Absa Africa Financial Market Index
Absa Africa Financial Market Index
OMFIF conducted extensive The Group’s registered head office is in Johannesburg, South Africa, and
quantitative research and data analysis. it owns majority stakes in banks in Botswana, Ghana, Kenya, Mauritius,
Qualitative survey data were collected Mozambique, Seychelles, South Africa, Tanzania (Absa Bank Tanzania and
and analysed by OMFIF. National Bank of Commerce), Uganda and Zambia. The Group also has
representative offices in Namibia and Nigeria, as well as insurance operations
© 2020 The Absa Group Limited and in Botswana, Kenya, Mozambique, South Africa, Tanzania and Zambia.
OMFIF Ltd. All Rights Reserved. For further information about Absa Group Limited, please visit
www.absa.africa
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and Events team The Official Monetary and Financial Institutions Forum is an independent
think tank for central banking, economic policy and public investment – a
Fiona Kigen, Vice-President, Marketing:
Investment Banking, Erica Bopape,
non-lobbying network for best practice in worldwide public-private sector
Head of Marketing: Investment Banking, exchanges. At its heart are Global Public Investors – central banks, sovereign
funds and public pension funds – with investable assets of $39.4tn,
Andile Makholwa, Acting Head
of Communications: CIB, Fiona equivalent to 43% of world GDP. With offices in both London and Singapore,
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Head of Corporate Sales: Absa Regional and treasuries. OMFIF promotes higher standards, invigorating exchanges
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President: Group Stakeholder Relations,
Phumza Macanda, Head of Media
Relations
Acknowledgments10
26-29
Pillar 1:
Market depth
Pillar 5:
Examines size, liquidity and Macroeconomic
depth of markets and diversity of opportunity
products in each market.
Assesses countries’ economic
prospects using metrics
on growth, debt, export
competitiveness, banking sector
risk and availability of macro data.
14-17
30-33
Pillar 2:
Access to foreign exchange
Pillar 6: Legality and
Assesses the ease with which enforceability of standard
foreign investors can deploy and financial markets
repatriate capital in the region. master agreements
Tracks the commitment to
international financial master
agreements, enforcement of
netting and collateral positions
18-21 and the strength of insolvency
frameworks.
Pillar 3:
Market transparency, tax 34-37
and regulatory environment
Evaluates the tax and regulatory
Indicators and Methodology 38-39
frameworks in each jurisdiction,
as well as the level of financial
stability and of transparency of
financial information.
22-25
Absa Africa Financial Markets Index 2020 | 3
FOREWORDS Building the foundation
for tomorrow’s successes
Daniel Mminele
Group Chief Executive
Absa Group
Aim of index The Absa Africa Financial Markets Index is being released at
a time when many African countries are grappling with the
African economies are profound economic and health challenges posed by Covid-19.
The outlook remains highly uncertain in most markets, as
undergoing a significant downside risks continue to persist. With the global economy
forecasted to contract in 2020, our continent is expected to
period of transition and experience the first severe recession since 1992, placing pressure
on public finances, and eroding the progress that many countries
appraisal, with growing had made towards poverty alleviation and the Sustainable
foreign investment Development Goals. Volatility, uncertainty, and risk are likely to
remain at elevated levels, making medium-term planning difficult
interest and much until such time as effective vaccines are successfully developed,
comprehensively tested, and globally distributed.
examination of the These unpredictable operating conditions foretell challenging
continent’s potential for times for financial markets for the foreseeable future, requiring
continued effort from stakeholders, and even more regional
mobilising local resources. economic collaboration than ever before, in order to maintain
stability and regain market confidence.
Now in its fourth year,
In this landmark year, we are proud to partner once again
the index has become with OMFIF in releasing the fourth edition of the Afmi. We are
particularly pleased that this 2020 edition adds a further three
a benchmark for the markets, taking the total to 23 countries evaluated, further
investment community expanding our coverage of Africa’s financial markets.
Since its launch in 2017, the Afmi has become a key reference
and Africa generally tool used by policymakers and market participants to guide
to gauge countries’ their efforts in developing robust financial markets in Africa.
By establishing a common fact-base that allows cross country
performance across comparisons, the index helps anchor policy discussions between
regulators, exchanges, investors and corporates on how to
a host of indicators promote the open, accessible and transparent markets, that are
best placed to mobilise capital, and promote investment on the
important for financial continent.
market development. Africa’s path through and beyond the Covid-19 crisis will be
determined largely by the decisions that governments, the
private sector, and development partners take over the next
few months; bold and urgent decisions are required for us to
successfully navigate this turbulent time, but such decisions
must also be informed, collaborative and responsible.
The Absa Group is one of Africa’s largest diversified financial
services institutions and, as a proudly pan-African business, we
are committed to playing our part in co-creating solutions that
will support this continent to not only survive these challenging
times, but help ensure an even stronger foundation on which
tomorrow’s successes can be built.
4 | Absa Africa Financial Markets Index 2020
Harnessing the power of Reasons to be
capital markets optimistic
The fourth annual Absa Africa Financial Markets Index Africa is heading for its first recession in more than 25
comes at an unprecedented time in history when the years. However, there are reasons to be optimistic about
region, and the world, face complex Covid-induced the continent’s growth prospects. The near-term outlook
challenges. The pandemic has generated a wide range of points to increased resilience of African economies, with
spillover effects in Africa, including direct health impacts output expanding above trend growth rates in 2021.
of the disease, severe economic shocks from a sudden
Fiscal and monetary stimulus programmes are supporting
stop in trade and tourism, and lockdowns that slowed
local debt markets, helping prevent bankruptcies, and
domestic demand. International financial flows seized up,
spurring global demand and trade. The countercyclical
and many domestic markets did not have the depth to
liquidity support of multilateral development banks,
support the sharp increase in fiscal needs.
including the African Export-Import Bank’s pandemic
Governments across Africa have responded quickly to trade impact mitigation facility, is helping countries adjust
the virus outbreak, particularly in terms of monetary to the virus-induced macroeconomic fall-out and deal
and prudential actions. Efforts are underway to reprofile with pressures on liquidity.
sovereign debt across the region through the debt service
Recovery will rely on Africa’s commitment to
suspension initiative, and there is renewed focus on
macroeconomic stability. Decreasing inflationary
building local markets.
pressures and expectations have enabled central banks
The World Bank acted rapidly to approve projects that to extend monetary stimulus and other policy responses
addressed emergency needs of member countries – to support small- and medium-sized enterprises,
including those in Africa. The International Development helping them avert payment defaults. This shift from
Association accessed international capital markets to a single monetary policy objective (inflation targeting)
provide concessional, low-cost loans to countries in towards the dual objectives of price stability and growth
need. Over a period of 15 months, the World Bank Group represents a profound change in the region’s policy-
committed to deploy up to $160bn to help more than 100 making landscape. It denotes the deepening integration
countries protect poor and vulnerable people, support of Africa into the world economy.
businesses, and bolster economic recovery. Funding from
Another key driver of Africa’s improved resilience
the World Bank Group includes up to $50bn for African
is the African Continental Free Trade Agreement.
countries, of which $847m will be spent on 32 health
Companies are capitalising on economies of scale and
projects. A further $2.9bn will be dedicated to 17 economic
productivity gains associated with the defragmentation
policy loans.
of African economies to spread the risk of investing in
As we look ahead, it is clear how the power of capital smaller markets across the region. Expanding growth
markets can be harnessed to build back better. Therefore, opportunities and returns on investment are sustaining
it is exciting that the index now includes a focus on investment flows and shifting their composition away
sustainable finance. from natural resources towards labour-intensive
manufacturing industries.
Sustainable financing, insuring against natural disasters
and pandemics, hedging against commodity volatility, and This structural transformation will increase domestic
securing local currency financing are ways governments resource mobilisation and deepen capital markets. This
can support the next generation of growth in Africa. will set Africa on a path to fiscal and debt sustainability.
The World Bank Treasury is engaged across these areas Expected rising returns on investment will expand
throughout the continent, including building sustainable the pool of investors to include those who are pricing
capital markets and helping governments consider the full in sustainability preferences to enable Africa’s
range of financial solutions for managing risks. industrialisation latecomers to leapfrog into climate-
resilient growth models. As the Africa Financial Markets
Index 2020 so neatly illustrates, opportunities abound in
this diverse and propitious region.
Testing resilience
When the index was first released in 2017, only six out of 17
countries scored above 50, with many performing poorly on
more than 40 indicators considered. This year, 14 out of 23
countries scored above 50, indicating improvements across
the board. Stronger legal frameworks and growing local
investor capacity contributed to better scores overall.
1 1 South Africa 89 88 Foreign exchange controls eased but ratings downgrade hits liquidity
3 6 Nigeria 65 63 Firmer close-out netting rules set to boost repo and derivatives markets
5 4 Namibia 61 65 Large pension fund assets under management, but illiquid markets
10 10 Uganda 52 52 New primary dealer system set to spur bond market activity
12 7 Tanzania 50 55 High transparency in stock market and low tax on dividend income
17 15 Mozambique 43 44 Growing stock exchange and attractive tax environment for listed securities
18 - Malawi 37 - Improving transparency and financial stability after IFRS and Basel III adoption
19 18 Senegal 37 35 Promising regional market growth but lacking local institutional investors
Score across all pillars, max = 100. The fourth edition of the index adds three new countries, Eswatini, Lesotho and Malawi.
Egypt (50) Eswatini (49) Ethiopia (27) Ghana (59) Ivory Coast (43) Kenya (58)
45 24 11 48 36 52
64 45 30 54 47 57
66 58 37 83 66 74
26 64 10 27 14 41
78 68 55 65 58 67
23 33 19 78 35 57
Mozambique (43) Namibia (61) Nigeria (65) Rwanda (50) Senegal (37) Seychelles (51)
41 48 70 30 38 34
45 54 22 66 46 65
59 71 89 80 54 62
20 92 54 14 12 48
51 70 67 62 49 66
40 31 87 50 24 32
11
Lesotho (33)
23
Malawi (37)
70
Mauritius (79)
37
Morocco (56)
KEY
58 32 54 49
33 62 88 74 Pillar 1 Market depth
12 20 90 67 Pillar 2 Access to foreign exchange
65 67 72 72
21 21 98 36
Pillar 3 Market transparency, tax and
regulatory environment
Pillar 4 Capacity of local investors
South Africa (89) Tanzania (50) Uganda (52) Zambia (53) Pillar 5 Macroeconomic opportunity
100 35 42 41 Pillar 6 Legality and enforceability of
80 59 67 60 standard financial markets
94 73 80 75 master agreements
86 34 15 12
(xx) = overall score
78 59 70 47
94 43 39 83
Report authors
Kat Usita, Deputy Head of Research, OMFIF
Chris Papadopoullos, Economist, OMFIF
€1bn: Sovereign bonds sold by Morocco, evenly split in $594m: Amount raised
two tranches of 5.5-year and 10-year bonds. by Ivory Coast from
social bonds sold on the
West African Economic
The Nairobi
Securities
$5bn: and Monetary Union
securities market.
Eurobonds sold in
Exchange Egypt’s largest- The Nigerian Stock
released a ever international Exchange is preparing
revamped mobile issuance. to introduce derivatives
application for trading.
retail investors. Zambia formed a Ethiopia drafted
capital markets legislation to create a
Senegal is forming a stock market authority
state-backed €100m tribunal to that will regulate its stock
private equity fund. enhance dispute exchange when it opens.
resolution and
Lesotho enacted settlement. South Africa is
legislation that removing currency
requires pension exchange controls.
Seychelles established the
funds to invest Securities, Commodities and
a portion of Derivatives Exchange, listing Ghana adopted
their portfolio in both traditional and digital legislation to enforce
domestic assets. assets. close-out netting.
The Stock Exchange of Mauritius’ new trading The Reserve Bank of Malawi
rules enable links with international central implemented an automated trading
securities depositories like Euroclear. system for the Malawi Stock Exchange.
Pillar 1:
Market depth
14 | Absa Africa Financial Markets Index 2020
Stunted progress
Countries made strides in growing their markets, boosting international activity and
linking exchanges, but some initiatives were put on hold due to the pandemic.
Figure 1.1:
Figure 1.1: Greater market capitalisation improves Seychelles’ performance
Scores for Pillar 1 categories, max=500; harmonised score, max=100 (RHS)
Scores for Pillar 1 categories, max=500; harmonised score, max=100 (RHS)
500 100
450 90
400 80
350 70
300 60
250 50
200 40
150 30
100 20
50 10
0 0
Rwanda
Malawi
South Africa
Nigeria
Mauritius
Kenya
Ghana
Ägypten
Mozambique
Senegal
Morocco
Ivory Coast
Tanzania
Cameroon
Eswatini
Ethiopia
Botswana
Namibia
Zambia
Uganda
Angola
Seychelles
Lesotho
Sources: National securities exchanges, national central banks, World Federation of Exchanges, Association of African
Sources:
Exchanges,National securities
OMFIF analysis. exchanges,
Note: Category national
scores (LHS) central
provide the averagebanks, World
of indicator Federation
scores of
within each category. The
Exchanges, Association
harmonised score of African
(RHS) represents Exchanges,
the average OMFIF analysis.
of all Pillar 1 indicators and is usedNote: Category
to compile the total scores
scores for Pillars
1-6. More information on p.38-39.
(LHS) provide the average of indicator scores within each category. The harmonised
score (RHS) represents the average of all Pillar 1 indicators and is used to compile the
total scores for Pillars 1-6. More information on p.38-39.
broker on one exchange to channel a Source: Refinitiv, national stock exchanges, national central banks, World Federation of Exchanges, the Association of
African Exchange, OMFIF analysis
client’s buy or sell order to a broker
on a second exchange where a target
security is listed. The AELP is a joint
initiative by the African Securities
Exchanges Association and the African Figure 1.3: Seychelles, Malawi and Cameroon trump decline in equity
Development Bank to encourage market capitalisations
pan-African investment flows. It is Market capitalisation, % of GDP
funded by the Korea-Africa Economic
Co-operation Trust Fund through the 350
African Development Bank. 300
Pilot exchanges that are participating
250
in the project include: Bourse
Régionale des Valeurs Mobilières, 200
Casablanca Stock Exchange, the
Egyptian Exchange, Johannesburg 150
Stock Exchange, Nairobi Securities 100
Exchange, the Nigerian Stock
Exchange, and Stock Exchange of 50
Mauritius.
0
Mozambique
South Africa
Ivory Coast
Cameroon
Seychelles
Botswana
Morocco
Mauri�us
Tanzania
Namibia
Rwanda
Senegal
Eswa�ni
Malawi
Uganda
Zambia
Nigeria
Angola
Ghana
Kenya
Ägypten
Pillar 2:
Access to foreign exchange
18 | Absa Africa Financial Markets Index 2020
Easing restrictions
Loosening capital controls has improved liquidity in some foreign exchange markets,
but further easing is needed to encourage greater activity.
90
350
80
300
70
250
60
200 50
40
150
30
100
20
50
10
0 0
Eswatini
Tanzania
Mauritius
Ethiopia
South Africa
Ruanda
Nigeria
Egypt
Botswana
Zambia
Kenya
Namibia
Angola
Uganda
Seychellen
Ghana
Mozambique
Cameroon
Malawi
Lesotho
Morocco
Ivory Coast
Senegal
Sources: International Monetary Fund, national central banks, OMFIF analysis. Note: The harmonised score (RHS)
represents the average of all Pillar 2 indicators and is used to compile the total scores for Pillars 1-6.
MoreSources: International
information on p.38-39. Monetary Fund, national central banks, OMFIF analysis. Note: The
harmonised score (RHS) represents the average of all Pillar 2 indicators and is used to
compile the total scores for Pillars 1-6. More information on p.38-39.
30
20
10
0
Mauritius
Eswatini
Ruanda
Tanzania
Egypt
Nigeria
Sambia
Botswana
South Africa
Kenya
Namibia
Ghana
Cameroon
Malawi
Angola
Uganda
Lesotho
Ivory Coast
Marokko
Seychellen
Mozambique
Senegal
2018 2019
has been in Zambia, where the kwacha countries in the index grew foreign rates would be key to unlocking greater
has fallen 40% against the dollar amid exchange reserves by 5% to $256.6bn international activity in the market.
a shortage of dollars resulting from in 2019.
In February, South Africa’s finance
lower copper exports. Ratings agencies
Mauritius has high net portfolio ministry announced changes to its
expect both countries will need to
investment but is less vulnerable foreign exchange system that will ease
renegotiate external liabilities.
to foreign exchange fluctuations approval processes for foreign currency
Most index currencies have depreciated despite the high ratio to reserves. The transactions. While prudential limits
against the dollar, with an average significant inward flow is due to its on domestic banks and institutional
depreciation of 8% across the index position as a favourable domicile for investors remain, these caps will be
between January and September. The investment funds, often comprised of reviewed periodically.
exceptions have been countries with international money invested globally.
In September, the WAEMU delayed the
pegs to the euro: Ivory Coast, Senegal
planned launch of its new currency,
and Cameroon, where currencies have Capital controls and currency
the eco. The eco will keep many of
strengthened. regimes
the characteristics of the CFA franc,
Since the onset of the pandemic, Both Nigeria and South Africa took including its peg to the euro and free
foreign exchange reserves have important steps over the last 12 convertibility guaranteed by France.
largely held up for those countries months to make their market more However, there will be less French
with timely data available. Prior to accessible to international investors. oversight.
the virus outbreak, large annual The governor of the Central Bank of
increases in reserves were recorded Nigeria said in June that the country
in a number of index countries. Ghana will continue to pursue unification
and Mozambique raised reserves by of its various exchange rates. One
20%, while the West African Economic survey respondent in Nigeria said
and Monetary Union increased by 18% foreign exchange stability through the
and Mauritius by 15%. Collectively, convergence of different exchange
Pillar 3:
Market transparency, tax
and regulatory environment
22 | Absa Africa Financial Markets Index 2020
Supportive regulatory environment
Most index countries have tax systems that promote capital market development.
Many have adopted the International Financial Reporting Standards, though some lack
audit capacity and transparency.
Figure 3.1:
Figure 3.1:Nigeria
Nigeriaimproves ranking
improves with greater
ranking number of
with greater corporates
number rated
of corporates rated
Scores for Pillar 3 categories,
Scores categories, max=800;
max=800;harmonised
harmonisedscore,
score,max=100
max=100(RHS)
(RHS)
700 100
90
600
80
500 70
400 60
50
300 40
200 30
20
100
10
0 0
Mauritius
Eswatini
South Africa
Rwanda
Zambia
Namibia
Botswana
Tansania
Angola
Ethiopia
Nigeria
Kenia
Egypt
Ghana
Mozambique
Seychelles
Cameroon
Uganda
Marokko
Ivory Coast
Malawi
Senegal
Lesotho
Pillar 4:
Capacity of local investors
26 | Absa Africa Financial Markets Index 2020
Long-term assets propel capital market development
Pension funds are an important source of capital and liquidity for local
markets, but their size varies widely across the index countries.
Figure 4.1: Namibia’s tops pillar with high concentration of pension assets
Scores for Pillar 4 indicators, max=200; harmonised score, max=100 (RHS)
Note for Will: Could you please swap the two categories – pension fund AUM should be on
top. (Excel
Figure won’t let me
4.1: Namibia do this.)
tops thanks
pillar with-KUhigh concentration of pension assets
180 90
160 80
140 70
120 60
100 50
80 40
60 30
40 20
20 10
0 0
Kenya
Mosambik
Uganda
Ivory Coast
Namibia
Tanzania
Mauritius
Botswana
Nigeria
Cameroon
Rwanda
Senegal
Lesotho
Zambia
South Africa
Morocco
Eswatini
Seychellen
Ghana
Egypt
Malawi
Angola
Äthiopien
Sources: African Development Bank, Organisation for Economic Co-operation and Development, International
Monetary Fund, national securities exchanges, national central banks, national pension regulators. Note: The
harmonised score (RHS) represents the average of both Pillar 4 indicators and is used to compile the total scores for
Pillars 1-6. More information on p.38-39.
Note for Will: Could you please swap the two categories – pension fund AUM should be on
top. (Excel won’t let me do this.) thanks -KU
Tanzania
Botswana
Eswatini
Ruanda
Ethiopia
Zambia
Angola
Namibia
Südafrika
Kenya
Seychelles
Nigeria
Ghana
Malawi
Egypt
Mozambique
Cameroon
Uganda
Senegal
Morocco
Lesotho
Ivory Coast
Malawi
Uganda
Ruanda
Sambia
Egypt
Mauritius
Seychellen
Angola
Ivory Coast
Eswatini
Namibia
Kamerun
Nigeria
Ghana
Mozambique
Botswana
Senegal
Tanzania
Kenia
South Africa
Morocco
to which pension funds can propel
capital market development, low
market liquidity can prevent pension
funds from investing in local assets and
Sources: National central banks, national financial regulators, pension industry trade bodies, national finance ministries, African
encourage them to adopt buy-and-hold Sources: National
Development central for
Bank, Organisation banks, national
Economic financial
Co-operation regulators,
and Development, pension
International industry
Monetary Fund, trade bodies,
national securities
strategies or invest internationally. For exchanges, OMFIF analysis
national finance ministries, African Development Bank, Organisation for Economic Co-
this reason, a local liquidity weighting operation and Development, International Monetary Fund, national securities exchanges,
is applied to pension fund assets. OMFIF analysis
Morocco and Mauritius score highly
because they have a high ratio of financial inclusion survey undertaken makes it easier for new payments firms
pension fund assets relative to their every four years. It found that 93% of to provide services to existing bank
local market, and because their local Rwandan adults have access to formal account holders, creating opportunities
market is relatively liquid. services such as bank accounts and for fintech firms.
mobile payments, and informal ones
Mobilising local savings A professional services firm in
such as savings groups. This is up from
Nigeria said fintechs had helped
Policies that support financial inclusion 89% in 2016 and 72% in 2012. The
improve access to finance for small
and encourage long-term savings help government aims for all adults to be and medium-sized enterprises. ‘The
bolster the capacity of domestic capital formally included by 2024. More and [fintech] industry has revolutionised
available for investment, and contribute more employers are paying wages into the administration of loans to
to broader development goals. Survey accounts, which is driving bank account consumers with SMEs leveraging on
respondents in all index countries use. Education and information were technology,’ they said. ‘This has created
reported a high use of payments highlighted as key to improving mobile healthy competition for commercial
accounts, including both formal and accounts take up. banks that are only now fast becoming
informal sector workers. However, In February, Kenya launched Treasury active players by establishing business
longer-term savings products such as Mobile Direct, allowing more of the units focused on financial inclusion and
savings accounts, pension plans and retail investment market, banked and SME customers.’
insurance are not as popular. unbanked, to access the government Digital and mobile platforms are
In Angola, a project designed to bond market. The Nairobi Securities proving to be important tools during
transfer money to low income Exchange launched a mobile application the Covid-19 disruption, especially
households launched earlier this year in June to increase local and foreign in enabling the delivery of financial
brought more individuals into the investor participation in the market. services. Central banks, financial
financial system. One respondent said: The application is expected to pave institutions and technology firms
‘The Kwenda project, which provides the way for other institutions to use should continue working together to
money transfers to poor people in rural digital platforms such as brokers and provide innovative means of access
regions, is improving financial inclusion investment banks. to widen participation in the formal
by contributing to the engagement of financial system, whether through
Mauritius launched its MauCAS
these people with the financial system, saving, investing or accessing credit.
payments system, which routes
some of them for the first time.’
transactions made through cards and
In May, the National Bank of Rwanda mobile phones for settlement at the
published the results of a wide-ranging Bank of Mauritius. The new system
Pillar 5:
Macroeconomic opportunity
30 | Absa Africa Financial Markets Index 2020
Bouncing back from crisis
In the light of the pandemic, most economies are likely to contract this year.
However, some will recover more strongly than others, particularly those that are less
dependent on oil and commodities exports or global tourism.
Figure 5.1: South Africa regains tough spot despite economic struggles
Figure 5.1: South Africa regains top spot despite economic struggles
Scores for Pillar 5 indicators, max=800; harmonised score, max=100 (RHS)
Scores for Pillar 5 indicators, max=800; harmonised score, max=100 (RHS)
800 100
700 90
80
600
70
500 60
400 50
300 40
30
200
20
100 10
0 0
Mauritius
Kenia
Tansania
Zambia
South Africa
Botswana
Namibia
Eswatini
Ruanda
Äthiopien
Angola
Egypt
Malawi
Nigeria
Seychelles
Lesotho
Ghana
Cameroon
Mozambique
Morocco
Uganda
Ivory Coast
Senegal
Source: International Monetary Fund, World Bank, national central banks, national finance ministries, African Development
Bank, OMFIF analysis. Note: The harmonised score (RHS) represents the average of all Pillar 5 indicators and is used to
Source:
compile International
the total Monetary
scores for Pillars Fund,
1-6. More World Bank,
information national central banks, national finance
on p.38-39.
ministries, African Development Bank, OMFIF analysis. Note: The harmonised score (RHS)
represents the average of all Pillar 5 indicators and is used to compile the total scores for
Pillars 1-6. More information on p.38-39.
Tanzania
Senegal
Kenia
Cameroon
Uganda
Egypt
Malawi
Ethiopia
Morocco
Angola
Lesotho
Botswana
Eswatini
Namibia
Nigeria
Mauritius
Zambia
South Africa
Seychelles
Kamerun
Kenia
Senegal
Mozambique
Botswana
Eswatini
Mauritius
Nigeria
Namibia
Ivory Coast
Ruanda
Zambia
Uganda
Seychelles
Tanzania
Ethiopia
Malawi
Ghana
Morocco
Lesotho
Egypt
allowing countries more flexibility in for 19.9% of gross loans, down from shown the value of diversification. The
their financing sources and decisions. 23.5% in 2018. This diversification index countries collectively exported
has helped banks reduce their NPL $424bn in 2019, 12% less than in
Banking health ratios. The central banks of Nigeria 2014. This drop can be fully accounted
With a sharp downturn in growth, NPL and Botswana both applied regulatory for by Angola and Nigeria, the index’s
ratios are expected to surge across the forbearance to NPLs as part of Covid-19 largest oil exporters. Nigeria’s exports
index this year. response measures. had been recovering since and
continued to increase in 2019, which
Before the Covid-19 upheaval, many Angola, the other major oil exporter helps its pillar score. Large and growing
countries’ banking systems were in in the index, has done less well in exporters were Ghana, Morocco and
strong positions. Egypt, Ethiopia, adjusting to low oil prices. The NPLs Egypt. Ghana is likely to fall back as
Mauritius, Namibia, Rwanda, Seychelles, of its banks rose to 32.5% of gross one of its expanding export markets is
South Africa and Lesotho had NPL loans at the end of 2019 from 28.3%. oil and gas, but this could be offset by
ratios of less than 5% of total loans in The country is undertaking policies flourishing export markets in gold and
2019. A low NPL ratio can help banks to improve the health of its banking cocoa.
keep credit open to the real economy system. In June, 80% of non-performing
Rwanda and Uganda both have small
during a crisis and provide finance for loans of the Savings and Credit
export market shares but have been
the recovery. Bank, the largest state-owned bank,
growing rapidly in recent years. Rwanda
were moved to Recredit, an asset
Nigeria has the largest decline in its accounts for 0.5% of all exports from
management firm set up by the state
NPL ratio in the year leading up to end- index countries. This share has doubled
to take on NPLs from the banking
2019, down to 6% from 11.7%. Data in the last five years, helped by strong
system. This was part of a broader bank
from the Central Bank of Nigeria show exports in metals, gold and coffee.
restructuring plan that includes partly
banks have reduced their lending to the Uganda accounts for 1.6% of index
privatising state-owned banks. exports, up from 1% five years ago.
oil and gas sector and expanded their
lending to agriculture, manufacturing, New entry Malawi has increased its
Economic diversification export share by around one-third with
construction and financial services.
Loans to the oil and gas sector account The latest slump in oil prices has mostly agricultural exports.
Pillar 6:
Legality and enforceability of standard
financial markets master agreements
34 | Absa Africa Financial Markets Index 2020
Inspiring investor confidence through legal certainty
Many countries are refining their legal frameworks to attract foreign
investment, with several counties drafting netting legislation.
Figure 6.1:
Figure 6.1:Greater adoption
Greater adoption of close-out
of close-out netting
netting rules rulesdocumentation
and GMRA and GMRA documentation
improves
observed across countries
overall performance
Scores
Scores forfor Pillar
Pillar 6 indicators,max=400;
6 indicators, max=400; harmonised
harmonisedscore, max=100
score, (RHS)
max=100 (RHS)
400 100
350 90
80
300
70
250 60
200 50
150 40
30
100
20
50 10
0 0
Mauritius
Eswatini
Zambia
South Africa
Nigeria
Kenya
Rwanda
Tanzania
Botswana
Ghana
Namibia
Ethiopia
Egypt
Kamerun
Angola
Mozambique
Uganda
Seychellen
Lesotho
Malawi
Morocco
Ivory Coast
Senegal
Sources:
Sources: National
National central
central banks, banks,
ISDA, ISDA, Frontclear,
Frontclear, Worldanalysis.
World Bank, OMFIF Bank Doing
Note: Business OMFIF
The harmonised score (RHS) represents
the average of all
analysis. PillarThe
Note: 6 indicators and is score
harmonised used to(RHS)
compile the total scores
represents for Pillars
the average of1-6. More information
all Pillar 6 indicatorson p.38-39.
and is used to compile the total scores for Pillars 1-6. More information on p.38-39.
Methodology
Pillars and indicators Harmonisation and scoring
The index scores each country based on six pillars:
Raw data are harmonised on a scale of 10-100 to allow
market depth; access to foreign exchange; market
comparability between indicators.
transparency, tax and regulatory environment; capacity
of local investors; underlying macro opportunity; and the Outliers in the raw data falling above or below two
legality and enforceability of standard financial markets standard deviations of the mean are accounted for
master agreements. Pillars are built from a set of key during the scoring. In the case of an outlier greater than
indicators listed on p.38-39. the upper bound, its value is replaced by the next-
highest data point in the sample. This means
Each individual indicator is weighted equally in each
indicators can have more than one country scoring
pillar, and each pillar is weighted equally in the overall
maximum points.
index score.
The scoring of each indicator and pillar works under the
same process. Once indicators have a harmonised score,
Data and survey the average is taken across each indicator in a pillar to
The data informing the scores for each pillar and their create the overall pillar score. Similarly pillar scores are
indicators stem from a mixture of quantitative and averaged to create the country’s composite score.
qualitative analysis. The quantitative data collected
are of the latest year available. For full year statistics How to get full marks
(i.e. GDP) this is 2019 data. For statistics covering the As the index is a comparison of a country’s financial
previous 12 months (i.e. securities market turnover) this market against the selected sample, a country can
is July 2019-July 2020. In cases where the data refer to reach the maximum score of 100. In such a scenario, the
current conditions, such as for the Basel implementation country must achieve the maximum score of 100 in all
stages, international accounting standards, and credit six pillars.
ratings, the data are as of mid-August 2020.
The survey element provides both quantitative and
qualitative data relating to legal, regulatory and market
conditions in each of the countries, such as information
on tax environment, as well as responses based on
country experiences.
The survey was conducted from June-August 2020,
covering more than 30 individuals from institutions
operating throughout Africa. Participants include chief
executives, managing directors, managing partners or
country experts across a range of global, regional and
local institutions, including banks, securities exchanges,
regulators, asset managers and investors.
Absa Africa Financial Markets Index 2020 | 39
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40 | Absa Africa Financial Markets Index 2020