Africa needs to develop vibrant capital markets to bolster its economic growth and accelerate sustainable development, financial experts have argued.
Speaking at the 27th African Securities Exchanges Association (ASEA) conference held in the Botswana capital Gaborone on Wednesday, the experts noted that Africa can benefit from viable capital markets through the mobilisation of its domestic resources at a time the continent is facing high indebtedness and lack of affordable finance.
“Access to finance is a major constraint to African development and capital markets are a key player to overcome this constraint,” Jean-Marc Kilolo, Economic Affairs Officer with the Economic Commission for Africa (ECA) said while opening the conference.
African countries are spending more in debt repayments than the amount they are getting from concessional funding and foreign aid, Kilolo said.
“In tackling the perceived risk in Africa, it is very important to make sure that African officials know how to engage sovereign credit rating agencies; so we need to build statistical capacity to provide accurate information so that we have assessments that reflect our potential,” the ECA official said, emphasising that the African Peer Review Mechanism is supporting the establishment of an Africa credit rating agency to provide an alternative assessment that accounts for Africa’s idiosyncrasies.
Botswana Stock Exchange chairperson Kopano Bolokwe said African countries need to establish and integrate their capital markets as one of the means to deal with its environmental and political risks.
Bolokwe highlighted the need to recognize the differences between African countries in governing laws, securities rules, trading and post-trading, clearing and settlement mechanisms in looking at market integration.
He challenged African stock exchanges and brokers to do the “heavy lifting” in ensuring the smooth integration of capital markets across the continent.
According to the expert, ECA has been pushing for the reform of the global financial architecture, with the aim to reform sovereign credit rating to reduce the perceived risk of Africa and get an accurate assessment of countries’ creditworthiness.
It was agreed that by developing domestic financial markets, African countries can reduce dependence on volatile foreign capital and manage capital flows more effectively.
MG/jn/APA