African Capital Markets: Issues, Challenges and Prospects

J. K. Randle


By Bashorun J.K. Randle  |

HAVING just listened to (and thoroughly enjoyed) the 42-page dissertation on the exotic topic of Integrating West African Capital Markets by our distinguished Guest Lecturer, Dr. Adu A. Antwi who is the Director-General of the Securities and Exchange Commission, Ghana I am tempted to suggest that there is nothing left to be said.   Hence, we should proceed to lunch forthwith !!  However, I suspect that our hosts, the organizers of today’s Pearl Awards Annual Lecture did not intend to treat us to a free lunch.   In life, as indeed in the capital market, nothing is free.  Not even in Freetown, Sierra Leone.

Truly the paper presented by Dr. Antwi is clearly the product of remarkable intellect combined with exceptional professionalism. In presenting his case for integration, our guest lecturer leaves us no choice than to urge speedy implementation rather than more talking or discussions, seminars, committees, workshops, councils etc ad infinitum.

Indeed, the idea of integrating West Africa Capital Markets appears to have been overtaken by the prospects of a quantum leap as suggested in a report by CNN on “Inside Africa” last week.  Africa is abundantly blessed with vast resources and the potential for development as well as prosperity is huge.   At the tail end of the programme Bob Geldorf who had hitherto been a champion of aid for Africa was singing a different tune:

“What Africa needs is investment not aid”

By the same token, what West Africa urgently requires is to deliver real value and commensurate returns on investment if integration is to have relevance rather than remain fanciful adventure.

In any case we have been presented with sufficient evidence that the Guest Speaker and his colleagues have carried out a sufficiently robust Feasibility Report as well as:

  • Vision Statement
  • Mission Statement
  • Strategic Planning
  • Computer model
  • Financial model
  • Road Map
  • Timelines and Milestones.

We are also entitled to believe that the team of professionals at their disposal would have documented the “SWOT” Analysis (Strengths; Weaknesses; Opportunities; and Threats) in respect of the integration process – from conception to final destination.

Whether we are speaking of West Africa or the entire continent of Africa the major challenge is Revitalization.

Our reality check will no doubt persuade us that in most (with very few exceptions) of the countries that we are seeking to integrate, the economy is in shambles while the political template is at best uncertain, if not in turmoil.  In addition, we have to factor in four critical issues.

  1. Idiosyncratic leadership
  2. Corruption
  3. Insecurity
  4. Poverty, joblessness and hopelessness.

We also have to contend with the not inconsequential problem of language – Francophone versus Anglophone and the attendant clash of cultures.

These are the countries that make up West Africa (ECOWAS Region), and the “lingua franca” of each of them.

Nigeria English
Ghana English
Sierra Leone English
Gambia English
Senegal French
Burkina Faso French
Guinea French
Cote D’Ivoire French
Republic of Togo French
Mali French
Cape Verde Portuguese
Guinea Bissau Spanish
Liberia American / English
Niger French
Chad French
Benin French

In any case, regardless of how we intend to proceed, we have to commence with the profound issue of source of investment flow into the capital markets –

Domestic savings

Remittances from the diaspora, or

Foreign Direct Investment.

There is another category which is somewhat sensitive.  It relates to the staggering amounts which have been looted from West Africa (and the African continent).   The figures being quoted are truly mindboggling.

Here, we cannot afford to confuse the rigid morality of the pulpit with the ruthless, aggressive and flexible morality of the market place/capital market.

However, let us be clear about one thing – whether it is the development of West Africa or Africa in its entirety, we are the masters of our own fortune.   We must be ready to accept responsibility for our development.   Nobody else will do it for us.   Why should they ?

Also, we must recognize what is patently obvious – while turmoil and uncertainty prevail, the beneficiaries are those who are plundering our resources.   It is to their advantage that we should be distracted and be pre-occupied while brigandage and impunity run riot.

The pattern is the same all over – oil theft in Nigeria (estimated at 400,000 barrels per day!!); illicit smuggling of diamonds in Sierra Leone, Gold in Mali; Bauxite and Aluminium in Guinea.

The relevance of this to the capital market is that for the various stock exchanges to merge successfully the fundamentals must be right.  Theoretically, (and hopefully in practice) market prices are the product of and reflection of the underlying respective economies and resources as well as expectation of future prosperity.

Here, we must pause and reflect on the anguish of those who were victims of the recent financial meltdown and the collapse of numerous stock exchanges.  Some of them, particularly those who engaged in margin loans, were wiped out.  Indeed, it is no secret that some went to their graves early while others contemplated suicide when their spirits were at their lowest ebb.  To now implore them to embrace the merit of integration of capital markets in West Africa is an act of monumental insensitivity and is tantamount to rubbing salt into injury.

Perhaps I should add that for the last three weeks, CNN and several other television channels have been showing heart wrenching stories of desperate refugees from Africa ready to risk all – wives and children included, to cross in vastly overcrowded boats from Libya or Tunisia just to get into Europe.  Invariably, the boats capsized and the rate of attrition has been terrible.  Nevertheless, those who survive are ecstatic in anticipation of the promised land which they wrongly believe to be better than they left behind in West Africa and other parts of the African continent.

It is also instructive that the European Union Commissioner in Nigeria, Mr. Michel Arrion recently disclosed that there are more African professionals living in Europe and America that in Africa itself.

I hope I am quoting him correctly:

The European Union Delegation says Nigeria is a rich country which should not depend on aid from foreign donors.

Mr Michel Arrion, the EU Ambassador and Head of Delegation to Nigeria and ECOWAS, expressed the opinion in Abuja on Tuesday.

He told newsmen that any money given to Nigeria by the EU was “seed money.”

Arion explained that aids given to Nigeria by the EU were to fund projects on a pilot scale while the Nigerian Government was expected to replicate them on a larger scale.

“Please note that our aid is strategically tailored to unlock Nigeria’s potential. Nigeria is not an aid-dependent economy, with aids constituting less than one per cent of its GDP.

“Therefore, when we fund projects on a pilot scale, governments at various levels can replicate them at a larger scale for wider reach and greater benefits.

“Nigeria is a rich country, but Nigerians are regrettably poor.

“To really develop the economy in a sustainable way, the core issue will be to redistribute social benefits through fiscal measures using taxation, and social measures using safety nets.

“Strengthening the institutions is absolute key in this regard”, he said.

The EU official added that the EU’s development assistance to Nigeria, under the 11th European Development Fund, would focus on the North.

According to him, the focus on the Northern part of the country was due to the fact that development indicators in the area were “unacceptably worse.”

He said the emphasis would be on improved access to basic social services such as health, nutrition and social protection.

“The fund will also be on improved access to electricity which will lead to economic growth and improved security”, he said.

Arion said the EU recently signed an agreement with the Nigerian government to fund a pilot project.

According to him, the project is aimed at providing community-based psychological support and protection services for children and adolescents affected by the Boko Haram insurgency in Borno.

At the risk of stating the obvious, we are not likely to make much progress with integration unless we address the critical issue of our image in the international market place.  We need to urgently re-connect with the rest of the world in terms of law and order as well as accountability and transparency.  The perception is that Africa is a jungle where man and beast compete for supremacy.

Again, when President Muhammadu Buhari joined the G7 meeting yesterday on the invitation of the seven most powerful nations in the world – United States of America, Britain, France, Japan, Germany, Canada and Italy, the number one item on the agenda was corruption followed very closely by insecurity, particularly the Boko Haram insurgency.

These are fundamental issues which have to be tackled alongside the integration of our capital markets.

For those who are tempted to insist that in West Africa (as in the rest of Africa) we are mostly struggling to survive, hence integration would only add to our woes, we must go the extra mile to demonstrate that we have done our homework thoroughly.  Indeed, the paper delivered by Dr Antwi provides sufficient basis and assurance that the mobilization of our savings combined with other resources should provide a beacon of hope for our collective prosperity – provided we allow market forces to prevail over market rigidity or manipulation.

By way of digression, let me add that the very idea of the “Stock” Exchange owes its conception and origin not to a lawyer, banker or chartered accountant but to a surgeon, Dr John Stocks.

It was only in recent times that a cynic delivered judgement:

“You buy out of greed and sell out of fear.”

Another case that offers sanguine lessons is that of Greece.  A decade ago, Greece had a vibrant Stock Exchange.  However, it was mostly a comedy of smoke and mirrors.

The stock prices and asset valuation were completely out of sync with the fundamentals of the economy.  The Greek Stock Exchange along with its bond market crashed and brought in its wake the crash of the Greek currency and the threat of Greece defaulting on its loans as well as the prospects of its exit from the European Common Market and Eurozone.

In crafting the road map for integrating West African Capital Markets, we should not only focus on the potential benefits but also on the threat potential.

For example, Islamic fundamentalists nearly took over the entire nation of Mali until France came to the rescue of the thoroughly destabilized citizenry.  Under those circumstances, it is unlikely the Stock Exchange would have survived.

Bashorun JK Randle is a former President of the Institute of Chartered Accountants of Nigeria (ICAN) and former Chairman of KPMG Nigeria and Africa Region.  He is currently the Chairman, JK Randle Professional Services.

Email: [email protected]

— Jun 29, 2015 @ 01:00 GMT


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