THE PROMOTION OF CAPITAL MARKETS IN AFRICA: Assessment of needs in Capital Markets Development Southern, Western and Central Africa

1-3 November 1999 Addis Ababa, Ethiopia

TABLE OF CONTENTS
Page I. II. Introduction.........................................................………......1 The findings of the Needs Assessment Missions to Southern and West African Countries.....…………….........4 South Africa............................................................…………...5 Botswana...............................................................…………....7 Malawi..................................................................…………......8 Zambia.................................................................….……….....9 Ghana..................................................................………........11 Nigeria..................................................................…………....14 Cameroon (Banque des Etats de I’Afrique Centrale - BEAC)..................................................…………...15 Côte d’Ivoire (Bourse Regional Des Valeurs Mobilieres BRVM)...........................................………............16 III. The Needs Assessment Survey Questionnaire in Capital Markets Development Summary Responses.………………………………………………….....18 Recommendations for the Design of the ECA Annex 1..................................................................………...23 The Promotion of Capital Markets in Africa...…………...23 Annex 2..................................................................………...27 List of Institutions Visited and Meetings with Chief Executives...............................................……………….....27

IV.

For this and other publications, please visit the ECA web site at the following address: http: //www.un.org./depts/eca/ or contact The Director Development Management Division (DMD) Economic Commission for Africa P. O. Box 3001 Addis Ababa, Ethiopia Tel: (251 – 1) 51 72 00 Fax: (251 –1) 51 44 16 E-mail: ecainfo@un.org

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I. Introduction

There is indeed a growing body of research which points towards capital market development and financial deepening in general and stock markets development in particular making positive contribution to economic growth. An array of financial instruments including stock market quoted shares and the bond market is almost certainly going to enhance the overall level of savings in an economy. Capital markets are the markets for long-term loanable funds as distinct from the money markets, which deals in short-term funds. However, there is no clear-cut distinction between the two markets. In principle, capital market loans are used by industry and commerce mainly for fixed investment. The capital market is an increasingly international one and in any country the market is not one institution but all those institutions that much the supply and demand for long-term capital and claims on capital. In this respect, stock exchanges could be defined as the central point of the capital market. The evolution of capital markets in Africa in recent years has been rather dramatic, as countries have sought not only to mobilize domestic resources but also to attract foreign direct investment. Accordingly, activity in a number of capital markets that had been dormant for years picked-up significantly and a number of new markets have emerged. In a number of established stock exchanges, activity has been boosted by increased listings of companies; mostly made possible by privatization of state-owned enterprises. At present, there are about twenty stock exchanges in the continent (See Table 1). However, many African stock markets are characterized by a relatively limited number of scrip, which are held to a substantial extent in perpetuity by few insurance and pension funds. The participation by individual savers/investors is