December 6 2019

Johannesburg Stock Exchange and AfDB promote cross-border activity

Source: African Law & Business

Improving links between African stock exchanges and increasing cross-border trade and investment are the aims of an alliance led by the Johannesburg Stock Exchange, African Development Bank and six other stock exchanges.

The Johannesburg Stock Exchange (JSE) and African Development Bank (AfDB) have partnered to promote African cross-border investment.

The two organisations hosted the African Exchange Linkage Project (AELP), along with other African exchanges from the African Securities Exchanges Association (ASEA), last month, aiming to improve cross-border trading and securities activity between the continent’s exchanges.

The organisations also sought to increase pan-African investment, encourage diversification and improve financial market liquidity.

Lack of intra-African trade, compared to trade with non-African countries and trading blocs, has been cited as one of the major factors limiting the growth of the continent’s economies, and many recent initiatives, led by the African Continental Free Trade Area (AfCFTA) have been launched to tackle this.

A recent report suggested that AfCFTA could bring up to USD 3 trillion in economic benefits, much of it from trade within the continent, with 53 out of 54 countries now having signed the agreement. Last month also saw the establishment of a partnership between AfDB and Johannesburg-headquartered bank Absa, aimed at supporting trade and finance for small businesses and corporates.

Speaking at the opening of the event, AfDB capital markets and development manager Emmanuel Diarra cited the long association between the bank and the African Securities Exchanges Association, saying: “This partnership compliments the Bank’s interventions toward the development of deep and resilient capital markets in Africa.”

He promised: “The bank will continue to enhance its work with regulatory institutions, institutional investors, stock exchanges and other capital market stakeholders to strengthen regulatory frameworks, broaden market participation and product offerings, as well as improve the dissemination of capital markets data for transparent pricing mechanisms.”

JSE policy head Anne Clayton commented that AELP “is a great addition to many collaborative initiatives around Africa”.

She said JSE was focused on supporting “sustainable and inclusive growth and development, not only in South Africa but on the continent as well”.

Clayton added: “There is great interest within Africa for investment, and the AELP provides an opportunity for alignment of exchanges within the continent, therefore collaborations with key stakeholders will continue to be at the centre of securing a growth path for Africa.”

As well as JSE, AELP consists of the Egyptian Exchange, Stock Exchange of Mauritius, the Casablanca Stock Exchange, Nairobi Securities Exchange, the Nigerian Stock Exchange and West Africa’s Bourse Régionale des Valeurs Mobilières (BRVM), based in Ivory Coast, which between them make up 85% of the continent’s securities market capitalisation.

BRVM formed a partneship with the International Finance Corporation in early 2019, aimed at improving corporate governance.

Trade links was one of the factors considered by the World Bank’s recent Doing Business report, which found that Africa’s business climate had improved, but not enough to make the necessary progress.

Ethiopia recently became the second African country, after Rwanda, to join the electronic trade platform established by Chinese corporation Alibaba