By Mukami Njue
Whereas nonetheless in its growing stage, the African monetary market is considerably contributing to the continent’s capability to finance its key initiatives reminiscent of small enterprises, housing, automotive, infrastructure, inventive and agriculture sectors. This market, made up of over 30 securities exchanges and a complete market worth of over $1.5 trillion, might do extra for the event of the continent. However, to attain this, we have to be able to reply among the most urgent questions: how can we enhance the present market infrastructure to extend liquidity and improve buyers’ market confidence? How can we improve the regulatory, supervisory, and danger monitoring methods to extend transparency? And what are some methods we are able to enhance capital-raising initiatives on securities exchanges like rights points and preliminary public choices (IPOs)?
Admittedly, our monetary markets proceed to tussle with a number of macro and micro elements reminiscent of political unrest and downgrades by international credit standing businesses. Nonetheless, this isn’t in isolation as different markets are inclined to face it too. Coping with these points strategically might considerably enhance the efforts being made to impression overseas buyers’ confidence, which has seen the market fledgling however at a sluggish charge. Moreover, our capital markets are nonetheless underutilised for capital mobilisation, particularly from Overseas Direct Investments (FDI) that account for lower than 10% of annual capital flows. Thus, what can Africa do to reform the outline of African capital markets from traits related to it, reminiscent of low liquidity, fragmentation, and weak regulatory environments?
Firstly, the senior administration of listed corporations must strategically plan for normal conferences with each buyers and analysts to construct relationships. Via strategic efforts reminiscent of in-person conferences, roadshows, and investor conferences, the administration creates an avenue to current the enterprise methods, outlooks, and monetary efficiency, which supplies the buyers and analysts deeper insights into their operations and strategic route. To run these initiatives, the corporate must be guided by an investor relations skilled, in conducting investor concentrating on workouts, that may assist the corporate perceive the kind of fund managers investing within the enterprise and their funding types. This might vary from institutional buyers and personal fairness companies to high-net-worth people and retail buyers. Ideally, these conferences must be achieved a minimum of 2-3 occasions a yr.
Secondly, to mitigate the transparency points, the markets must be extra structured. That means, the important thing regulators ought to impose tighter measures that see to it that the listed corporations are obligated and penalised, if want be, in the event that they don’t make among the key calendar dates obtainable to buyers and analysts in good time. This contains importing the important thing dates and occasions reminiscent of earnings reviews and annual common conferences (AGMs), on their investor relations microsites and the securities web sites in good time.
Thirdly, with the Worldwide Financial Fund (IMF) estimating over 40% of state-owned companies (SOEs) in sub-Saharan Africa to be unprofitable, governments ought to contemplate privatisation. The aim could be to attract in non-public funding which might consequence within the discount of the monetary burden and improve market actions of SOEs. Nonetheless, the effectivity of this method is tied to the stringent regulatory framework, higher market situations, and strategic planning for privatisation processes.
Fourthly, African monetary markets ought to contemplate leveraging information analytics and machine studying that may assist combination and standardise information from totally different sources. Moreover, machine studying may also help analyse giant quantities of historic and real-time information, therefore figuring out patterns that may assist and predict potential market dangers. This method may also help detect anomalies that will result in biases, therefore enhancing market transparency, buying and selling volumes in addition to asset valuation, that are baits to buyers.
Lastly, African international locations ought to contemplate issuing Eurobonds which couldn’t solely act as a benchmark for the company bond market but in addition a chance for international locations to refinance current debt at doubtlessly decrease rates of interest. Moreover, Eurobonds current a broader pool of overseas buyers. This method will necessitate international locations to impose stricter monetary reporting and governance requirements, which might, general, enhance transparency and effectivity, which has up to now impacted the per capita GDP in some African international locations by a median of about 10%.
Mukami is an investor and public relations marketing consultant.