African countries continue to face funding challenges, mainly due to the modest size and low capitalisation of the continent’s stock markets, Financial experts attending this year’s Africa Investment Forum Market days said.
Speaking during a session on “Capital Market: Mobilising Investment for Transformational Growth”, the panellists acknowledged the significant progress made over the past ten years regarding access to financial services, particularly mobile services, and the development of financial markets. Still, there is much to do to develop long-term financing on the continent.
Morocco’s King Mohammed VI opened the Africa Investment Forum 2023 Market Days in Marrakesh on 8 November 2023. The 3-day forum drew over 1,000 delegates from more than 60 countries, including heads of state and government.
Given the ever-increasing needs of African countries in numerous sectors, capital markets play a vital role in attracting investment.
Karabo Morule, founder of Amara Strategic Investments in South Africa, said the low investments in Africa’s stock market could be due to an investor confidence problem. “It's all about risk, or the perception of risk.”
For example, he said in the third quarter of 2023, funding for African start-ups fell by 50% compared to last year. That said, African stock exchanges have significant potential growth prospects. “We need to think about how best to encourage potential investors.”
Alexandre Kateb, founder of The Multipolarity Report, noted that traditional banks are reluctant to share data within their ecosystem, even though they have everything to gain.
Mohamed El Kettani, CEO of Morocco’s Attijariwafa Bank, added: “The investment potential in Africa is enormous. It’s essential to expand capital markets using two vectors: confidence linked to the credibility of countries and regional integration so that we can put an end to the fragmentation of financial centres.”
El Kettani called for macroeconomic reforms to lessen risk, standardise regulations, and establish institutional and corporate governance that meets market requirements.
“Market integration can only be achieved through strong political will, just like with the launch of the African Continental Free Trade Area (AfCFTA) and the African Union project to interconnect the continent's financial centres,” he said.
“The creation of a single continental stock exchange is gaining ground in people's minds, but to attract international capital, we need a coherent vision and an effective capacity for integration, and we also need to act swiftly.”
Papa Ndiaye, CEO of Dakar-based AFIG Funds, a private equity fund management company, said market players must act quickly and innovatively. “Capital markets are not for the faint-hearted. We need to be daring and maximise our creativity. We must also be realistic: integrating these markets into a single exchange is crucial.”
“We need champions who can set the pace,” said Mr Ndiaye, providing the example of the consolidation of the financial sector as an anti-crisis shield and a vector for growth, mirroring the Nigerian ecosystem, which has seen the emergence of major banks on a regional scale.
Innovation in Africa via financial vehicles tailored to the funding needs of businesses is also a necessity, according to Dr Wilmot Allen, founder and CEO of consultancy firm VentureLift Africa, based in Nairobi, Kenya.
“But we need to lead this innovation among Africans, with the contribution of the diaspora, which controls several hundred billion dollars of investment in funds abroad,” he insisted. “We must achieve the Africanisation of capital markets.”
