SA financial markets the most attractive in Africa for investors
SA tops Absa Africa Financial Markets Index for second year running despite weaker economic performance
SA is still the most attractive financial market for international investors in Africa, according to the Absa Africa financial markets index.
The country remained in the top position for the second year running with a score of 93 out of 100, supported by strong financial market infrastructure and a robust legal framework.
Despite this, the report warns that SA's macroeconomic performance deteriorated in the past year as it plunged into recession for the first time since the global financial crisis, exposing SA to “rising financial risks”.
This could result in the country being challenged as the preferred African market for international investors by Kenya, Nigeria and Botswana.
The index, produced by the Official Monetary and Financial Institutions Forum, ranks the attractiveness of various financial markets for investors. It was compiled last week with the official launch on Wednesday.
It looks at market depth, access to foreign exchange, tax and regulatory environment and market transparency, capacity of local investors, macroeconomic opportunity, and enforceability of financial contracts, collateral positions and insolvency frameworks.
In 2017, SA topped the index on all fronts. But this year SA is one place behind Kenya in access to foreign exchange and behind Nigeria in market transparency, tax and regulatory environment.
“SA’s open and highly liquid foreign exchange market has exposed it to capital outflows, reflecting concerns about the country’s macroeconomic trajectory,” says the report.
Of all the countries surveyed, SA is the only one where the total value of listed equities is more than $100bn, standing at $1.1-trillion.
SA has more than $40bn worth of listed corporate bonds, compared with the average value of $707m for the other 19 countries, and a bond turnover of almost 300% of market capitalisation compared with the average value of the other countries of 20%.
According to the report, SA and countries such as Ghana and Kenya are lowering barriers to entry for small firms to expand the inflow of new listed companies.
Capital markets in Africa have strengthened against a more stable regional political and economic background, says the report.
“This is due in part to the impact of commodity stabilisation and resilience in the face of global economic and political uncertainty.”