New research from CFA Institute, Capital Formation in Africa: A Case for Private Markets, examines the case for mobilizing private capital to support the structural investment needs of sub-Saharan Africa. The research identifies and analyses existing barriers to the development of capital markets and offers a series of policy recommendations for regulators, policymakers, the investment industry, and international institutions active in the region.
Structured as a series of market-specific chapters, Capital Formation in Africa: A Case for Private Markets, covers 11 African economies, with contributions from local investment industry leaders in Botswana, Ethiopia, Kenya, Mauritius, Nigeria, South Africa, Uganda, West Africa (with a focus on Côte d’Ivoire and Senegal), Zambia, and Zimbabwe.
Dr. Phumzile Mlambo-Ngcuka, Former Deputy President of South Africa, writes in her foreword to the research:
“The CFA Institute research illuminates the current state of Africa’s capital markets but also serves as a call for stakeholders to engage thoughtfully with the markets evolving dynamics. It is my hope that this work will inspire policy reform and innovative solutions that navigate the complexities of capital formation with investor protection and strategic foresight. In doing so, we can shape the future of finance and drive the socioeconomic development of Africa.”
Ahmed Rashad Attout, Director of Financial Sector Development at the African Development Bank, also comments in his foreword to the research:
“At the African Development Bank, we are committed to building enduring partnerships with stakeholders who share our vision of a prosperous, inclusive, resilient, and integrated Africa. It is in that spirit that we welcome this important research from CFA Institute. The publication provides a much-needed local perspective on capital market development in Africa. Its conclusions and recommendations provide a basis for advancing the development of the investment solutions needed to build the efficient, dynamic, and integrated capital markets that Africa needs to drive its development agenda.”
The research will be launched today in Abidjan, where the African Development Bank is holding its annual meeting, during a panel discussion moderated by Olivier Fines, CFA, Head of Policy Research and Advocacy at CFA Institute. Fines adds:
“There is historically a strong correlation in various parts of the world between capital market development and socioeconomic progress. This research seeks to consider the main barriers to capital formation in sub-Sahara Africa and whether private markets, particularly private equity and private debt, can be a catalyst for stronger capital market development in the region. The authors believe private capital is particularly suited to the region’s current structural investment needs, including infrastructure and small- and medium-sized enterprise funding. The research also considers the potential for mixed finance projects and offers enduring lessons for sub-Saharan Africa based on the successes of the Asian tiger economies.”
Recommendations in the report:
For Regulators and Policymakers:
- Offer regulatory clarity and predictability through clear roadmaps and policy consultations when making significant changes to existing legislation
- Issue guidance on the regulatory treatment of private assets
- Develop strong and standardized corporate governance rules to improve corporate governance practices, the bedrock of investor confidence
For Governments:
- Consider forming public-private partnerships to stimulate the growth of financial infrastructure
- Collaborate with local firms to deliver investor education campaigns and offer grants and scholarships to students and early-career professionals pursuing accredited professional licensing qualifications
- Consider initiating projects to create endowment-like funds aimed at generating economic growth in various sectors of the economy
- Coordination between public authorizers and the private sector can make clearer the objective to integrate capital markets within the economic fabric of society
For Institutional Investors and the Investment Industry in Sub-Saharan Africa:
- Allocate resources and provide incentives for professionals to improve their skills; identify areas of skill deficits and recruit talent to address gaps
- Consider targeting small- and medium-sized enterprises in marketing campaigns that highlight the availability of funding and capital-raising options
- Develop private markets by aligning long-term and stable financing needs of SMEs and startups with private market’s long-term investment horizon
- Leverage local institutional investors (local pension funds, insurance firms, and sovereign wealth funds) as long-term anchor investors in capital markets
Africa Fact: By 2025, 50% of the population in Sub-saharan Africa will subscribe to mobile services.
Voluntary
These days, the pizza arrives before the police.
Station Wmd
Fun South African Fact: South Africa is home to the oldest meteor scar in the world – the Vredefort Dome in a town called Parys. The site is a UNESCO World Heritage Site.