SA retains leadership in financial market development
But is overtaken in two of six key criteria
SA retained its top position in the Absa African Financial Markets Index for the third year in a row, but experts urged the country not to sit on its laurels.
They said the country, which achieved an overall score of 88 out of 100, with its nearest competitor, Mauritius, scoring 75, must continue to do more to develop its financial sector.
The index, which was first published in 2017, measures the development of financial markets in twenty African countries according to six key criteria which include financial market depth, access to foreign exchange, market transparency, capacity of local investors, macroeconomic opportunity, and the legality and enforceability of standard financial market agreements.
“The overall trend has been one of improvement. Countries are catching up to South Africa, and they must not become complacent,” says Danae Kyriakopoulou, chief economist and director of research at the Official Monetary and Financial Institutions Forum (OMFIF) which assists Absa in the construction of the index.
Kyriakopoulou pointed out that SA’s lead narrowed as a result of a lower overall score (88 in 2019 versus 93 in 2018) at the same time as competitors such as Mauritius and Namibia increased their scores.
According to Absa’s head of global markets for regional operations, George Asante, SA was surpassed in two of the pillars for the first time. This included in the field of macroeconomic opportunity, where Egypt overtook SA on account of its more attractive economic growth potential, and pillar six, which saw SA concede dominance due to Kenya and Mauritius’ superior insolvency regimes.
“The index has stimulated discussions by central banks, stock exchanges, and investors on the continent and it is influencing change,” says Asante and adds that policy makers have become more determined to accommodate the needs of local investors.
“Kenya for instance started issuing long-term bonds, while Seychelles issued the first blue bond (marine) in the world. We are seeing more flexible exchange rate regimes being adopted by the countries which saw them attract investment.”
Such has been the positive feedback from the index that other regions in the world have requested the construction of their own.