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Open up capital markets, African nations advised

Tuesday November 25 2014

An investor at the NSE trading floor during the opening of the Exchange Building in Westlands.

An investor at the NSE trading floor during the opening of the Exchange Building in Westlands. FILE PHOTO | DIANA NGILA | NATION MEDIA GROUP

GITONGA MARETE
By GITONGA MARETE
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Capital markets in Africa have too much protection, stifling growth.

Calling on the regulators to open up the markets, especially to foreign investors, an expert addressing the 18th African Securities Exchanges Association (ASEA) conference at Leisure Lodge in Diani, Kwale county, Tuesday said this has to be done if things are to change.

“I have respect for regulators in Africa and what they are trying to do. But it is worrying. African capital markets suffer from too much protectionism and stringent rules. The fact is that protected and inaccessible markets remain small,” said Mr Allan Thomson, managing director of Dreadnought Capital, based in Johannesburg, South Africa.

He said that opening up the markets to foreign investors would bring in much needed capital and training for the local markets.

He added that membership at most capital markets was expensive, which kept away potential investors.

“I once approached a securities exchange in Africa and was told to pay $1 million to become a member yet they were only five. I suggest a zero membership fee because investors bring in skills and capital,” he added.

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Well established capital markets could also help African countries lessen vulnerability of their economies to external shocks by locally marshalling funds through instruments such as bonds and reducing currency shocks, the conference heard.

REQUIREMENT FOR LISTING

In Kenya for example, Capital Markets regulators require a company listing at the securities exchange to reserve at least 25 per cent of shares to local investors, and at least Sh250 million to participate at the Nairobi Securities Exchange.

The newly elected president of ASEA and chief executive of the Nigeria Stock Exchange, Mr Oscar Onyema, encouraged interest in the stock market as a solution to the strain on government borrowing and lending.

The conference, which ended yesterday, brought together delegates from 23 countries across Africa.

ASEA was established in 1993 and seeks to provide a forum for securities exchanges in Africa with the aim of developing member exchanges and provide a platform for networking.