Absa Africa Financial Markets Index: Ghana makes significant in-roads in deepening financial markets
Barclays Bank Ghana, on Tuesday 4th December, released the second edition of the Absa Africa Financial Markets index which shows Ghana as one of the best frontier markets in Africa. Ghana made an impressive eight places upward move from last year’s rating to rank the 4th in Market Depth. A more transparent and well-regulated market together with increased focus on bringing companies into the formal sector has been instrumental in this regard.
The country also made significant progress in Market Transparency, Tax & Regulatory Environment, to rank 6th on this pillar. However, there is the need to empower our local investors and boost their capacity as Ghana scored low in this area.
Overall, Ghana ranked 7th among 20 African countries. The five highest ranked financial markets in the 2018 index are: South Africa, which remains in the top position; Botswana, which rose to second place from third last year; Kenya, which climbed two spots on improved access to foreign exchange; Mauritius, which moved down to the fourth place from second last year; and Nigeria, owing to improvements in administrative efficiency and tax incentives that have boosted the country’s regulatory environment. Nigeria is a new entrant to the top five, as a result of Namibia falling to sixth place from fourth this year.
Now in its second year, the index tracks financial market development in 20 countries across six indicators. It provides benchmarks against which countries can measure their progress while developing their financial market frameworks to enhance investor access and sustainable growth.
Commenting on the index, Maria Ramos, Chief Executive Officer of Absa Group, notes: ‘The development of well regulated, deep and liquid financial markets is a key priority that should be at the top of Africa’s development agenda. The index facilitates a meaningful debate about the maturity and accessibility of Africa’s financial markets. It is an important contribution that supports policy-makers, investors, regulators and other market participants to identify the areas and initiatives which will drive the most significant improvements.
‘As a bank, we are aware of the critical role that financial markets must play to cushion our economies by channelling the wealth of savers to those who can put it to long-term productive use’ says Mrs. Abena Osei-Poku, Managing Director of Barclays Ghana. ‘The significant investments we have made in partnership with the OMFIF and our commitments going forward are premised on our firm belief that we will remain a force for good in Ghana and on the entire African continent.
This year’s edition extends coverage to three additional countries – Angola, Cameroon and Senegal – and pays special attention to policies for enhancing market growth, including financial inclusion and investor education. Countries are progressing with policies that support the development of financial markets across the continent. South Africa’s ‘twin peaks’ strategy for improving financial regulation and Mozambique’s ‘financial sector development strategy’ stand out among the frameworks introduced over the past year. Such initiatives have boosted performance for the index as a whole.
The greatest area for improvement across the continent remains the ‘capacity of local investors’. Excluding the top five economies, the remaining countries average a score of just 22 out of 100 in this pillar. Survey respondents highlighted that the lack of knowledge and expertise of pension fund trustees and other asset owners hinders the development of new financial products, by reducing their demand for more sophisticated assets and strategies to diversify returns. The index also shows that improvements in market infrastructure and regulatory frameworks could boost the performance of countries in the middle of the index over coming years.
‘It is heartening to see the advances made by African countries, in many areas, to improve the efficiency of capital markets,’ says David Marsh, Chairman of Official Monetary &Financial Institutions Forum (OMFIF). ‘However, more remains to be done regarding the robustness of market infrastructure and regulatory frameworks across Africa and we look forward to tracking progress annually.’
The 20 economies surveyed are: Angola, Botswana, Cameroon, Egypt, Ethiopia, Ghana, Ivory Coast, Kenya, Mauritius, Morocco, Mozambique, Namibia, Nigeria, Rwanda, Senegal, Seychelles, South Africa, Tanzania, Uganda and Zambia. The index provides a toolkit for countries wishing to build financial infrastructure by tracking progress annually across six pillars: market depth; access to foreign exchange; tax and regulatory environment and market transparency; capacity of local investors; macroeconomic opportunity; and enforceability of financial contracts, collateral positions and insolvency frameworks.
The Index can be viewed here: https://thinktank.omfif.org/afmi2018
For further information about OMFIF, please visit: www.omfif.org
For further information about Absa Group Limited, please visit: www.absa.africa