Wednesday, November 29, 2023

The fragile African empire

By Portia Nkani

There is general agreement that growth momentum in Africa remains fragile, and that the ‘Africa rising’ narrative is now far more nuanced than before, with different regions and indeed countries facing divergent economic prospects.

Following from this, global financiers are de-risking and this puts the onus on stakeholders in Africa to take responsibility for addressing structural gaps in African financial markets in order to meet investment hurdles and continue to attract local and global capital.

According to Peter Matlare Executive Director, Absa Group Limited, addressing these structural challenges will require partnership and collaboration from all partners. “Importantly, a common fact-base is required to anchor conversations and facilitate discussions towards finding solutions,” he adds.

The Absa Group Financial Markets Index which was recently launched, which is a quantitative and qualitative assessment of the anatomy of Africa’s financial markets, also comes as an important tool in this endeavour.

The Index intends to drive conversations among policy-makers, market participants and other partners to address gaps and track progress on an ongoing basis.

From Matlare’s point of view; while what will be successful or effective interventions will be heavily dependent on country specific circumstances, he fundamentally believes that addressing legal, infrastructural, and consistent publication of market data gaps is critical to Africa’s ability to tap into local and global savings pools.

He adds that, mobilising these resources will help accelerate productive investment that contributes to sustainable domestic employment creation and generates income to service the underlying debt.

C├®lestin Monga, Vice President and Chief Economist, African Development Bank, says, developing financial markets infrastructure and attracting private capital from Africa and beyond are key elements in Africa’s development. He thinks, “this can offer additional growth and funding opportunities for local firms, providing access to long-term financing and helping them overcome some of the challenges of low lending rates and high costs across the continent. Financial market development also offers opportunities for international and domestic investors to access fast growing African countries. In the context of low returns on assets in more traditional markets, this is an ever more important consideration.”

Meanwhile, going through the index report-development of local investor capacity and ability to attract foreign capital are key points of focus for African economies. Countries across the continent are implementing a growing number of national policy frameworks for market development. The Index intends to track progress annually, supplying a toolkit for countries wishing to build financial infrastructure. Given its size and historical position, South Africa tops the 2017 list. Others are closing the gap. Mauritius and Botswana have shown some strengths in tax and regulation and access to foreign exchange. Kenya and Ghana provide signs of progress. Ivory Coast, with a low overall score, is home to a growing regional bourse, pointing to future improvement.

Africa has supreme capacity in terms of talents, natural resources, a young, growing and increasingly urban population, and a vastly entrepreneurial spirit. The continent has deeply faced challenges from the post-2014 commodity cycle slump, save for the impact on countries across the continent varying. Some have increased their growth rates as a result of cheaper energy imports and falling borrowing costs. Others, hit by lower export prices, have sought to improve their economic governance, increase the sustainability of their fiscal positions and diversify their economics sectors in order to improve resilience to future shocks, Botswana included.


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