More cooperation needed to boost African infrastructure

Greater regional integration of market infrastructures such as exchanges and central securities depositories (CSDs) will help boost foreign investment into Africa.

Integrated market infrastructures would theoretically bolster efficiencies around payment and settlement, while it could also enhance liquidity in some markets. There are a number of regional initiatives including WACMI in West Africa, CoSSE in Southern Africa and EAC in East Africa seeking to improve regional integration of market infrastructures. Some go further and advocate a continent-wide initiative, something which is being reviewed by the Africa Development Bank.

A number of exchanges and CSDs already have linkages. However, a unified market infrastructure system in Africa would make foreign investment into the continent more straightforward. A number of challenges are hindering its development. The most obvious is the lack of a common currency and political willpower to push through such a wide-ranging reform.

“There is huge fragmentation in Africa hence why we have a number of different regional initiatives spanning East Africa, West Africa and Southern Africa. One of the biggest issues surrounds sovereignty. Many countries will want their own CSDs and exchanges. As such, concerns over sovereignty have somewhat hindered progress in attaining harmonisation,” said Rajesh Ramsundhar, head of product management and investor services, TPS Investor Services at Standard Bank, speaking at NEMA Africa in London.

Other issues stymying closer integration of a unified market infrastructure surrounds the lack of unified currency. “One of the biggest issues stopping us is currency. I can buy a Kenyan security anywhere in Africa but there are a huge number of hoops to convert Nigerian Naira into Kenyan Shilling. It is possible that an embrace of technology like Bitcoin or Blockchain could change this,” said Kyari Bukar, CEO, CSCS, the Nigerian CSD.