Absa Africa Financial Markets Index 2019 - Taking you further into Africa than ever before - OMFIF
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Absa Africa Financial
Markets Index 2019
Taking you further into Africa
than ever before.
13.4928° N | 38.4436° E
Absa_financial_market_index_2019_live file.indd 1 07/10/2019 09:40
The Absa Africa Financial Markets Absa Group Limited (‘Absa Group’) is listed on the Johannesburg Stock
Index was produced by OMFIF in Exchange and is one of Africa’s largest diversified financial services groups.
association with Absa Group Limited.
The scores on p.7 and elsewhere Absa Group offers an integrated set of products and services across
record the total result (max=100) of personal and business banking, corporate and investment banking, wealth
assessments across Pillars 1-6. For and investment management and insurance.
methodology see individual Pillar Absa Group has a presence in 12 countries in Africa, with approximately
assessments and p.38-39. 42,000 employees.
OMFIF conducted extensive The Group’s registered head office is in Johannesburg, South Africa, and
quantitative research and data it owns majority stakes in banks in Botswana, Ghana, Kenya, Mauritius,
analysis. Qualitative survey data were Mozambique, Seychelles, South Africa (Absa Bank), Tanzania (Barclays Bank
collected and analysed by OMFIF with Tanzania and National Bank of Commerce), Uganda and Zambia. The Group
input from Absa. also has representative offices in Namibia and Nigeria, as well as insurance
operations in Botswana, Kenya, Mozambique, South Africa, Tanzania and
© 2019 The Absa Group Limited and Zambia.
OMFIF Ltd. All Rights Reserved. For further information about Absa Group Limited, please visit
www.absa.africa
Absa CIB Marketing and
Communications team
The Official Monetary and Financial Institutions Forum is an independent
Fiona Kigen, Vice President -
think tank for central banking, economic policy and public investment – a
Marketing, Nkululeko Tjelake,
non-lobbying network for best practice in worldwide public-private sector
Assistant Vice President - Marketing,
exchanges. At its heart are Global Public Investors – central banks, sovereign
Sizwekazi Mdingi, Head of Integrated
funds and public pension funds – with investable assets of $37.8tn,
Communications, Andile Mkholwa, Vice
President - External Communications,
equivalent to 43% of world GDP. With offices in both London and Singapore,
Kirsty van der Nest, Vice President - OMFIF focuses on global policy and investment themes – particularly in
Stakeholder Relations. asset management, capital markets and financial supervision/regulation
– relating to central banks, sovereign funds, pension funds, regulators
and treasuries. OMFIF promotes higher standards, invigorating exchanges
OMFIF Editorial, Meetings between the public and private sectors and a better understanding of the
and Marketing team world economy, in an atmosphere of mutual trust.
Simon Hadley, Director, Production, For further information about OMFIF, please visit www.omfif.org
Julian Frazer, Senior Editor, William
Coningsby-Brown, Assistant
Production Editor, Julie Levy-
Abegnoli, Subeditor, Stefan Berci,
Communications Manager, James
Fitzgerald, Marketing Manager,
Marcin Stepan, Head of Programming,
Ben Rands, Head of Logistics, Sofia
Melis, Head of Client Relationships.
2 | Absa Africa Financial Markets Index 2019
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Contents
Forewords 4-5
Pillar 4:
Introduction 6-7
Capacity of local
Executive summary 8-11 investors
Contains country comparisons and highlights
opportunities and challenges for the region’s Examines the size of local
financial markets. investors, assessing the level
of local demand against supply
Acknowledgments 11 of assets available in each
market.
Highlights 12-13 p. 26-29
Pillar 1:
Market depth
Pillar 5:
Examines size, liquidity and Macroeconomic
diversity of products in opportunity
markets, as well as countries’
efforts to merge exchanges Evaluates economic
and launch new markets. performance, financial risks
and financial transparency,
p. 14-17 demonstrated by availability
of data, open monetary policy
p. 30-33 communication and the timely
release of state budgets.
Pillar 2:
Access to foreign
Pillar 6: Legality and
exchange
enforceability of standard
Looks at factors that impact financial markets
markets’ accessibility to master agreements
international investors,
including the severity of Measures how well countries
capital controls, exchange rate have adopted internationally
p. 18-21 reporting standards and levels accepted legal standards,
of foreign exchange liquidity. the enforcement of netting
p. 34-37 and collateral positions, and
insolvency regime adequacy.
Pillar 3: Indicators and Methodology p. 38-39
Market transparency,
tax and regulatory
environment
Assesses countries’ regulatory
and tax environments for
financial markets, as well as
transparency and enforcement
p. 22-25 of accounting rules.
Absa Africa Financial Markets Index 2019 | 3
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FOREWORDS
Benefiting
the people
behind the
numbers
Peter Matlare
Deputy Chief Executive
Officer, Absa Group
Christine Lagarde, as managing director of the
International Monetary Fund, once said, ‘We cannot
just look at a country by looking at charts, graphs, and
modelling the economy. Behind the numbers, there are
people.’ This sentiment is reflected in the Absa Africa
Financial Markets Index.
This report is published against the backdrop of
people’s growing disillusionment across the African
continent with their individual and collective
socioeconomic and political prospects. Accelerated
economic development, underpinned by strengthening
Aim of index economic resilience and building robust institutions, is
key to realising the aspirations of our fellow Africans.
African economies are The deepening and widening of financial markets
are crucial steps towards national economic self-
undergoing a significant sufficiency. To reach the next level of growth, Africa
requires a collective commitment to ensuring the
period of transition and transnational cross-pollination of ideas. This index
appraisal, with growing suggests we are making headway. The continent’s
challenges are clearly visible, and its countries are
foreign investment crafting actionable solutions.
interest and much The report assesses progress and potential across six
key pillars: market depth, access to foreign exchange,
examination of the market transparency, the capacity of local investors,
continent’s potential macroeconomic opportunity, and the legality and
enforceability of standard financial markets master
for mobilising local agreements.
resources. Now in its Most promisingly, it highlights positive developments
in market infrastructure and the fostering of market
third year, the index has growth. Foreign exchange liquidity is improving, while
market transparency and financial inclusion have
become a benchmark been prioritised. Many countries have set ambitious
for the investment strategies for national economic and financial market
transformation.
community and Africa As a leading African banking group, Absa is committed
generally to gauge to furthering the development and prosperity of the
continent and its people. We trust that the insights
countries’ performance embodied in the index will inspire active engagement
among policy-makers and market participants,
and highlight how they resulting in measurable actions that foster inclusive
can learn from others. growth and sustainable development to benefit the
people ‘behind the numbers’.
4 | Absa Africa Financial Markets Index 2019
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Nurturing Financial
the growth markets can
of African help more
businesses Africans
Ludger Schuknecht Jingdong Hua
Deputy Secretary General, Vice-President and Treasurer,
Organisation for Economic Co-operation and Development World Bank
Private sector development is key for growth on the Africa’s economic successes have often been
African continent. A strong and dynamic private sector supported by financial market development, which
can unlock jobs and opportunities for better lives, and in turn has been supported by improved economic
is therefore instrumental in attaining development management and better institutions. This year’s
objectives. Fortunately, the international community Absa Africa Financial Markets Index highlights some
is paying increasing attention to the important role of important achievements on the continent, but also
the private sector as a motor of progress. the large variation across countries and the major
In 2017 in Hamburg, G20 countries agreed that it was opportunities yet to be marshalled.
time to grant the private sector a central place in their Although financial investments are becoming
co-operation with Africa. The G20 Compact with Africa increasingly international, their currency denomination
was established in partnership with international should become increasingly local to match projects’
organisations and African countries to strive towards
risk profiles. Because currency depreciations often
a more enabling environment for private investment.
follow economic shocks, foreign currency borrowers
African members committed to implement reforms
with local currency earnings are simultaneously
in their macro, business and financing frameworks to
burdened by economic hardship and increasing debt
facilitate investment. G20 countries and international
organisations committed to enhance and better service obligations. Infrastructure projects, non-
coordinate their efforts, and encourage their exporting firms and small or medium-sized firms
businesses to step up their activities in the region. all need local currency financing to manage risks.
This is a novel approach and an opportunity to which Emerging markets have gradually been able to develop
12 African countries subscribed, and much progress both local investor bases and tap international
has already been made. investors for local currencies; Africa must continue this
trend. Financial markets in countries’ own currencies
Nurturing the growth of African businesses requires will help African businesses, infrastructure borrowers,
an open and enabling investment environment as well homeowners and microentrepreneurs gain access to
as access to finance. It is encouraging, therefore, to the finance they need.
see Compact and other African countries working on
both these fronts, together with international partners The World Bank has a long history of supporting the
and organisations. The third edition of the Absa development of local currency financial markets. We
Africa Financial Markets Index shows that, across the help governments design, finance and implement
continent, countries are making remarkable steps to investment projects and hold billions in local currency-
develop and enhance their capital markets. denominated loans. We share knowledge globally
By tracking progress on financial market on economic and financial markets policies and
developments, this OMFIF-Absa report is a valuable regulations. The World Bank is committed to finding
part of the monitoring and reporting of exciting new and innovative local currency financing solutions,
progress in Africa. It helps us know where things because African nations need more options to borrow
are moving, and who is open for business. We in the in their own currencies.
international community look forward to further Local currency market development relies on many
progress in the months and years ahead. fundamentals captured by this index. It is my hope
that readers will explore the many opportunities we
have to improve the local mobilisation of finance
and to develop investable projects. We must all help
Africa create local markets that combine these forces
to develop well-functioning financial markets and
enhance economic development to benefit all Africans.
Absa Africa Financial Markets Index 2019 | 5
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Individual steps show collective progress
Despite disparities in individual standing, financial market developments in
countries covered by the Absa Africa Financial Markets Index show a collective
progression towards a more robust, investment-supporting environment. Key
mergers, new regulations and innovative financial products have contributed to the
expansion of financial markets across the region. Policies that incentivise market
activity and attract new players, such as favourable tax regimes and internationally
aligned contractual frameworks, have boosted country scores.
When the index was first launched in 2017, the average mark for 17 countries was
49.6 out of 100 and only three scored above it, indicating much room for growth.
Since then, the index has been expanded to include three additional countries,
and the average overall score across all 20 has climbed to 52.7. The Seychelles
progressed the most since the first edition of the index. Its score climbed to 47
from 29, partly owing to its growing pool of local assets.
In this edition, nine countries perform above average, showing that progress is
becoming more evenly distributed across the index: South Africa, Mauritius, Kenya,
Namibia, Botswana, Nigeria, Tanzania, Zambia and Rwanda. In the face of changing
global conditions and domestic challenges for each market, this improvement
shows that the region is moving in the right direction.
The countries whose scores increased most since last year are Mauritius, Tanzania,
Egypt, Namibia and Mozambique. Market depth improved in Mauritius following
a substantial listing of bonds by the central bank. Enhanced export performance
improved Egypt’s macroeconomic environment. Some markets remain hampered by
the allure of the international bond market, a cheaper way for their governments to
raise money but a barrier to the deepening of local markets and developing reliable
yield curves. The outlook for Ethiopia, one of the lowest scoring countries, has
improved following plans to launch a stock exchange in 2020, which may list the
shares of telecoms companies it is planning to privatise.
6 | Absa Africa Financial Markets Index 2019
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INTRODUCTION
Rank Score
2019 2018 2019 2018 Comments
1 1 South Africa 88 93 Deep market liquidity anchored by strong domestic investors
2 4 Mauritius 75 62 Sizeable pool of investible pension assets with strong legal framework
3 3 Kenya 65 65 Sovereign bond listings enhance asset pool
4 6 Namibia 65 57 Wide range of financial products available but low market turnover
5 2 Botswana 64 65 Drop in pension assets reduces local investor capacity
6 5 Nigeria 63 61 Multiple exchange rate reporting weakens robust performance across pillars
7 15 Tanzania 55 43 Strong investment environment but markets still small and illiquid
8 8 Zambia 55 53 Improving regulatory and legal frameworks but weak capacity of local investors
9 11 Rwanda 53 49 High transparency and financial reporting standards
10 10 Uganda 52 50 Active foreign exchange market and high level of foreign reserves
11 16 Egypt 51 42 Strong macroeconomic outlook and high transparency
12 9 Morocco 51 50 High growth in export market share and strong insolvency regime
13 7 Ghana 50 55 Attractive tax environment but low wholesale foreign exchange market turnover
14 12 Seychelles 47 45 Small and illiquid equity market
15 18 Mozambique 44 36 Low securities turnover and high level of external debt
16 13 Ivory Coast 41 44 Fragmented bond market hinders yield curve development
17 19 Angola 36 34 Shallow markets but improving regulatory environment
18 14 Senegal 35 44 Fast-growing economy but small pool of local assets available for investment
19 17 Cameroon 35 41 Weak domestic investor capacity
20 20 Ethiopia 27 26 Rapid economic growth but still lacking financial markets infrastructure
Score across all pillars, max = 100.
Absa Africa Financial Markets Index 2019 | 7
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EXECUTIVE SUMMARY Morocco (51)
South Africa retains top position,
other countries catching up
38 48 56 66 72 27
The Absa Africa Financial Markets Index evaluates financial
market development in 20 countries, and highlights economies
with the clearest growth prospects. The aim is to show not
just present positions but also how economies can improve Senegal (35)
market frameworks to meet yardsticks for investor access and
sustainable growth. The index assesses countries according to
six pillars: market depth; access to foreign exchange; tax and
regulatory environment and market transparency; capacity of
local investors; macroeconomic opportunity; and enforceability
of financial contracts, collateral positions and insolvency 40 35 43 12 53 29
frameworks.
In addition to quantitative analysis, OMFIF gained additional
insights by surveying over 40 policy-makers and top executives
from financial institutions operating across the 20 countries, Ivory Coast (41)
including banks, investors, securities exchanges, central
banks, regulators, audit and accounting firms and international
financial and development institutions.
Continued on p.10 >>
38 51 67 14 51 26
Overall pillar scores max = 100
Pillar 1: Pillar 2: Pillar 3: Pillar 4: Pillar 5:
Market Access to foreign Market transparency, Capacity of Macroeconomic
depth exchange tax and regulatory local investors opportunity
environment
South Africa 100 South Africa 78 South Africa 96 South Africa 83 Egypt 76
Nigeria 70 Egypt 77 Mauritius 86 Mauritius 76 South Africa 74
Mauritius 67 Uganda 71 Nigeria 86 Morocco 66 Morocco 72
Botswana 55 Rwanda 66 Rwanda 85 Namibia 66 Botswana 70
Kenya 55 Kenya 65 Ghana 85 Seychelles 57 Uganda 69
Namibia 52 Botswana 64 Botswana 77 Botswana 54 Namibia 67
Ghana 50 Seychelles 64 Zambia 75 Nigeria 46 Kenya 67
Zambia 46 Zambia 61 Tanzania 74 Kenya 39 Mauritius 66
Egypt 45 Tanzania 60 Uganda 73 Ghana 22 Rwanda 63
Uganda 45 Mauritius 57 Namibia 72 Tanzania 22 Nigeria 60
Mozambique 41 Ivory Coast 51 Kenya 71 Angola 21 Ghana 59
Senegal 40 Morocco 48 Egypt 68 Cameroon 20 Ethiopia 59
Morocco 38 Namibia 45 Ivory Coast 67 Egypt 18 Seychelles 58
Ivory Coast 38 Mozambique 45 Angola 57 Mozambique 17 Cameroon 57
Angola 37 Cameroon 36 Mozambique 56 Uganda 16 Tanzania 54
Tanzania 34 Senegal 35 Morocco 56 Rwanda 16 Mozambique 54
Rwanda 31 Ghana 31 Seychelles 45 Ivory Coast 14 Senegal 53
Cameroon 28 Nigeria 31 Senegal 43 Zambia 13 Ivory Coast 51
Seychelles 24 Ethiopia 30 Cameroon 39 Senegal 12 Zambia 51
Ethiopia 11 Angola 29 Ethiopia 31 Ethiopia 10 Angola 49
8 | Absa Africa Financial Markets Index 2019
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Key Egypt (51)
Pillar 1 Market depth
Pillar 2 Access to foreign exchange
Pillar 3 Market transparency, tax and
regulatory environment
45 77 68 18 76 24
Pillar 4 Capacity of local investors
Pillar 5 Macroeconomic opportunity
Pillar 6 Legality and enforceability of standard Ethiopia (27)
financial markets master agreements
(xx) = overall score
Nigeria (63)
11 30 31 10 59 20
Ghana (50)
70 31 86 46 60 87
Kenya (65)
Rwanda (53)
Cameroon (35)
50 31 85 22 59 55 Uganda (52)
55 65 71 39 67 96
31 66 85 16 63 57
28 36 39 20 57 26
Seychelles (47)
45 71 73 16 69 35
Pillar 6:
Legality and enforceability Angola (36)
of standard financial Tanzania (55)
markets master agreements Zambia (55)
Mauritius 98 24 64 45 57 58 31
Kenya 96
South Africa 95
Namibia 90 37 29 57 21 49 26
34 60 74 22 54 88
Tanzania 88
46 61 75 13 51 81
Nigeria 87 Mozambique (44)
Zambia 81
Botswana (64)
Botswana 62 Namibia (65)
Rwanda 57
Ghana 55
Mozambique 52
Uganda 35 41 45 56 17 54 52
Seychelles 31 55 64 77 54 70 62
Senegal 29 52 45 72 66 67 90
Morocco 27 Mauritius (75)
South Africa (88)
Angola 26
Cameroon 26
Ivory Coast 26
Egypt 24
Ethiopia 20
67 57 86 76 66 98
100 78 96 83 74 95
Absa Africa Financial Markets Index 2019 | 9
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The report finds that:
South Africa tops the index largely potential for improvement in the Seychelles are considering enacting
due to its sizeable lead in ‘market coming year. It has announced some form of netting legislation,
depth’. While it is likely to remain plans to establish a stock exchange which would earn them higher marks
an outlier in this pillar, the creation in 2020. Local banks and other in coming years.
of new bourses and key mergers financial service firms are in the
between existing ones will improve process of adopting international
‘Access to foreign exchange’ is
the standing of other countries in financial reporting standards. the only pillar where average scores
coming years. This year, Botswana, fell. Aggregated reserves grew
Kenya and Namibia join the ranks Countries perform best modestly to $244bn from $233bn
of countries that score over 50 in collectively in ‘market transparency, last year, but countries like Zambia
Pillar 1, which also includes Nigeria, tax and regulatory environment’, and Angola are running low, leaving
with 13 out of 20 scoring above the them potentially vulnerable to
Mauritius and Ghana. Issuance of
average mark of 67. Favourable tax foreign exchange risk. There is also
new debt with longer tenor has
regimes in different jurisdictions high disparity in interbank foreign
lengthened the yield curve in Ghana,
exchange turnover across countries.
Nigeria and Tanzania. The creation incentivise market activity and
South Africa’s turnover is 466% of
of new products, such as green and the entry of new players. Survey
GDP, but the index average without
blue bonds, could enhance market respondents in Rwanda, Tanzania,
it is only 13%.
activity and attractiveness to Kenya, Ghana and South Africa
foreign investors in coming years. gave positive feedback for their Egypt’s strong performance
Assigning primary dealers will respective tax systems. Uganda, in ‘macroeconomic opportunity’
help create a secondary market in Cameroon and Senegal have earned is driven by steady economic
jurisdictions where none yet exist. international corporate credit and export growth, along with a
ratings for the first time. decline in non-performing loans.
Other countries are catching up in It does well in macro reporting
the rest of the index. Egypt has the ‘Legality and enforceability of and transparency, topping Pillar 5
highest score in ‘macroeconomic standard financial markets master as it completed the International
opportunity’ while Mauritius and agreements’ improved significantly, Monetary Fund’s reform programme
Kenya claim the two top spots with the average score growing to earlier this year.
in ‘legality and enforceability of 55 from 47 last year. Amendments
standard financial markets master to insolvency laws and processes The amount of pension assets
agreements’. Ethiopia, although boost the scores of Kenya, Morocco varies greatly among countries
lagging behind, has significant and Rwanda. Ghana, Morocco and the in the index. Mauritius leads with
10 | Absa Africa Financial Markets Index 2019
Absa_financial_market_index_2019_live file.indd 10 07/10/2019 09:41Acknowledgements
The team consulted more than 40 policy-makers, regulators and
$4,331 per capita, followed closely
market practitioners across African financial markets in writing this
by South Africa, Namibia, Botswana
report, whom we thank for their views and opinions. Although some
and the Seychelles. Meanwhile, requested anonymity, we thank the following for their contribution:
11 countries have less than $100
pension fund assets for every
Arnold Bagubwagye, Deputy Director, Bank of Uganda
person. Expanding the coverage
of pension schemes increases Sunil Benimadhu, Chief Executive, Stock Exchange of Mauritius
the amount of investible assets José Miguel Cerdeira, Economist, Banco de Fomento Angola
available, enhancing local investor Jacqueline Irving, Senior Sector Economist, Sector Economics and
capacity. Because of limited Development Impact Department, International Finance Corporation,
product availability, pension funds World Bank Group
in some countries are constrained George Kwatia, Tax Partner, PricewaterhouseCoopers (Ghana) Limited
to investing in sovereign securities. Vipin Mahabirsingh, Managing Director, Central Depository
Building up pension fund assets & Settlement Co. Ltd., Mauritius
through innovative and inclusive Moremi Marwa, Chief Executive, Dar es Salaam Stock Exchange Plc
schemes can help spur demand for
Prosscovia Nambatya, Corporate Finance Lawyer, Uganda
a wider range of financial products
Anica Nerlich, Financial Analyst, Global Macro and Market Research
and lead to greater market activity.
Department, International Finance Corporation, World Bank Group
There have been significant Akiules Neto, Executive Director, Angolan Securities Exchange
improvements for individual (BODIVA)
countries since the index was first Birgit Reuter, Financial Officer, Global Macro and Market Research
established in 2017. Since then, Department, IFC, World Bank Group
countries have taken steps to align Isaac Sekitoleko, Senior Planning and Risk Officer, Capital Markets
their local market infrastructure Authority, Uganda
with global standards. Tracking Valentin Tchakounte, Managing Director, Nambi Capital
these changes annually helps
measure the gradual progress We also thank individuals from the following institutions: Deloitte,
of Africa’s financial markets and Bank of Mauritius, Bank of Tanzania, Mauritius Commercial Bank
provide guidance on how countries and MERJ Exchange.
can advance further.
Report authors
Kat Usita, Deputy Head of Research, OMFIF
Chris Papadopoullos, Economist, OMFIF
With support from
Jeff Gable, Chief Economist, Absa Group Limited
George Asante, Head of Global Markets, Absa Regional Operations
Garth Klintworth, Head of Global Markets, Absa Group Limited
Danae Kyriakopoulou, Chief Economist and Director of Research,
OMFIF
Bhavin Patel, Senior Economist and Head of Fintech Research, OMFIF
Di Wu, Research Assistant, OMFIF
Absa Africa Financial Markets Index 2019 | 11
Absa_financial_market_index_2019_live file.indd 11 07/10/2019 09:41Highlights 2018-19
Mauritius established a
The Seychelles issued the world’s multi-commodity spot
first sovereign blue bond, an and derivatives trading
instrument developed to finance platform and clearing
house.
sustainable marine and fisheries
projects.
$1.5bn:
Pooled assets
South Africa’s Financial Cameroon’s under management
Sector Conduct Authority
published a draft conduct Douala Stock of Kenyan pension
standard determining skills Exchange funds that formed
and training requirements merged with
for board members of the Kenya Pension
pension funds. regional stock Fund Consortium to
market Bourse invest in alternative
The des Valeurs assets.
Johannesburg Mobilières de
l’Afrique Centrale. Ivory Coast is developing
Stock Exchange an agricultural
launched a commodities exchange to
be launched in 2020.
Nasdaq clearing
platform for 400%: Mauritius
equity and Oversubscription of
currency Nigeria’s first 30- launched an
derivatives year government ebond trading
bond issued earlier and market
markets. this year. surveillance
Namibia issued the
system, a new
first green bond Zambia is introducing a electronic trading
from a commercial primary dealer system system for its
to boost the secondary
bank in southern market for government government
Africa. bonds. bonds.
12 | Absa Africa Financial Markets Index 2019
Absa_financial_market_index_2019_live file.indd 12 07/10/2019 09:41Market developments and policy changes boost
growth of financial markets across the continent
The Bank of Mozambique Morocco is developing The Bank of Ghana
approved its first plans for an agricultural released an Interbank
independent licensed commodities exchange, Forex Market Conduct
broker, Amaramba Capital. Bourse des Matières to regulate and improve
Premières Agricoles. trading practices.
Rwanda’s central
The Dar es Salaam Stock Exchange has been made a
bank shifted full member of the World Federation of Exchanges.
to targeting
inflation
between 2-8% 10x: Increase Angola expects
through interest in banks’ its first ever initial
rates instead of minimum capital public offering this
managing money requirements year, following
supply. as proposed the privatisation
by Egypt’s new of multiple state-
banking bill, raising owned enterprises.
Tanzania created a Tax it to $294m from
Ombudsman Office to $29.4m.
handle disputes arising All local Ugandan banks
from the administration of signed onto a GMRA and
tax laws. Uganda reduced the market is now able to
trade horizontal repos.
withholding
Ethiopia announced tax on 10-year
Senegal began
plans to launch a
government bonds implementation of a hybrid
stock exchange by Basel II and III banking
2020. to 10% from 20%. regulation framework.
Botswana formed a
Financial Stability Council Morocco issued its first sovereign sukuk,
to coordinate between the Islamic bonds that are compliant with
country’s various financial sharia principles.
authorities.
Absa Africa Financial Markets Index 2019 | 13
Absa_financial_market_index_2019_live file.indd 13 07/10/2019 09:41Pillar 1:
Market depth
Serra da Leba, Angola
15.0711° S | 13.2486° E
Absa_financial_market_index_2019_live file.indd 14 07/10/2019 09:41Making headway on market infrastructure
Countries are making progress on developing active secondary markets and reliable
yield curves, but still have some way to go. New markets were created, enhancing
product diversity and market size.
Figure 1.1:1.1:
Figure Large disparities
Financial remain
markets remain in market
uneven sizelevel
in size and andoflevel of activity
activity
Scores for Pillar 1 categories, max=500; harmonised score, max=100 (RHS)
Scores for Pillar 1 categories, max=500; harmonised score, max=100 (RHS)
500 100
450 90
400 80
350 70
300 60
250 50
200 40
150 30
100 20
50 10
0 0
Kenya
Mozambique
Ivory Coast
Tanzania
Uganda
Senegal
Namibia
Cameroon
Mauritius
Zambia
Angola
Rwanda
Ethiopia
Morocco
Seychelles
South Africa
Nigeria
Botswana
Ghana
Egypt
Product diversity Size of markets
Liquidity Depth
Primary dealer system Pillar 1 harmonised score (RHS)
Sources: National securities exchanges, national central banks, OMFIF analysis. Note: Category scores (LHS) provide
Sources: National securities exchanges, national central banks, OMFIF analysis. Note:
the average of indicator scores within each category. The harmonised score (RHS) represents the average of all Pillar 1
Category
indicators scores
and is used (LHS)theprovide
to compile thefor
total scores average ofMore
Pillars 1-6. indicator scores
information within each category.
on p.38-39.
The harmonised score (RHS) represents the average of all Pillar 1 indicators and is
used to compile the total scores for Pillars 1-6. More information on p.38-39.
Absa Africa Financial Markets Index 2019 | 15
Absa_financial_market_index_2019_live file.indd 15 07/10/2019 09:41South Africa receives the highest to renew their licence in 2019 due to currency yield curve. This is due partly
Pillar 1 score again this year. Its stock falling revenues. Turnover has been to easy access to Eurobond markets,
market capitalisation, the largest hit by uncertainty over Umeme, the where bonds come at cheaper nominal
in the index, is triple the size of its country’s main electricity firm and interest rates and in some cases give
economy. Botswana has the second- most-traded stock. Still, Uganda’s useful currency hedges. In the West
largest market capitalisation at 204% overall performance in this pillar African Economic and Monetary Union
of GDP, but finishes fifth in the pillar improves slightly, with the decline in (UEMOA), governments can offer
due to lower secondary market activity. liquidity offset by the higher value of bonds through the central bank’s
Most of Botswana’s listed companies listed bonds and equities. auction system and regional securities
are dual-listed mining firms that trade exchange, preventing the formation of
Morocco’s market capitalisation is 51%
at low volumes on the local stock a yield curve and stunting secondary
of the country’s GDP, and its equities
exchange. Nigeria, Africa’s largest market growth.
market is the fifth most active in the
economy, has a small equity market at
index, with turnover at 9% of market In October 2019, Egypt’s central
8% of GDP, but maintains second place
size. Its score, however, is constrained bank introduced the Cairo Overnight
due to its high level of activity and
by the limited availability of financial Interbank Average benchmark to
broad range of available products.
products compared to other index deepen its money, derivatives and
Mauritius’ score increases by 11 nations. capital markets. This will help price
points, driven by the listing of Bank of a broad array of products, enhancing
Egypt has a fairly liquid stock market
Mauritius bonds with a value of $268m market liquidity. Angola is tapping
with turnover at 26% of market
at end-June 2019, raising the total reissuances of government bonds to
capitalisation. There are no equities
value of bonds listed on the exchange spur secondary market trading and
listed on Angola’s exchange, and both
by 27% compared with the same time boost the debt market’s size.
Cameroon and Mozambique have
last year. Namibia’s performance on Most index countries have a primary
market capitalisations of less than 5%
the pillar also improved due to a 17% dealer system in place for government
of GDP. Ethiopia is the only country in
rise in the value of its listed bonds, bonds, improving the efficiency of debt
the index without a stock exchange,
with contributions from the public issuance and reducing operational
although the government plans to
and private sector. Kenya earns points risk associated with counterparties.
establish one in 2020.
following a sharp climb in the value of However, the volume of ‘horizontal
listed sovereign bonds and a 20% rise Enhancing market depth repos’ (short-term loans between
in bond turnover in the 12 months to commercial banks) is low in nearly all
Survey respondents in several
June 2019. markets except South Africa, Nigeria
countries said the lack of a reliable
In contrast, Uganda’s market liquidity benchmark yield curve against which and Mauritius, where the average daily
continued to drop, with $11m in to price various securities is hindering turnover in 2018 was $4.5bn, $290m
turnover, down from $25m. A local the development of domestic capital and $55m, respectively. Uganda’s
survey respondent said one of the markets. Governments have not central bank has approved reforms to
market’s largest brokers decided not prioritised developing a credible local its primary dealer system to narrow
the number of banks involved. It tried
expanding primary dealership to all
commercial banks in 2017, but found
Figure 1.2: Product availability
the secondary market had become
Government
Corporate
Currency
securities
Climate-
Exchange-
Equities
fragmented.
futures
aligned
Options
backed
swaps
bonds
Asset-
bonds
traded
bonds
funds
The Central Bank of Nigeria disrupted
FX
Angola debt markets by barring local banks
Botswana from buying government bills at an
Cameroon
Ivory Coast open market auction in July 2019, to
Egypt encourage banks to lend more to the
Ghana private sector.
Kenya
Mauritius
Morocco
A lack of interest from international
Mozambique investors stymies capital market
Namibia development in several countries.
Nigeria
Rwanda Some survey respondents said the
Senegal low interest in their country was due
Seychelles
South Africa to a lack of awareness, or a dearth of
Tanzania domestic investment opportunities. For
Uganda
Zambia
others, like South Africa, international
appetite has waned in the light of
Ethiopia not included as does not have a securities exchange
Sources: National securities exchanges, national central banks, OMFIF analysis credit ratings downgrades and political
16 | Absa Africa Financial Markets Index 2019
Absa_financial_market_index_2019_live file.indd 16 07/10/2019 09:41uncertainty. Ghana is trying to reduce company and underpinned by ‘An efficient and liquid
foreign investment in its government blockchain technology, the first public
debt. The country’s central bank and offering of its kind.
bond market provides
finance ministry are discussing a cap some scope for effective
on the amount of debt that can be Ghana is working on a ‘capital market
master plan’ for the next decade of transmission mechanism
held by foreign investors, as a way to
reduce external vulnerabilities. development, though few details for monetary policy.’
are yet available. Legislation was
Fostering market growth introduced to permit the listing of Maxwell Opoku-Afari, first
It has become a more challenging real estate investment trusts on the deputy governor, Bank of
environment for new listings in exchange. Mauritius has created a Ghana, June 2019
certain countries. Kenya’s interest new regulatory and tax framework to
rate cap, introduced in 2016, has encourage development of Reits.
hampered credit creation, weakening Merging and making markets
companies’ financial bottom line
and hindering their expansion plans, The past year has seen progress in
negatively impacting their capital initiatives to launch new markets or
issuance. The value of bonds listed merge existing ones, which should
on the Nairobi exchange doubled to improve efficiency and liquidity.
$17.5bn from $8.8bn over the year, Cameroon’s Douala Stock Exchange
due entirely to sovereign issues. One merged with the Bourse des Valeurs
survey respondent said the country’s Mobilières de l’Afrique Centrale to
large government bond issuance in create a unified regional exchange in
recent years has crowded out investor Central Africa. Cameroon’s regulator
demand for private sector securities. has also joined forces with the
Many countries plan to bolster their regional regulator, a move that survey
market capitalisation. Kenya’s Capital respondents expect will add depth to
Markets Authority wants to boost the financial market framework.
the country’s venture capital and The West African Capital Markets
private equity markets to create a Integration programme is an ongoing Figure 1.3: Market
outstanding, listed on exchanges, $bn
pipeline of smaller firms that can project that would closely align the
Total sovereign and corporate bonds
size and liquidity
pursue initial public offerings. The exchanges of Ghana, Nigeria, Sierra
Total turnover in bond market,
Capital Markets Authority of Uganda Leone, Cape Verde and the BRVM. It
% of market capitalisation
Total turnover of equities,
is developing mandatory listings for would allow brokers from each country
Market capitalisation,
% bonds outstanding
firms in strategic sectors such as to trade directly on any of the others’
telecommunications, tier one banks and exchanges. The regional regulator is
mining firms to increase the number
also working to develop covered bonds,
% of GDP
of listed companies on its bourse. The
green and social bonds, and Reits.
Casablanca Stock Exchange launched
a programme in 2016 to encourage Ethiopia plans to develop a secondary South Africa 292 33 342 190.9
listings of small and medium-sized market in government bonds, which Botswana 204 0 13 1.4
enterprises and expects the first such should create the basis for a broader Mauritius 72 4 3 1.3
IPOs to go ahead this year. securities exchange. Respondents Morocco 51 9 15 0.7
Rwanda 35 0 4 0.2
expect Ethiopia’s privatisation of Ethio
The Bourse Régionale des Valeurs Senegal 33 4 2 5.1
Telecom will aid the formulation of a
Mobilières, the UEMOA stock exchange, Kenya 25 6 35 17.5
introduced in 2017 its small-cap index stock market. Uganda 22 0 0 2.1
Seychelles 21 3 0 0.2
to help provide smaller firms with The Stock Exchange of Mauritius began
Ivory Coast 19 4 2 5.1
capital before a listing on the main trading in commercial paper after Namibia 18 2 3 3.1
exchange, but still awaits its first the central bank finalised regulations Zambia 18 1 9 5.5
listing. Egypt’s market capitalisation for issuance and trading. There are Egypt 18 26 10 43.1
was lifted by the privatisation of a further plans to create a green bond Ghana 17 0 78 14.8
number of state-owned enterprises. Tanzania 14 1 5 4.1
market. Mauritius established a new
Nigeria 9 6 66 58.3
The MERJ Exchange (formerly Trop-X) commodities and derivatives exchange Mozambique 4 0 3 1.0
in the Seychelles demutualised in to enhance its position as a wealth Cameroon 1 0 4 0.3
September and listed on its own and asset management destination. Ethiopia 0 0 0 0.0
market. It launched tokenised Similarly, Ghana’s commodity exchange Angola 0 0 37 7.5
securities of its own stock – digital has started operations, trading Sources: National stock exchanges, national central
banks, World Federation of Exchanges, Thomson
assets representing shares in a agricultural products. Reuters, OMFIF analysis
Absa Africa Financial Markets Index 2019 | 17
Absa_financial_market_index_2019_live file.indd 17 07/10/2019 09:41Pillar 2:
Access to foreign exchange
Chott El Jerid, Salt Lake, Tunisia
33.7782° N | 8.3965° E
Absa_financial_market_index_2019_live file.indd 18 07/10/2019 09:41Rebuilding and reforming
Foreign exchange liquidity is improving in key index economies, while oil exporters
appear to be recovering from past difficulties and strengthening foreign reserves.
Figure 2.1:
Figure South
2.1: Africa,Egypt
South Africa, Egypt
and and Uganda
Uganda buoyed buoyed
by foreignby foreign
exchange exchange liquidity
liquidity
Scores
Scores for Pillar
for Pillar 2 indicators,
2 indicators, max=400;harmonised
max=400; harmonised score,
score,max=100
max=100(RHS)
(RHS)
400 100
350 90
80
300
70
250 60
200 50
150 40
30
100
20
50 10
0 0
Mauritius
Rwanda
Tanzania
South Africa
Kenya
Botswana
Zambia
Namibia
Nigeria
Ethiopia
Egypt
Cameroon
Ghana
Angola
Seychelles
Mozambique
Uganda
Morocco
Senegal
Ivory Coast
Net portfolio investment to reserves Interbank FX turnover
FX capital controls Official exchange rate reporting standard
Pillar 2 harmonised score (RHS)
Sources: International Monetary Fund, national central banks, OMFIF analysis. Note: The harmonised score (RHS)
represents the average
Sources: of all Pillar
International 2 indicators
Monetary Fund,andnational
is used tocentral
compilebanks,
the total scoresanalysis.
OMFIF for PillarsNote:
1-6. More
The
information on p.38-39.
harmonised score (RHS) represents the average of all Pillar 2 indicators and is used to
compile the total scores for Pillars 1-6. More information on p.38-39.
Absa Africa Financial Markets Index 2019 | 19
Absa_financial_market_index_2019_live file.indd 19 07/10/2019 09:41Pillar 2 examines factors that impact interbank market and is responsible for Africa’s interbank foreign exchange
markets’ accessibility to international almost 60% of total activity. However, activity is still highest, with turnover
investors. These include the existence the index score deliberately excludes equivalent to 466% of GDP. Mauritius is
and severity of capital controls, central bank transactions to reflect second at 98%, followed by Uganda at
exchange rate reporting standards and market activity only. 72%. Excluding South Africa, the index
the level of foreign exchange liquidity. average is 13% of GDP.
In 2016, Ghana loosened surrender
This pillar also addresses the need The FX Global Code, established in
and repatriation requirements for
to manage volatility resulting from 2017 through the efforts of central
exporters, which partly explains
openness. This is measured by central banks worldwide and the Bank for
the growth in its interbank foreign
banks’ ability to meet demand for International Settlements, sets best
exchange market. The move has
currency, by looking at the ratio of net practice principles for the foreign
allowed more foreign currency to
portfolio flows to reserves. exchange market. Market participants
flow through the commercial banking
South Africa reclaims the top spot in system rather than being facilitated in South Africa, Kenya and Botswana
this pillar after having been overtaken only by the central bank. The result are adopting the code, according to
by Kenya in the previous edition of has been a steady increase in monthly survey responses. Only a few banks
this index. High interbank foreign interbank foreign exchange turnover. in Mauritius have adopted the code.
exchange turnover, regular exchange The BoG published the Ghana More are expected to follow suit, which
rate reporting and a favourable reserve Interbank Forex Market Conduct, a set would improve the country’s standing
level relative to net portfolio flows of guidelines for market participants, in coming years.
all contribute to South Africa’s high to support further development. Reserves running low
position. Kenya, meanwhile, drops
South Africa has the most active Zambia suffers the largest drop in its
in ranking after the International
interbank foreign exchange market, score for portfolio reserves. These fell
Monetary Fund reclassified its
with annual turnover reaching $1.7tn to $1.6bn at the end of 2018 from a
exchange rate regime to ‘other
in 2018, considerably higher than other peak of just under $4bn in 2015. The
managed arrangement’ from ‘floating’,
index countries. Egypt and Mauritius 2018 figure is far below the generally
a move the central bank contests.
follow, each with foreign exchange accepted adequacy benchmark of three
Boosting foreign exchange liquidity turnover greater than $10bn. Nigeria’s months’ imports cover. Reserves fell
turnover rose by 38% to $7.8bn from slightly further over the first half of
Ghana scores low in this pillar overall,
$5.6bn the year before. On the other 2019. Zambia still pays interest on
though its interbank foreign exchange
hand, Ivory Coast, Senegal, Ethiopia, external debt, its mining production
market has deepened in recent years.
the Seychelles, Angola, Cameroon and has declined, and international
Monthly average turnover in the
Rwanda have negligible or no interbank investors have less appetite for
interbank foreign exchange market
foreign exchange turnover. Zambian assets.
doubled to around $200m in 2018.
The Bank of Ghana deals heavily in the Even relative to its economy, South Following the sharp fall in oil prices in
2014, Angola ran significant current
account deficits. Its stock of reserves
has since halved. It achieved a current
Figure 2.2: Foreign exchange exposure uneven across countries account surplus in 2018 for the first
Net portfolio investment to reserves, % time in five years, but its reserves
100 relative to its net portfolio investment
50 remain low, weighing on its pillar score.
In contrast, Nigeria, the continent’s
40 other major oil exporter, has kept a
tighter control over deficits and has
30 been running a current account surplus
20 since 2016. It has held successful
Eurobond issuances and built up its
10 reserves back to more than $40bn.
0 Uganda performs strongly in this
pillar, with almost the same score as
Seychelles
Mauritius
Ghana
Nigeria
Ivory Coast
Kenya
Namibia
Botswana
Senegal
Morocco
Uganda
Ethiopia
Egypt
South Africa
Rwanda
Zambia
Tanzania
Angola
Cameroon
Mozambique
top-ranked South Africa. It has a high
level of foreign reserves relative to net
portfolio investment flows and enough
Sources: International Monetary Fund, World Bank, national central banks, OMFIF analysis
reserves to cover more than four
months of imports.
20 | Absa Africa Financial Markets Index 2019
Absa_financial_market_index_2019_live file.indd 20 07/10/2019 09:41Mauritius has high net portfolio ‘In 2016, Ghana Fig 2.3: IMF classification of
investment, but is less vulnerable to
foreign exchange fluctuations. The
loosened surrender exchange rate regimes
significant inward flow is due to its and repatriation
position as a favourable domicile for
funds, often comprised of international
requirements for
money invested globally. exporters, which Floating
The combined reserves of index partly explains The exchange rate is market-
countries have climbed 9% over the the growth in its determined. The central bank rarely,
if at all, intervenes to manage the
last five years to $244bn. Nominally,
the holders of the largest reserves are
interbank foreign exchange rate.
South Africa, Nigeria and Egypt, with exchange market. The Ghana South Africa
52% of the total.
move has allowed Mauritius Tanzania
Mixed year for floating rates more foreign currency Mozambique Uganda
Nigeria Zambia
Few major changes in exchange rate to flow through the Seychelles
regimes can be observed across index
countries each year. Nine have freely commercial banking
floating regimes, while the rest are a system rather than
mix of intermediate or fixed regimes.
being facilitated only
The IMF is urging Angola to move
towards a freer exchange rate as
by the central bank.’
Intermediate
part of its bail-out after the country
transitioned to a band system in The exchange rate floats within a
early 2018. The kwanza has gradually pre-determined range, or the central
depreciated and is now around half bank may intervene occasionally
of its previously fixed value against in a managed float arrangement.
Nigerian importers’ reliance on dollar
the dollar. Angola’s central bank May also be referred to as a soft or
transactions.
stopped direct sales of foreign crawling peg.
currency late last year. These will be Some countries are moving away
handled by authorised commercial Angola Kenya
from freer regimes. Early last year
banks. According to local analysts, Egypt Morocco
the IMF reclassified Kenya’s exchange
the policy has improved foreign Ethiopia Rwanda
rate regime to ‘other managed
exchange liquidity and increased arrangement’ from ‘floating’. In its
the volume of foreign exchange. The October 2018 Article IV economic
kwanza’s depreciation and rebound health check, the Fund noted that
in oil prices last year helped Angola the shilling was overvalued by around
reduce its twin deficits. A rebuilding 18%. It was one of the best performing
of its foreign reserves and possible African currencies over 2018 and Fixed
reclassification of its exchange rate has been stable against the dollar,
regime to ‘flexible’ from ‘intermediate’ The exchange rate is tied to another
which climbed against most African
could raise its Pillar 2 score in coming country’s currency or a composite
currencies during the second half of
years. of other currencies. May also be
the year. The Central Bank of Kenya
referred to as a hard peg. The central
Nigeria has moved towards unifying disagreed with the IMF’s assessment,
bank intervenes to maintain the
its various exchange rates and allowed arguing it only intervenes in foreign exchange rate.
its foreign exchange fixing rate (the exchange markets to counter volatility,
rate at which it sells dollars to certain and that the lender exaggerated the Botswana Namibia
local companies) to depreciate. This shilling’s overvaluation. Cameroon Senegal
has brought it closer to the Nigerian Ivory Coast
autonomous foreign exchange rate The reclassification pulls down Kenya’s
fixing rate used by foreign bond and rank but its score is still among the
stock investors. Last year it signed a highest in the pillar, as other indicators
currency swap agreement with China, remain healthy. It has a large stock of
its second largest trade partner, to foreign reserves, worth four months of Sources: International Monetary Fund, OMFIF analysis.
Note: Kenya formally disagrees with the IMF’s definition of
increase trade and ease pressure imports and 10 times its 2018 figure its currency regime.
on the naira-dollar rate by reducing for net portfolio investment.
Absa Africa Financial Markets Index 2019 | 21
Absa_financial_market_index_2019_live file.indd 21 07/10/2019 09:53:14Pillar 3:
Market transparency, tax and
regulatory environment
Pyramids of Meroe, Sudan
16.9380° N | 33.7489° E
Absa_financial_market_index_2019_live file.indd 22 07/10/2019 09:41Mixed progress on international standards enforcement
Many countries are moving towards supportive tax systems. However, in several
jurisdictions, transparent financial reporting is hindered by a lack of accounting and
audit capacity, attitudes to transparency and enforcement problems.
Figure
Figure 3.1:3.1: SouthAfrica
South Africa leads
leadsonon
transparency and taxand
transparency environment
tax environment
Scores
Scores for Pillar
for Pillar 3 categories,
3 categories, max=800;
max=800; harmonisedscore,
harmonised score,max=100
max=100 (RHS)
(RHS)
800 100
700 90
80
600
70
500 60
400 50
300 40
30
200
20
100 10
0 0
Mauritius
Tanzania
Zambia
Kenya
Rwanda
Angola
Ethiopia
Botswana
South Africa
Nigeria
Ghana
Namibia
Egypt
Seychelles
Ivory Coast
Mozambique
Cameroon
Uganda
Morocco
Senegal
Financial stability regulation Reporting and accounting standards
Tax environment Financial information availability
Market development Corporate action governance structure
Protection of minority shareholders Existence of credit rating
Pillar 3 harmonised score (RHS)
Source: Bank for International Settlements, International Financial Reporting Standards, Deloitte International Accounting
Source:
Standard BankBank
Plus, World for International
Doing Business,Settlements, International
Standard & Poor’s, Financial
Moody’s, Fitch, Reporting
OMFIF analysis. Note:Standards,
Category scores (LHS)
provide the average of indicator scores within each category. The harmonised score (RHS)
Deloitte International Accounting Standard Plus, World Bank Doing Business, Standard represents the average
& of all Pillar
3 indicators and is used to compile the total scores for Pillars 1-6. More information on p.38-39.
Poor’s, Moody’s, Fitch, OMFIF analysis. Note: Category scores (LHS) provide the average of
indicator scores within each category. The harmonised score (RHS) represents the average of
all Pillar 3 indicators and is used to compile the total scores for Pillars
Absa1-6.
AfricaMore information
Financial Markets Index 2019 | 23
on p.38-39.
Absa_financial_market_index_2019_live file.indd 23 07/10/2019 09:41This pillar assesses countries’ Kenya’s tax code is generally from one of the low-scoring countries
regulatory and tax environments for supportive, according to one local tax suggested that corporation tax
financial markets. These factors play a professional. However, in an effort to discounts for listed companies would
fundamental role in offering investors raise revenue, the government has promote further development.
incentives to invest in financial introduced prohibitive taxes, such
Mauritius, Nigeria and South Africa
products. They provide transparency, as an increased levy on mobile cash
score highest for tax overall. Nigeria
which is vital for fostering investor transactions. Responses were positive
has 14 ratified tax treaties and six
confidence. for Tanzania and Rwanda, where low
in the pipeline. ‘Nigeria’s tax system
taxes on capital gains and interest
Ghana scores highly, receiving a has performed considerably well in
income boost scores for their tax
near-perfect score for its tax regime. encouraging and facilitating financial
environment.
Financial market participants view market development,’ said a senior
Tax systems in Angola and Botswana member of a major accountancy
its tax system as broadly favourable
are less friendly. Respondents firm. Mauritius earned similar praise,
to financial market development.
said their systems were generally although in fostering a tax system
Two respondents praised its
unsupportive of financial market that encourages financial market
straightforward tax code, as well as
growth. One financial institution development, it must avoid being
exemptions on a variety of capital
executive in Botswana said that seen as a tax haven by international
market taxes such as capital gains planned improvements to the authorities. In 2018, it introduced
earned on listed stocks and interest tax regime were not high on the some levies on banks and financial
on government bonds to non- government’s agenda, and there institutions to comply with the
residents. There are also exemptions was insufficient public consultation Organisation for Economic Co-
on interest paid to resident individuals on changes that have been made. operation and Development’s base
by the government, local financial Ugandan respondents were also erosion and profit-sharing initiatives.
institutions, unit trust schemes and downbeat, saying the country has As a result, the OECD concluded that
mutual funds. In addition, there are the highest tax rates on dividends Mauritius does not have a ‘harmful
tax holidays or exemptions for venture in the region with no exemptions tax regime’ in terms of unfair tax
capital companies, rural banks and real or incentives to encourage financial competition, confirming its position as
estate investment trusts. market development. A central banker a compliant jurisdiction.
Financial market transparency
Figure 3.2: Most countries comply with global accounting standards Adoption of the latest financial
International Financial Reporting Standards required reporting and accounting standards
IFRS Standards helps improve transparency, which can
IFRS Standards
are required or The IFRS for SMEs increase domestic and international
are required for
permitted for Standard is required investor confidence. International
domestic public
listings by foreign or permitted financial reporting standards have
companies
companies
been widely adopted in 17 of the 20
Botswana
index countries. Of the remaining
Ghana
three, Ethiopia is planning a full roll-
Kenya
out for public companies by 2020,
Mauritius
which would boost its performance in
Namibia
this pillar. Ethiopian banks, insurance
Nigeria
companies and public enterprises are
Rwanda
in the process of adopting IFRS 9,
South Africa
transitioning from Generally Accepted
Tanzania
Accounting Principles. No domestic
Uganda
companies use IFRS in Egypt, while in
Zambia
the Seychelles only the central bank
Cameroon
has adopted these standards.
Ivory Coast
Senegal There are common complaints
Angola across index countries with regard
Morocco to financial reporting. Those that
Mozambique have adopted IFRS still find market
Egypt reporting hindered by factors such
Ethiopia as a lack of regulatory enforcement
Seychelles or insufficient accountancy and audit
Source: International Financial Reporting Standards, OMFIF analysis. Countries are ordered by number of tick marks, then alphabetically. capacity. ‘Financial reports are not
24 | Absa Africa Financial Markets Index 2019
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