Africa, buffeted by fiscal, environmental and political risks, urgently needs to develop vibrant capital markets to bolster its economic growth and accelerate sustainable development, financial experts have argued.

Participants at the 27th African Securities Exchanges Association (ASEA) Conference, hosted in Gaborone, Botswana from 26-27 November 2024 underscored that Africa can benefit from viable capital markets through the mobilisation of domestic resources at a time the continent is facing high indebtedness and the lack of affordable finance.

“Access to finance is a major constraint to African development and capital markets are a key player to overcome this constraint,” said Jean-Marc Kilolo, Economic Affairs Officer, with the Economic Commission for Africa (ECA), speaking at the opening of the conference.

Organized by the the African Securities Exchanges Association (ASEA), the African Securities Dealers Association (ASSDA), African Exchange Linkage Project (AELP) and the Economic Commission for Africa (ECA), the two-day conference will explore the theme, “Enhancing Africa’s Capital Markets Collaboration and Integration through the AELP.”

The chair of the Botswana Stock Exchange, Kopano Bolokwe, noted that some significant strides have been made in the regional AELP project as an avenue for fulfilling long-held aspirations for the integration of African capital markets.

Low credit ratings for African countries are leading to high borrowing costs and liquidity challenges. This is according to panellists at a plenary session on harnessing sovereign credit ratings power for Africa’s economic transformation, organised by the Economic Commission for Africa at the 2024 African Economic Conference (AEC) in Gaborone, Botswana.

Zuzana Schwidrowski, Director of the ECA’s Macroeconomic, Finance and Governance Division at the ECA said low credit ratings contribute to high borrowing costs and more broadly to a vicious spiral of liquidity challenges as well as debt accumulation for African countries. Despite the overall challenges in credit ratings, she emphasized some positive developments and turnarounds in selected credit ratingtrajectories of African sovereigns, such as Moody’s upgrade of Tanzania or S&Ps positive outlook on South Africa. However, the overall double-digit inflation prevents African Central Banks to reduce policy rates, which is another factor behind high borrowing costs and overall subdued growth, especially among resource (and fuel)-intensive exporters. 

In her presentation on credit ratings in Africa, Sonia Essobmadje, Chief of ECA’s Innovative Finance and Capital Markets Section, said, “Improving Africa’s fundamentals and implementing a structural reform program would certainly over time contribute to better ratings, but more importantly to sustainable, inclusive growth and the well-being of the population. The development of African national and regional financial markets should be a priority, as this would reduce excessive dependence on external debt and improve the transmission of monetary policy.”