The role that African financial markets can play in the integration and development of the continent

As per the old Chinese adage “may you live in interesting times”. I think most people would agree that in recent years we have seen this come true as we do indeed “live in interesting times”.

As it relates to African Financial Markets, we have not been spared the volatility and unpredictability that comes from these interesting times and with an expectation of more to come in the not-too-distant future.

Financial Markets (the Markets), to most people refers to an abstract hard-to-imagine world of high frequency trading, algorithms, and numbers. I often think of feature films like Wallstreet, Margin Call, The Wolf of Wallstreet and the instructive The Big Short when trying to explain what my job entails.

While entertaining, these films do not necessarily fully represent what the Markets are in a strict finance sense. In our terms, the Markets refers to services and flows related to the trading and sales of global debt, equity, foreign exchange, and other commodities. Whether it be pricing capital flows for a government’s infrastructure needs, or providing investment outlets to pension funds or even you and I who may just require an exchange rate to make payments when on holiday in another country.

By facilitating and pricing the cost of capital flows, the Markets play a crucial role in providing access to capital for businesses, governments, and entrepreneurs. On the other hand, when this facilitation of funding is accompanied with market depth and proper regulations, would attract local and much sought after international investment flows, which are critical to economic growth and national prosperity. In this sense, a better developed Financial Market could be akin to taking the national shop to becoming a mall of a wider range of products.

Furthermore, besides the role of exchange rates in attracting international investment flows, a developed, transparent and market determined exchange rate regime also enhances regional trade, which aligns with initiatives like the African Continental Free Trade Area (AfCFTA). A less spoken about fallout of this initiative could be that; a more integrated African financial system could reduce the reliance on foreign capital and stabilize local currencies and maybe reach the holy grail of a unified African currency…thus making Africa a more resilient economy, in essence improving the standard of living of the African citizen.

Additionally, as access to and cost of technology becomes a lot more practical in Africa, its application to financial services and the Markets specifically, provides a huge opportunity to achieve financial inclusion and product innovation, thus providing greater access to either credit or investment opportunities at a much greater portion of the population. Technology can also play a significant part in strengthening regulation and compliance, which has for many years been an Achilles heel of African market development.

The Markets as abstract or complicated as it may seem, in its purest form is the meeting place where economic development is built on, whether its setting effective and transparent exchange controls that allow for the inflow of foreign investments or supporting the development of market products that extends the interest rate yield curve, thus allowing the pricing of long term mortgages…the Markets provides much larger benefits into the future growth of economies on the continent. As ‘times get interesting’ let’s put our fate in our hands today, before a time when our hands are forced, and the pain is unbearable.

By virtue of Standard Bank’s 162-year heritage, balance sheet size, and footprint, we are an industry leader on the continent in the African Financial Markets, as in other banking categories. We are cognisant that Markets cannot be an isolated universal panacea for development, however the development in Africa remains a core passion of the bank. With our competitive advantage to provide structured solutions and mobilising much needed USD across African markets, our on-the-ground presence allows us to build deep relationships and gain a strong understanding of the market dynamics.

Given this experience and advantage, earlier this year, we hosted our inaugural African Markets Conference (AMC) where we brought together a mix of policy makers, business leaders, financiers, and government representatives from the continent to chart ways of maximising on our existing ties.

We are confident that this inaugural AMC will serve as a catalyst to re-examine monetary policy, increase intracontinental trade, improve the ease of transacting on the continent and showcase the investment opportunities on the continent. Traditionally these have been and remain areas of misalignment especially where Africa’s development and growth is concerned.

The important work of building a shared understanding of the African financial markets, will play a key role in forming an integrated approach to development which is key to driving Africa’s growth. The AMC aims to provide a platform for Standard Bank and other like-minded stakeholders turn talk into action and continue to build this great continent that we call home.