Africa’s Most Developed Financial Markets In 2022

The Absa Group and OMFIF recently launched the Absa Africa Financial Markets Index 2022 report, which assesses the growth of the financial markets in 26 countries and identifies those with the most favourable market environments.

The objective is to demonstrate current situations and how nations might strengthen market structures to support investor access and sustainable growth.

The index rates nations based on six criteria:

  • macroeconomic opportunity
  • market depth
  • access to foreign exchange
  • tax and regulatory environment
  • market transparency
  • the capacity of local investors
  • enforceability of financial contracts

Despite the index’s performance being hampered by challenging market conditions, 19 of the 26 countries ranked higher than they did the year before, according to the report.

This was partly because of the widespread development of sustainable financial markets, which are becoming more significant to international investors.

According to the survey, Namibia, Uganda, and Kenya are the three nations with the most significant score increases.

They have strengthened their market frameworks for governance, social issues, and the environment.

In Kenya, the regulation of financial stability now includes climate concerns. Scores for most nations, including Angola and Lesotho, which both conducted their first initial public offerings over the last year, have improved due to greater product diversification.

Greater product diversification has improved rankings for most nations, including Lesotho and Angola. They have just issued their maiden initial public offerings.

  • The Absa Group and OMFIF recently launched the Absa Africa Financial Markets Index 2022 report, which assesses the growth of the financial markets in 26 countries
  • This year, the index was still developing. With the inclusion of Madagascar, the Democratic Republic of the Congo, and Zimbabwe, the number of nations now covered has increased to 26
  • The research demonstrates how nations have improved market infrastructure, transparency, and regulation by utilising new technology without directly affecting scores

The sixth edition of the Absa Africa Financial Markets Index offers a comprehensive snapshot of the continent’s financial markets. This year, the index was still developing; with the inclusion of Madagascar, the Democratic Republic of the Congo, and Zimbabwe, the number of nations now covered has increased to 26.

The ranking also acknowledges how digital initiatives and innovations have helped the growth of the African financial market.

The research demonstrates how nations have improved market infrastructure, transparency, and regulation by utilising new technology without directly affecting scores.

It also provides information on numerous programmes for financial inclusion that contribute to expanding the domestic investor base. For Africa to become more appealing to investors and easier to access, sustainability, digitalisation, and financial inclusion must continue to advance. This will help the continent build its resilience to any upcoming external shocks.

Major conclusions include:

This year, the top three nations are still South Africa, Mauritius, and Nigeria because they continue to rank highly in terms of market size, transparency, and the ability to enforce contracts.

Namibia and Kenya gain positions within the top 10, and Uganda moves up two spots to fourth. Progress in implementing ESG policies and frameworks is primarily responsible for these three countries’ improved scores.

There are 17 countries in the index with sustainability-focused policies, an increase of 5 from the previous year.

Overall AFMI scores, 2022 vs 2021

The sufficiency of foreign exchange (FX) reserves has generally decreased from the previous year. Ten African Finance Markets Initiative (AFMI) nations will each get US$1.6 billion in IMF financing in 2022 to help them weather the effects of outside shocks.While efforts to integrate financial markets across Africa are gaining traction, several nations are employing digital technologies to enhance market access, knowledge, and inclusion.

Note: 2021 scores may differ from those released in AFMI last year since they consider newly available data and methodological adjustments.

According to capital market mechanisms that actively direct sufficient risk pricing, Africa appears to be a desirable investment destination, according to OMFIF Chairman David Marsh.

Numerous sites could be developed. To further these beneficial reforms, the private sector must exert unrelenting efforts alongside the International Monetary Fund, multilateral development organisations, and our network of partner institutions in Africa.

According to Charles Russon, chief executive of Absa Corporate and Investment Banking, the index has positively affected the infrastructure, product, and policy growth of the financial markets on the African continent.

“Now in its sixth year, this index has spurred market transparency, improved policy-making, and enabled the development of Africa-focused alternative investment products that will have an influence for generations to come,” Russon said.

The index was also well-received by influential international decision-makers. The 2022 Absa Africa Financial Markets Index, with improved geographic coverage and thematic scope, serves as a crucial tool for legislation and regulators in developing financial markets on the African continent, according to Antonio Pedro, acting executive secretary of the United Nations Economic Commission for Africa.

It offers an in-depth comparative assessment to aid in the formation of policies for the long-term growth of the financial market.

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