This morning, Barclays Bank launched the Africa Financial Markets Index – an index that is prepared by Barclays Africa Group Limited and which looks at financial markets in the continent. The Index which is a survey of stock markets features 17 African countries, Kenya included. It gives rankings, challenges, as well as recommendations on how different countries can improve their ranking in financial markets. Kenya is ranked Number 5 out of 17 with the index noting that we have strong contact enforcement but over cautious regulators. South Africa which emerged tops and which we’re bench-marking against has highly developed financial markets but challenging macroeconomic outlook.
A key partner in producing the report is the Official Monetary and Financial Institutions Forum – an independent think tank for economic policy, central banking, and public investment. The index was prepared in consultation with different players in the financial scene – regulators, policy makers and market practitioners across Africa.
Barclays Bank’s involvement in producing the index stems from the bank’s belief that a robust financial environment is a key factor in creating and cementing sustainable economic growth and development throughout the continent. Barclays believes that Africa is ripe for the next stage of development and that the index will play a big part in informing countries on deepening and expanding financial markets.
According to Barclays Kenya’s Managing Director Jeremy Awori, “The Index provides countries with valuable insights and tools to improve the state of their financial markets”.
It is a thorough index and apart from doing quantitative analysis, the producers also got additional financial insights from upto 60 top financial executives from around the 17 countries. They talked not only to bankers, but also regulators, investors, accounting firms and security exchanges to name a few. The information was then fashioned into 6 pillars, each of which had a specific outlook on financial markets. The pillars were market depth, access to foreign exchange, market transparency, tax and regulatory environment, capacity of local investors, macroeconomic opportunity and legality and enforceability of standard financial markets agreements.
There is need to tighten and strengthen market regulations, deal with overlapping regulations and coordinate them better. To synchronize laws to protect investments #AFMindex
— Shiko-Msa (@Shiko_Msa) January 17, 2018
One of the recommendations made for growth in markets in Africa is the bolstering of local investors so that the financial atmosphere would have a buffer and not dip if foreign investors pulled out. Limitations to local investment were also noted, like lack of proper assets. Another, especially for Kenya, is to increase the number of companies participating in the NSE so as to increase investor options for both local and foreign investors.
The index comes quite timely because there is a global appetite for investment in emerging markets and it will help countries position themselves on the receiving end of this crucial investment, as well as know where they may be going wrong and why some countries may be picked over others. The survey for example challenged Kenya to improve on areas such as low historical growth in export market share, low GDP per capita and relatively small market capitalization.
We’ll be look at the report more indepth in a later blogpost.