London Stock Exchange Group Launches Reports on African Capital Markets

The FINANCIAL — London Stock Exchange Group launches its series of reports on African capital markets, which were developed as part of its London Africa Advisory Group (LAAG).

The reports will be launched at the African Investment Forum in Johannesburg. The five reports put forward recommendations on how African capital markets could be further developed to increase global investment flows. The reports were commissioned by LAAG following its series of meetings over two years with its members, Africa’s business leaders, policymakers and investors. The reports have been produced in conjunction with stakeholders in London and across Africa.

The reports address five key topics:

developing the green bond market for infrastructure products;

attracting passive investment flows;

developing offshore local currency bond markets;

capital raising challenges for SMEs and;

corporate information dissemination.

Suneel Bakhshi, Chairman of International Advisory Groups, LSEG:

Summary of key findings:

Developing the green bond market in Africa: Studies suggest Africa will be more severely affected by climate change than any other continent, which will require the continent to take advantage of green capital raising tools and sources of funding;

Attracting passive investment flows to African markets: Passive investment flows are key to supporting depth of African capital markets; a key factor for this is country classification (Developed, Emerging or Frontier Markets) and flows could be enhanced through country classification upgrades;

Developing offshore local currency bond markets in Africa: To sustain the continent’s strong GDP growth of the past two decades, substantial investment, particularly in infrastructure, is required; raising debt finance from larger offshore capital pools in local currencies is an attractive solution which mitigates an issuer’s currency risks associated with borrowing in hard currencies;

The challenges and opportunities of SME financing in Africa: Small and medium-sized enterprises (SMEs) account for around 90% of Africa’s businesses, but experience a shortage of financing at all levels; these companies, which provide nearly 80% of the continent’s employment, can benefit from increased training and capacity building, a public register of companies, and supportive government policy;

Trends in corporate information dissemination in Africa: Company news plays a central role in the efficient functioning of financial markets improving depth in securities trading; centralised regulatory information services and their distribution are therefore key in disseminating company news to the relevant stakeholders in a timely manner.