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Unattractive African stock markets: How to reverse the trend

Despite the global crisis, financial markets have been able to maintain a strong attractiveness in 2021. This is not the case in Africa, where only 8 IPOs were recorded last year, against 30 in 2017. The observation has was dressed during the Africa Capital Markets Forum, a 2-day event that ends today in Casablanca. How did you answer it? Here are a few ideas discussed during the conclave.

The African stock market has an overall capitalization of 1.580 billion dollars as of December 31, 2021. With this volume, “the continent does not weigh much on the world stage, barely 1.68% of the capitalization” , declares from the outset Edoh Kossi Amenounve, president of the African Securities Exchange Association (ASEA), during the Africa Capital Markets Forum which started yesterday in Casablanca at the initiative of i-Conferences. Of this volume, the SADC (Southern African Development Community) alone accounts for 83%, ie more than 1,000 billion dollars. With 115.5 billion, North Africa only accounts for 8.55%. In addition, registered IPOs on the continent are falling, noted the ASEA Chairman. In 2021, they were only 8 compared to 30 in 2017. “African stock markets therefore practiced a low attractiveness for SMEs on the continent: 14 IPOs on average per year since 2017”, laments Amenounve.

By way of comparison, in 2021, and despite the global crisis, Asia Pacific counted 908 and the United States a thousand. For market liquidity, the turnover rate observed on the continent (excluding South Africa and Egypt) stands at 3.75%. The Casablanca Stock Exchange does better by modulating a rate of 12.87%, against 25.04% for Johannesburg. According to the president of the association, several solutions exist to reverse the trend. Starting with the privatization of public enterprises in African states. We must also give all the necessary weight to private actions. “It is an important vector for the passage on the stock exchange of SMEs”, explains Amenounve. Where is it stuck then? To attract SMEs, “we need the mobilization of the entire ecosystem, appropriate regulations and communication around the stock markets.

I salute in passing the tour carried out by the Casablanca Stock Exchange, which we accompany, to inform Moroccan SMEs and whose stopover is scheduled for Friday in Oujda”, indicates Nasser Seddiqi, director of financial operations at the Moroccan Capital Market Authority. (AMMC). But it’s not just SMEs that can appeal to the stock market. State companies, 2,000 in number on the continent, are also targeted. “We must privatize these companies to allow a revitalization of African stock markets,” recommends Amenounve. For Tarik Senhaji, CEO of the Casablanca Stock Exchange, it is not necessary to privatize them entirely. “Putting some of their shares on the stock market is sufficient and can be used as leverage for later privatization,” he explains. According to the organizers, they were expected for the two days of this conclave some 250 participants from nearly 30 countries. These represent ministries of finance, market regulators, financial institutions, stock exchanges, management and intermediation companies, strategy consultants, technology providers… as well as all the parties concerned by the development of capital markets in North, West and Central Africa.




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