New African Stock Exchanges linkage project targets $1trn market capitalization

• Exchange to represent continent’s 90% equity market
• To create seamless trading platforms across continent

A new African Stock Exchanges linkage project being promoted by the African Development Bank (AfDB) with other stakeholders, which would integrate stock exchanges across Africa, is set to create an integrated capital market on the continent with capitalization in excess of $1 trillion.

The incoming African Stock Exchanges capitalization would represent 90 percent of Africa’s total equity market.

According to stock market experts, the new African Stock Exchange linkage will increase liquidity and enable seamless trading platforms across the continent’s 55 sovereign nations, 1.3 billion people and a combined GDP of $3.4 trillion.

Akinwunmi Adesina, president of AfDB said the pan-African multilateral financial institution is happy to be supporting the Africa Exchange linkage project, as it seeks to integrate stock exchanges across Africa.

“The goal of our efforts is to support the integration of Africa’s markets. This will create an integrated capital market with capitalization in excess of $1 trillion, representing 90 percent of Africa’s total equity market. This will increase liquidity and enable seamless trading platforms across the continent,” Adesina said while speaking recently at the 5th annual meeting of the Africa Economic Zones Organisation (AEZO).

The Afreximbank’s 2020 African Trade Report said Africa’s stock market picture was mixed in 2019, but more exchanges ended the year up than down. South Africa’s JSE All Share Index recorded an 11.4 percent rise over the year, while Morocco’s MASI Free Float All Shares Index and Egypt’s EGX 30 Index grew by 8.9 percent and 5.7 percent respectively.

However, some of the continent’s most important stock exchanges experienced falls over the course of the year. The Nigerian Stock Exchange NSE All Share Index fell by 13.6 percent, the Bourse Régionale des Valeurs Mobilières in West Africa dipped by 7.3 percent, and the Nairobi Securities Exchange LTD 20 Index dropped by 5.5 percent.

There are a number of stock exchanges in Africa, most of which are very small by world standards. The five big stock markets, according to market capitalisation are: the JSE, the largest and most developed bourse on the continent, founded in November 1887. The JSE has a market capitalisation of $987 billion and 388 listed companies, 76 foreign domiciled companies, and a market cap to GDP ratio of 278.94 percent.

The second biggest is the NSE, which began in 1960 as the Lagos Stock Exchange before name-change in 1977 to NSE. It has a market cap of N17.91 trillion or $44 billion, 176 registered companies and a market cap to GDP ratio of 8.83 percent. The Egypt Stock Exchange (EGX) comprising the Alexandria (1883) and Cairo (1903) exchanges with $46 billion market cap follows next, with 222 listed companies and a market cap to GDP ratio of 17.61 percent.

The Casablanca Stock Exchange (in Morocco) was established in 1929, known as Office de Compensation des Valeurs Mobilières, has market cap of $48 billion with 75 listed companies. The Namibian Stock Exchange, one of Africa’s oldest stock exchanges, was founded in 1904, but relaunched in 1992. It makes use of the JSE’s equity trading systems and services to trade, clear and settle its securities. The Namibian stock market has a market cap of about $76 billion, with 36 listed companies.