD FOR AFRICAN EXCHANGES

Is there a road or a highway to the future for African exchanges? Africa is seen as the next great investment opportunity by international investors due to the very large infrastructure development opportunities, better growth prospects than other continents, a young growing workforce and domestic pension funds looking to invest in their markets. The pension funds in 10 African countries already have $379bn in assets and then there is the growth of sovereign wealth funds; 15 African countries have created them in last 20 years, managing $159bn by the end of September 2014 with 5 funds started in the last 3 years. A further 13 African countries are in the process of examining or creating sovereign wealth funds. But are African exchanges positioned to take advantage of these potential investments by major investors, domestic or foreign? As Ashish Chauhan, CEO of BSE India said at the World Exchange Congress in March 2015, “If you don’t work for the larger purpose of the society, exchanges will become irrelevant. Slowly they will become smaller and smaller…Most of the funds are being raised by private equity, by venture capitalists, not by the exchange industry. Stock exchanges that concentrate on trading for the sake of trading are in a zero-sum game.” Across most of the exchanges in Africa there is a low level of companies listed to invest in, which means there is a lack of liquidity. When quality companies are listed, their liquidity is usually lower because of a lack of other quality assets for investors to switch to.

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ACROSS MOST OF THE EXCHANGES IN AFRICA THERE IS A LOW LEVEL OF COMPANIES LISTED TO INVEST IN, WHICH MEANS THERE IS A LACK OF LIQUIDITY

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