African markets

Pandemic hits African markets but leaves room for optimism

An annual ranking of major African financial markets reflects the impact of the Covid-19 pandemic…

An annual ranking of major African financial markets reflects the impact of the Covid-19 pandemic but also shows that proactive governance can create economic resilience and that there is growing interest in green finance.

African financial markets are feeling the effects of the pandemic, but there are reasons for optimism, especially with a new emphasis on greener financial products.

Published yesterday, October 13, by the bank headquartered in Johannesburg Absa with data from the economic council OMFIFthe fifth edition African Financial Markets Index found that the average performance of the continent’s markets had declined over the past year, due to low liquidity.

The index assessed 23 African financial markets against six main criteria, aimed at painting a picture of economic potential and macroeconomic opportunities, and the authors hope it will spur the continent’s governments to take a more proactive role in improving their savings.

“Because our index is there to measure open transparency and accessibility, backward scores can lead you to a quick conclusion that markets are deteriorating,” says Absa chief economist Jeff Gable, but he encourages to take a closer look at the results, pointing out that few of the 23 markets are actually in decline.

“We don’t see a lot of examples where countries are backing down,” Gable said. ALB. Instead, there have been specific setbacks due to the pandemic, such as declining equity commodity trading, a drop in foreign exchange reserves and liquidity, which are primarily a sign of Covid-19. Gable acknowledges, however, that if market volumes do not return post-pandemic, an overhaul will be required.

The results are consistent with last year’s index which found that although negatively affected by the pandemic, the continent’s top markets showed resilience and continued to improve, and that there was growing interest in green investments. The 2019 report had laid out the scale of the improvements needed for progress to be made, although the coronavirus has since complicated that mission.

Even the top-ranked countries have lower overall scores than in 2020, with the rankings based on data and opinions from policymakers, regulators and professionals operating in the markets, assessing market depth, access to currencies, market transparency, capacity of local investors, macroeconomic opportunity and enforceability of standard framework agreements.

South Africa again leads the index, as in all previous years, which is as much related to past historical factors and its well-established financial infrastructure as it is a reflection of current performance. The country has struggled with economic problems for many years, but still leads in terms of market depth and currency, and ranks in the top three for all other criteria.

The country’s economic difficulties are reflected in the index as a decline in its macroeconomic opportunity, a factor that has been accelerated by the coronavirus.

Mauritius and Nigeria show consistent performance and were ranked second and third. Nigeria leads in market transparency, taxation and regulation, while Namibia, Egypt and Ghana are best in investor capacity, macroeconomic opportunities and enforceability of standard framework agreements , respectively.

The fact that different countries apply different criteria is a sign of how markets can be improved, says Gable, as it “reinforces the idea that there is a lot of learning that can be done in African markets.” , sharing ideas and information on how to move forward. , and he hopes to stimulate “the encouragement of dialogue and discussion” and “friendly competition” through the report.

The index ranks 23 of the continent’s 54 countries, so the economies featured are a self-selected group of high performers, and even 22n/a ranked Cameroon received praise for entering a regional scholarship, and 23rd Ranked Ethiopia received positive feedback for taking steps to launch a stock exchange.

David Marsh, President of OMFIF, wrote in the report that “Covid-19 has had a greater negative impact in Africa than elsewhere. Exacerbated social pressures, commodity price volatility, worries about rising US interest rates and fears that Africa could be squeezed by Sino-US competition compound the challenges,” although he said noted that a “full-scale financial crisis” had not materialized.

Marsh has seen a growing awareness across Africa of international market norms, the value of deeper financial markets as a buffer against economic fluctuations, and sustainable finance.

“Improving the resilience of financial markets in Africa makes the continent better equipped to forge a better future,” Marsh wrote.


Gable argues that more than the final positions themselves, it is instructive to examine the “relative positioning” of countries against each other, and their movement up and down the rankings.

Among the best performers are Malawi benefiting from the adoption of the global repo agreement, Egypt from economic reforms and good management of its reserves, and Uganda climbing to fifth place thanks to its large pension fund assets. “This is a positive change,” Gable said of the improving markets.

The progress made by Malawi and Uganda is another reflection of governments taking proactive decisions to improve their markets, he adds, hoping the report encourages “an enabling environment that allows financial markets to function, smoothly and transparently for all”.

Ghana also moved up from sixth to fourth, thanks to its strong contractual framework and consolidation, while other countries slipped back.

The countries that fell weren’t necessarily bad either, with Namibia and Botswana falling slightly while maintaining a strong overall position. “Namibia has made significant changes,” says Gable. There has been an “active decision by policy makers to actively encourage asset managers to be active in the market”, after enacting legislation encouraging the use of pension fund assets, deepening its markets, and providing good liquidity and retirement assets. Botswana’s success was based on market growth, even though it suffered from a weak exchange position.

Marsh praised the response of the International Monetary Fund (IMF) and multilateral development banks to the pandemic, with many countries, including São Tomé and Príncipe and South Sudan, receiving economic support from the IMF.

The Managing Director of the IMF recently called for the transformation of African economies with lasting improvements after the pandemic.

Looking ahead, Gable expects the introduction of retail investors to stock markets will impact their performance over time.


Having noted the growing interest in environmental, social and governance (ESG) investing in previous years, the authors have included ESG finance in the rankings for the first time this year, including the presence of regulation for these products.

The inclusion of ESG has hurt some countries’ overall score, but Absa and OMFIF hope it will encourage those countries to do more on this front.

“Global money is now increasingly directed towards products that have ESG aspects and so you don’t want to be a country, a region, a market, that doesn’t supply products in those spaces”, or you don’t You won’t have access to all parts of the markets, says Gable.

Nine countries have introduced green or sustainable financial products, most commonly green bonds, with Kenya and Morocco having the best offering on this front, while Kenya also has ethical securities that contribute to socially responsible investing.

“On the continent, there are many opportunities ‘for social bonds and green finance’ to have a real and significant impact,” says Gable, as there are projects that otherwise would not have funding, even if they will take longer to fully materialize and mature.

Egypt launched the Middle East and North Africa region’s first green bonds in September 2020 as part of a push towards a greener economy, while the African Finance Corporation issued its first green bond the same month. In June of this year, Ecobank issued $350 million in sustainability bonds.


World Bank Scores To do business report were not included because this year’s report was cancelled.

Although not included in the index, the Absa and OMFIF report also looked at the digitization of financial markets, with at least eight countries studying digital currencies, which Gable described as “one of the next big things”. which may be included in future editions of the index.

Pandemic hits African markets but leaves room for optimism