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Gaborone ‑ Plans are at an advanced stage for SADC nationals or investors in one SADC country to access stock markets in another electronically without having to travel.
Member states are currently working towards the integration of the stock exchanges through the Committee of SADC Stock Exchanges (CoSSE), though the timeframe for the integration has not yet been established pending creation of enabling legislature and adaptation of technology.
CoSSE has membership of eight out of the 12 stock exchanges in the region and others are yet to apply.
This was revealed at the Society for Worldwide Interbank Financial Telecommunications (SWIFT) African Region conference held in Gaborone, Botswana, recently.
CoSSE chairperson, Beatrice Nkanza, revealed that the idea started around 1996 under the auspices of the SADC Finance Protocol.
“The challenges faced by individual stock exchanges at the regional level include growth, liquidity and attracting investors,” she said, adding that they started with the harmonisation of bureaus; so far, exchanges in the region are automated from trading to depository.
“We are dealing with issues of investor education and we have realised that there is little participation on the retail side. We want to capitalise on technological advances,” she said.
Nkanza, who is also the CEO of Lusaka Stock Exchange, said they want the stock exchanges in the region to communicate such that an investor in one country would be able to access a market in another country.
According to Nkanza, CoSSE has come up with policy impediments, and they are trying to turn the legislature into an enabler but not a hindrance.
She said already there were some levels of cross-border trading, but that it has to be harmonised so that it becomes a seamless activity.
“The CoSSE advocates what individual stock exchanges want, such as the interfacing of the markets for cross-border trading, safe settlements on deposits and a strong participation from local investors,” said.
Head of custody and settlements at Strate Ltd, South Africa’s central securities depository, Iann Seymour-Smith, said central security deposits are facing similar challenges to the stock
“However said, following the Financial Markets Act, we will soon link up with the Swiss depository and that two others in Europe have shown interest.
“In Africa, there is still a challenge as there are no single CSDs connected in Africa,” said Smith.
He further revealed that they have been appointed by CoSSE to work with other CSDs in the SADC region on the model that will enable linkages within the region.
Strate has been appointed as CSDs for Johannesburg Stock Exchange (JSE).
Botswana Stock Exchange (BSE) CEO, Hiran Mendis, said there are many models of integration, and that the CoSSE listing model was not accepted as each stock exchange wanted to reserve its sovereignty.
“I do not see any problems as many countries have the infrastructure to enable integration, but noted that there are impediments. Botswana, for example, does not have foreign exchange controls while other countries in the region have them. So, going forward we will need to look at the business model of integration, the costs and benefits of integration,” he said.
Speaking at the same event, Botswana Finance Minister, Kenneth Matambo said economic growth in Africa provides opportunities for the financial sector.
Matambo said that financial sector and ICT-related business opportunities would increase further as the continent shifted from the current status as a source of raw materials and importer of services to an exporter of finished products.
“Similarly, the needs of the rapidly-growing African consumer market must be provided for by way of establishing efficient services sectors. The ideals required intra African investments as well as investment from countries further afield to take advantage of the continent’s rapid acquisition of skills, technologies and a growing market,” said Matambo.
In this respect, Matambo said, it was notable that trade between Africa and emerging market countries, particularly China, has grown several-fold in the last decade, thus contributing to the continent’s economic growth and diversification, and providing a reasonable cushion from the ravages of the recent global economic recession.
Matambo said SWIFT and other providers of payments technology should continue to be an important component of the global financial flow architecture that could facilitate Africa’s expanding role in global trade and finance.
Matambo expressed worry that Southern Africa had been experiencing worrying trends in a crime known as “identity theft” which he said affected debit and credit cards at the most, automated teller machines (ATMs) and other modes of payment.
“Such fraudulent activities have huge financial and economic costs and if not tackled effectively, they have the potential to reverse the gains in national, regional and international payments and financial flows,” the minister said.
He also observed that African economic growth rate would outpace global economic rate.