Issue 5 - Africa's Financial Markets: a Real Development Tool?

Issue 5 - Africa's Financial Markets: a Real Development Tool?

Editorial

By Luc Rigouzzo, Proparco's Chief Executive Officer

African financial markets have been experiencing spectacular growth since the early 1990s. Their number has since risen from roughly a dozen to 23 and they now provide continent-wide coverage. Market capitalization has risen ninefold and over 2 000 businesses are now listed. There has been a sharp increase in initial public offerings (IPOs) in recent years which have allowed some banks or businesses to raise sizeable amounts of capital – this gives a clear sign of the depth of local savings and domestic investors’ interest in stock markets.

For instance, since 2000 nearly USD 4 billion have been raised locally on the Lagos Stock Exchange in Nigeria alone. Thanks to privatization programs, hundreds of thousands of Africans have become shareholders of major companies in their countries. Yet the size of these markets remains small – both on a global scale and in terms of African economies. Liquidity is often totally lacking and this deters foreign investors that are still not sufficiently active on these stock markets. Businesses are reluctant to conduct an IPO and very seldom manage to finance themselves through bond issues.
 
This fifth issue of the magazine Private Sector and Development makes a comprehensive review of developments (recent and future) on Africa’s financial markets. It also highlights their utility and their impacts on African economies and poses the questions: Is the continent not at a too early stage on its “development path” to invest in the creation of financial markets? What do stock markets really bring to businesses that decide to conduct an IPO? What is the popular base of these markets? And how do they link up with banking markets – which themselves are in their infancy in many countries?
 
True to its editorial line, the magazine Private Sector and Development has once again decided to compare the ideas of researchers, development actors and private operators, investors or listed businesses. I would like to thank all the contributors for the originality and diversity of their points of view and for having managed to go beyond the often oversimplistic vision that we have of African realities. Yet such a topic could have become completely bogged down in ideological positions and recent debates on the crisis. This has not been the case. The authors tell us about just how important financial markets have become for Africa and the extent to which the stock market tool - with its limitations and weaknesses – has now become a local reality.
 
Proparco has been supporting the development of Africa’s financial markets alongside other funders for 15 years now. This choice has become a cornerstone of our strategy. It is important to assess the impact and relevance of these operations and this issue of Private Sector and Development clearly contributes to this. The articles, which I hope you will read with pleasure and interest, underscore our aim to pursue our operations to support these markets while, of course, remaining aware that they are just one element among all the physical and financial infrastructure required for the development of the continent.