Charles Stevens is passionate about the African capital markets. As Head of Barclays Securities Administration, one of the two custody networks operating in sub-Saharan Africa, he has travelled extensively throughout the region and believes it is at last on the cusp of meaningful change for the better.
One reason for his renewed optimism is the atmosphere he encountered at a conference hosted in New York in April. Stevens reckons the African Capital Markets Development Forum, organized by the United Nations Development Programme and the African Stock Exchanges Association in collaboration with the New York Stock Exchange, will prove a milestone in the development of the African capital markets.
“It was an opportunity for all who have an interest in the further development of these markets, especially the Stock Exchanges, to get to know and to gain exposure to a number of influential US capital markets professionals,” says Stevens. “Overall the message from a number of speakers was that by working together African countries could achieve considerable improvements in their capital market infrastructure to attract and retain both domestic and foreign investment.”
The Conference covered the need for more robust regulatory structures, and the necessity of adopting international standards. But the hottest issue was how to increase foreign participation in the African markets, which would add liquidity, and how this was linked to the demand for better information and corporate governance. There was some talk, says Stevens, about the desirability (and practicability) of creating regional exchanges.
“All of these are weighty subjects, but there was no doubt that a huge amount of enthusiasm and thirst for more knowledge was generated,” says Stevens. He himself spoke about the role Barclays and the custodian bank community is playing in the development of African capital markets especially in the areas of support for inward foreign investment and in the development of corporate bond markets. “We have become one of the leading custodian banks in the region over the past ten years and have led the way in a number of corporate bond issues recently,” says Stevens.
Zephirin Diabre, Associate Administrator of the United Nations Development Program – and the man behind The African Capital Markets Development Forum and the African Stock Exchanges Handbook (which the UNDP published to coincide with the Forum) agrees that the conference was more successful than he had dared to hope. “African equities represent a vastly underutilized option for international investors,” he says. “By mobilizing private capital, African can promote the economic growth needed to reduce poverty. We have viewed the Forum and the Handbook as practical ways of helping that along, and sincerely hope that positive spin-off effects with investors will follow. Feedback to the Forum has thus far been overwhelmingly positive, and several newspapers, including the New York Times, and business journals have been moving the Forum’s keys messages and agenda forward. The question I keep hearing is when are you having the next one?”
Tim Reucroft, Director of Research at custody and CSD consultants Thomas Murray in London, was encouraged by two developments. “Firstly the move by Fitch, the rating agency, funded by the USA, to provide sovereign ratings for many African countries,” he says. “This will greatly improve the rated country’s placing in the Thomas Murray global ratings tables, which are published on a monthly basis in the Financial Times (and where Africa as a region currently does not do particularly well). Secondly, development in the actual implementation of central depositories (CSDs) in many of those countries that do not currently have this component of their post trade infrastructure. The impending implementation in Kenya is a case in point. Implementation of a CSD would greatly improve a country’s ranking in the eyes of investors.”
Speakers at the conference were drawn from academia and the World Bank, as well as stock exchanges, fund management firms, custodian banks and specialist consultancies such as Thomas Murray.