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AU exchange rejected

By Independent Reporter

AU experts reject Pan-African stock exchange, South Africa goes it alone

When the African Union surveyed its members on the viability of a Pan-African stock exchange, it got a wake up call.

It sent out 139 questionnaires to 53 state members but only 29 returned them.

The survey was part of preparations for the extraordinary conference of African finance ministers in the Ethiopian capital Addis Ababa.

It emerged that opposition to the Pan-African bourse was mainly because stock exchange rules and regulatory issues are not uniform or standard.

This is because the stock exchanges on the continent are at different levels of development.

The AU mooted a Pan-African Stock Exchange as a way of creating a vehicle through which African multinationals can borrow big money from the public.

At the Addis meeting mid-last month, participants backed the proposal but recommended further studies before it becomes operational.

Among the issues to be addressed is whether the pan-African Stock Exchange would be formed by regional stock markets converge to form strong units or by forming a continental body to oversee membership of the regional bourses.

Before the Addis meeting, the AU had consulted bankers, stock markets’ bosses, finance experts and stakeholders.

Other experts were wary of any decentralisation of new institutions. Others favoured effective involvement of governments while others were more for purely private sector control.

A participant from Libya cautioned participants in fears surrounding creation of a continental stock market.

“We do not have to mandate the states to create a national stock market before we can talk about a pan-African Stock Market, because some countries are not interested in the creation of the stock market,” the expert said. The Libyan finance expert, who was among the 71 experts from some 31 African states that honoured calls for an emergency meeting of African ministers to discuss Africa’s finance integration, said steps must be taken urgently to create the pan-African stock market.

The Libyan delegation opposed the gradual creation of a stock market as the slowest ever model to go about it.

“How can we say we will strengthen the national and regional stock markets if some states even lack interest on this subject,” the Libyan official asked.

But a Malawian delegate reportedly warned that the principles of a market do not demand that you create a market.

“A market creates itself out of demand,” the Malawian expert said, “The AU must tell us what it means by a pan-African Stock Exchange, is it an institution or a market.”

After the Addis stalemate, the Johannesburg’s Stock Exchange has switched to appealing directly to companies to list in South Africa, its Chief Executive Officer Russell Loubser has said.

The JSE, which is the biggest exchange on the African continent, is targeting Botswana, Kenya and Nigeria.

It has held discussions with exchanges in Kenya, Nigeria, Botswana, Ghana, Namibia and Mauritius.

JSE’s plan is to deepen liquidity or ease with which investors buy and sell stock. This reduces risk.

“The JSE is the only exchange in Africa that can offer some kind of liquidity, and we need to leverage off this,” Loubser said, “We can put all the shares from these markets under one segment and would instantly have a virtual African stock exchange without having to install extra software, buy new buildings or employ more people.”

A pan-African stock exchange would allow a company an effective listing in all the continent’s participating countries.

Under the JSE model, the exchange would enable investors to trade in shares in companies from Ghana, Namibia, Zimbabwe and Zambia, expanding coverage to most of Africa.

The JSE plan must, however, avoid swamping the new exchange with South African companies, already accounting for about 80% of the value of all African shares.

It must also find ways of dealing with the exchange controls operating in many African countries making settlement difficult.

 

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