Pan-African bourse still a pipe dream

A Pan-African stock exchange is most unlikely to be established because of the passion for owning a national exchange.
This is according to Nicky Newton-King, the newly-appointed head of the Johannesburg Stock Exchange (JSE).
The JSE JSE Securities Exchange, Africa’s biggest bourse, has in the past been understood to be angling for a unitary exchange that would initially start with countries trading of shares in Ghana, Namibia, Zambia and Zimbabwe.
The idea is to then expand from there and cover the continent.
Experts say a pan-African stock market would help attract and slow capital in times of crises.
However, the JSE’s Newton-King said a Pan-African Stock Exchange remained a dream at present.
She warned, “We’re going to fail the continent if we do not find a way to work together as exchanges to build bigger and deeper capital markets.
“The reality is Africa’s time is coming and everybody wants a bit of Africa and it’s very difficult for investors to get a better of Africa (trade) if we don’t create capital markets for them,” said Newton-King, who becomes JSE’s CEO with effect from January 1, 2012.
The JSE controls about 65 percent of total market capitalization of Africa’s stock exchanges.
Most of the 24 other exchanges share between zero and one percent.
In comparison to the airline business, Newton-King noted that it is an incorrect concept for every country to own a stock exchange “because an exchange is a facilitator, an agent and has to provide services to issues of listed companies and investors”.
The 120 year-old JSE Limited, she said, is 50 percent owned by people outside of South Africa. “It is very expensive to run an exchange and not commercially viable to have lots of exchanges all around the continent”, she told a group of African journalists on a Thomson Reuters Foundation workshop in South Africa. Newton-King observed that “an average day’s trade on the JSE is more than the annual turnover of Mauritius and Kenya taken together”, emphasizing that big investors may be unwilling to buy shares in companies listed on those markets because of the size of the stock exchange is too small.
JSE Limited therefore expects big and small exchanges to collaborate “to build a bigger pool of liquidity” of a virtual single exchange for companies to cross-list and trade in bigger markets.
The partnership strategy, according to Michelle Joubert, JSE’s head of investor relations, includes dual listing of companies from the rest of the continent on the JSE “to enable issuers to take advantage of increased profile and new capital raising opportunities”.
She added that a technology hub should also be built to ease the activities of the exchanges for increased trade.
“As far as we’re concerned we don’t need a Pan-African stock exchange.
“The kind of co-operation that we’re looking for is more of shared experiences and working together,” said Joubert.
South Africa is ranked first in the world for securities market regulation, according to the World Economic Forum’s Global Competitiveness Report.
The JSE is among four African exchanges accepted as members of the World Federation of Exchanges (WFE).
The others are Egypt, Mauritius and Morocco. – My Joy Online

December 2011
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