London Stock Exchange Group (LSEG) has launched 5 reports on African capital markets, developed as part of its London Africa Advisory Group (LAAG) at last week’s African Investment Forum in Johannesburg. The five reports put forward recommendations on how African capital markets could be further developed to increase global investment flows. Access all the reports here on the London Stock Exchange website.

The reports were commissioned by LAAG following over 2 years of meetings with its members, Africa’s business leaders, policymakers and investors. They were produced in conjunction with stakeholders in London and across Africa.

• 1. Developing the green bond market for infrastructure products
  2. Attracting passive investment flows
  3. Developing offshore local currency bond markets
  4. Capital raising challenges for SMEs
  5. Corporate information dissemination.

  Suneel Bakhshi, Chairman of International Advisory Groups, LSEG, said in a press release: “These reports are the result of work carried out over 2 years to deliver empirically grounded, actionable and Africa-specific policy recommendations. LSEG’s London Africa Advisory Group is designed to provide a platform for regular and collective dialogue through which to develop stronger relations with senior decision makers, regulators and business leaders across the continent. It is our intention that these recommendations offer practical advice and constructive solutions for supporting the development of Africa’s capital markets.”

  Summary of key findings:

• Developing the green bond market in Africa: Studies suggest Africa will be more severely affected by climate change than any other continent, which will require the continent to take advantage of green capital raising tools and sources of funding.
• Attracting passive investment flows to African markets: Passive investment flows are key to supporting depth of African capital markets; a key factor for this is country classification (Developed, Emerging or Frontier Markets) and flows could be enhanced through country classification upgrades.
• Developing offshore local currency bond markets in Africa: To sustain the continent’s strong GDP growth of the past two decades, substantial investment, particularly in infrastructure, is required; raising debt finance from larger offshore capital pools in local currencies is an attractive solution which mitigates an issuer’s currency risks associated with borrowing in hard currencies.
• The challenges and opportunities of SME financing in Africa: Small and medium-sized enterprises (SMEs) account for around 90% of Africa’s businesses, but experience a shortage of financing at all levels; these companies, which provide nearly 80% of the continent’s employment, can benefit from increased training and capacity building, a public register of companies, and supportive government policy.
• Trends in corporate information dissemination in Africa: Company news plays a central role in the efficient functioning of financial markets improving depth in securities trading; centralised regulatory information services and their distribution are therefore key in disseminating company news to the relevant stakeholders in a timely manner.