Rising Investors Fail To Lift African Equity Market
ISMAIL MUSA
Activities in the African equity market have fallen far below the rising number of domestic investors as the continent’s economy is burdened by fiscal challenges from growing debts and slow growth over the past three years
Data presented from the 2019 African Capital Market Watch by PricewaterhouseCoopers (PwC) Nigeria shows that between 2010 and the first quarter of 2020, the African equity market had been battered by the twin problem of debt and slow growth prior to the Covid-19 pandemic that worsens the situation.
At a webinar co-hosted by Making Finance Work for Africa (MFW4A) and PwC Nigeria to explore the impact of COVID-19 on African capital markets, it was revealed that Capital market value in 2019 was the lowest seen over the past decade, with a lower volume of deals in 2012.
African economies now face the unprecedented challenge of the COVID-19 pandemic, which has severely impacted global financial markets, according to Andrew Nevin, PwC Nigeria’s Chief Economist, and Alice Tomdio, the firm’s Director Capital Markets, who presented the data.
Commenting on the data and the potential impact of the COVID pandemic, Geoffrey Odundo, CEO of the Nairobi Securities Exchange said: “Capital markets in East Africa have taken a hit, with a 20% decrease in trading volume since the beginning of COVID-19.”
On the positive side, there was increased activity from domestic investors, he added.
Daniel Ogbarmey Tetteh, Director-General, Securities and Exchange Commission (SEC), Ghana, said that market activity on the Ghana stock market had remained robust, with an almost threefold increase in trading volumes between January and April 2020, compared to the same period in 2019. Again, a good proportion of these trades originated from domestic investors.
Speakers also stressed the important role of African capital markets in supporting the post-COVID recovery.
For this to happen, African markets need to be deepened and provide avenues for the investment of significant pools of local capital currently tied up in “dead” assets.
Expanding the range of available asset classes should also include measures to attract and support new listings.
The panel agreed that the increased engagement of local investors in the current environment was a positive sign and that developing a deep pool of domestic investors is essential for African capital markets to play their full role in supporting the post-COVID economic recovery.
The next session (in English) is scheduled for June 18th and will explore Financing SMEs in the COVID era.
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