African equity capital markets activity sees downward turn -But increase in domestic investors
A new report from auditing firm, PricewaterhouseCoopers (PwC) Nigeria 2019 shows that African equity capital markets activity have seen a downward trajectory over the past three years.
This was due to fiscal challenges faced by major economies on the continent as a result of the growing debt levels and slow economic growth.
The report, titled, ‘African Capital Market Watch reviewed the performance of Africa’s capital markets between 2010 and the first quarter of 2020.
PwC Nigeria’s Chief Economist, Andrew Nevin, who presented the report at a webinar, said the capital market value in 2019 was the lowest seen over the past decade, with the volume of deals lower only in 2012.
“African economies now face the unprecedented challenge of the COVID-19 pandemic, which has severely impacted global financial markets,” he stated.
Commenting on the data and the potential impact of the COVID pandemic, the CEO of the Nairobi Securities Exchange, Geoffrey Odundo, said “capital markets in East Africa have taken a hit, with a 20% decrease in trading volume since the beginning of COVID-19.”
On the positive side, there was increased activity from domestic investors, he added.
The Director-General, Securities and Exchange Commission (SEC), Ghana, Mr Daniel Ogbarmey Tetteh, for his part said market activity on the Ghana stock market had remained robust, with an almost threefold increase in trading volumes between January and April 2020, compared to the same period in 2019.
He said a good proportion of these trades originated from domestic investors.
Speakers who participated in the webinar also stressed the important role of African capital markets in supporting the post-COVID recovery.
For this to happen, they believed African markets need to be deepened and provide avenues for investment of the significant pools of local capital currently tied up in “dead” assets.
Expanding the range of available asset classes should also include measures to attract and support new listings.
The panel agreed that the increased engagement of local investors in the current environment was a positive sign, and that developing a deep pool of domestic investors is essential for African capital markets to play their full role in supporting the post-COVID economic recovery.