Absa Africa Financial Market Index

Absa Africa Financial
Markets Index 2020

Africa’s possibility is in the detail
Pictured: The iridescent feathers

of the African peafowl
Absa Africa Financial Markets Index 2020 | 1

The Absa Africa Financial Markets Index Absa Group Limited (‘Absa Group’) is listed on the Johannesburg Stock
was produced by OMFIF in association Exchange and is one of Africa’s largest diversified financial services groups.
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p.38-39. 42,000 employees.
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2 | Absa Africa Financial Markets Index 2020

Inhalt
Forewords4-5 Pillar 4:
Capacity of local investors
Introduction6-7
Examines the size of local
Executive summary 8-11 investors, assessing the level of
local demand against supply of
Contains country comparisons and highlights assets available in each market.
opportunities and challenges for the region’s financial
markets.
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
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.
Harnessing the power of Reasons to be
capital markets optimistic
Jingdong Hua Hippolyte Fofack

Vice-President and Chief Economist and
Treasurer, World Bank Director of Research and
International Co-operation,
African Export-Import Bank
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.

INTRODUCTION
Testing resilience
During a difficult year, African countries are facing enormous

challenges from Covid-19. As the health crisis persists, the
resilience of financial systems in every economy is being
tested. Financial markets have been disrupted, but expansion
and innovation in recent years will benefit the rebound and
recovery process.
On its fourth year, the Absa Africa Financial Markets Index

presents a wide-ranging view of progress across the region.
Coverage of this year’s edition has expanded to include three
new countries: Eswatini, Lesotho and Malawi. The addition
of these countries reflects mounting interest in the region’s
potential as a source of growth and opportunity.
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.
The countries whose standing improved the most from

last year are Ghana, Morocco and Seychelles. Firmer rules
enforcing close-out netting boosted Ghana’s standing.
Improving business environments in Morocco and Seychelles
earned them points.
The initial impact of the pandemic was felt by countries

with high levels of external debt as global investors pulled
back investments. The withdrawal of international capital
impacted the region’s stock markets as liquidity dropped
in the first half of 2020. The sudden drop in foreign activity
showed the value of having deep and liquid local markets
that can withstand external shocks.
Central banks and financial policy-makers have responded by

supporting local debt markets with a variety of tools, earning
praise from individuals and institutions that participated
in this year’s survey. While the longer-term outlook largely
relies on the extent to which activity could resume in the
local and global economy, recent progress in financial market
development will only serve to improve Africa’s chances of
having a rapid and sustainable recovery.

Rank Score
2020 2019 2020 2019 Comments
1 1 South Africa 89 88 Foreign exchange controls eased but ratings downgrade hits liquidity
2 2 Mauritius 79 75 Market infrastructure and tax environment favourable to foreign investment
3 6 Nigeria 65 63 Firmer close-out netting rules set to boost repo and derivatives markets
4 5 Botswana 63 64 T-bill issuance reform expected to deepen bond market
5 4 Namibia 61 65 Large pension fund assets under management, but illiquid markets
6 13 Ghana 59 50 Active foreign exchange market and stronger legal framework
7 3 Kenya 58 65 Improving corporate action governance structure
8 12 Morocco 56 51 Improving market and business environment
9 8 Zambia 53 55 Stronger framework for resolving insolvency
10 10 Uganda 52 52 New primary dealer system set to spur bond market activity
11 14 Seychelles 51 47 Rapid growth in market capitalisation and number of equity listings
12 7 Tanzania 50 55 High transparency in stock market and low tax on dividend income
13 9 Rwanda 50 53 Strong macroeconomic outlook and healthy banking assets
14 11 Egypt 50 51 Liquid equity and foreign exchange markets
15 - Eswatini 49 - Large pool of domestic assets and growing stock exchange
16 16 Ivory Coast 43 41 Expanding bond market and positive macroeconomic outlook
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
20 - Lesotho 33 - Securities exchange still awaiting inaugural listings
21 19 Cameroon 32 35 Bond and equity markets lifted by regional merger of exchanges
22 17 Angola 30 36 Debt crisis overshadows positive tax reforms
23 20 Ethiopia 27 27 Development of market infrastructure in progress
Score across all pillars, max = 100. The fourth edition of the index adds three new countries, Eswatini, Lesotho and Malawi.

EXECUTIVE SUMMARY
Building Africa’s financial markets

The Absa Africa Financial Markets Index evaluates financial market
Pillar 1: Pillar 2:
development in 23 countries, and highlights economies with the
Market Access to foreign
most supportive environment for effective markets. The aim is to depth exchange
show present positions, as well as how economies can improve
market frameworks to bolster investor access and sustainable
growth. The index assesses countries according to six
pillars: market depth; access to foreign exchange; market South Africa 100 South Africa 80
transparency, tax and regulatory environment; capacity of local Nigeria 70 Uganda 67
investors; macroeconomic opportunity; and enforceability Mauritius 70 Rwanda 66
of financial contracts, collateral positions and insolvency Botswana 55 Seychelles 65
frameworks. Kenya 52 Egypt 64
Ghana 48 Botswana 60
OMFIF conducted extensive quantitative research using data
Namibia 48 Zambia 60
from central banks, securities exchanges and international
financial institutions. In addition, OMFIF surveyed over 30 Egypt 45 Tanzania 59
policy-makers and top executives from financial institutions Uganda 42 Lesotho 58
operating across the 23 countries, including banks, securities Zambia 41 Kenya 57
exchanges, central banks, regulators, audit and accounting Mozambique 41 Namibia 54
firms and international financial and development institutions. Senegal 38 Ghana 54
Morocco 37 Mauritius 54
As the index grows, the network of institutions providing data
Ivory Coast 36 Morocco 49
and lending expertise to OMFIF’s research is also expanding.
Tanzania 35 Ivory Coast 47
Changes to scoring on certain indicators using more granular
data impacted scores of some countries, but these all contribute Angola 34 Senegal 46
to the overall reliability of the index as a benchmark of progress. Seychelles 34 Eswatini 45
Rwanda 30 Mozambique 45
Continued on p.10 >> Cameroon 28 Cameroon 36
Eswatini 24 Malawi 32
Malawi 23 Angola 30
Angola (30) Botswana (63) Cameroon (32)
Ethiopia 11 Ethiopia 30
Lesotho 11 Nigeria 22
34 55 28
30 60 36
51 82 40
16 61 14
41 72 54
10 46 21
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

Overall pillar scores max = 100
Pillar 3: Pillar 4: Pillar 5: Pillar 6:
Market transparency, Capacity of Macroeconomic Legality and enforceability of
tax and regulatory local investors opportunity standard financial markets
environment master agreements
South Africa 94 Namibia 92 South Africa 78 Mauritius 98

Nigeria 89 Mauritius 90 Egypt 78 South Africa 94
Mauritius 88 South Africa 86 Botswana 72 Nigeria 87
Ghana 83 Morocco 67 Mauritius 72 Zambia 83
Botswana 82 Eswatini 64 Morocco 72 Ghana 78
Uganda 80 Botswana 61 Uganda 70 Kenya 57
Rwanda 80 Nigeria 54 Namibia 70 Rwanda 50
Zambia 75 Seychelles 48 Eswatini 68 Botswana 46
Kenya 74 Kenya 41 Malawi 67 Tanzania 43
Morocco 74 Tanzania 34 Nigeria 67 Mozambique 40
Tanzania 73 Ghana 27 Kenya 67 Uganda 39
Namibia 71 Egypt 26 Seychelles 66 Morocco 36
Ivory Coast 66 Mozambique 20 Lesotho 65 Ivory Coast 35
Egypt 66 Malawi 20 Ghana 65 Eswatini 33
Seychelles 62 Angola 16 Rwanda 62 Seychelles 32
Malawi 62 Uganda 15 Tanzania 59 Namibia 31
Mozambique 59 Cameroon 14 Ivory Coast 58 Senegal 24
Eswatini 58 Rwanda 14 Ethiopia 55 Egypt 23
Senegal 54 Ivory Coast 14 Cameroon 54 Lesotho 21
Angola 51 Senegal 12 Mozambique 51 Cameroon 21
Cameroon 40 Lesotho 12 Senegal 49 Malawi 21
Ethiopia 37 Zambia 12 Zambia 47 Ethiopia 19
Lesotho 33 Ethiopia 10 Angola 41 Angola 10
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

Acknowledgements The report finds that:
The team consulted more than 30 policy-makers, regulators and 
South Africa and Mauritius retain
market practitioners across African financial markets in writing this the top spots in the index, scoring
report, whom we thank for their views and opinions. Although some 89 and 79, respectively. Although
requested anonymity, we thank the following:
both perform well in most pillars,
South Africa maintains a sizeable
Sheila Abrahams, Senior Consultant, Johannesburg Stock Exchange lead because of its much deeper
George Asante, Head of Global Markets, Absa Regional Operations capital and foreign exchange
Omobolanle Adekoya, Partner and Head, Capital Market Accounting and
markets. Nigeria, Botswana and
Consulting Services, PwC Nigeria Namibia round off the top five. All
three score above 50 in nearly all
Arnold Bagubwagye, Deputy Director, Bank of Uganda
pillars. Namibia loses points from
Sunil Benimadhu, Chief Executive, Stock Exchange of Mauritius its failure to align with international
José Miguel Cerdeira, Economist, Banco de Fomento Angola contractual standards, while
Jeff Gable, Chief Economist, Absa Group Limited Nigeria’s lack of a unified exchange
rate system pulls down its score.
Ingrid Hagen, Vice-President of Strategic Projects, Frontclear
Jacqueline Irving, Senior Sector Economist, Sector Economics and

Overall performance in Pillar
Development Impact Department, International Finance Corporation, 1: Market depth deteriorated,
World Bank Group partly because of the impact of
Garth Klintworth, Head of Global Markets, Absa Group Limited Covid-19 on market capitalisation
and activity. On average, countries’
George Kwatia, Tax Partner, PWC Ghana
scores dropped by 0.6 from last
Vipin Mahabirsingh, Managing Director, Central Depository year. Despite this, certain countries
& Settlement Co. Ltd., Mauritius
showed improvement. Seychelles’
Moremi Marwa, Chief Executive, Dar es Salaam Stock Exchange P–lc Merj exchange attracted additional
Prosscovia Nambatya, Corporate Finance Lawyer listings, leading it to be only one
Birgit Reuter, Financial Officer, Global Macro and Market Research of three countries where market
Department, International Finance Corporation, World Bank Group capitalisation increased over
the year. The Stock Exchange of
Peter Werner, Senior Counsel, International Securities and Derivatives
Association Mauritius amended its trading rules
to open its market to international
central securities depositories.
We also thank individuals from the following institutions: Bank of
Mauritius, Bank of Namibia Financial Markets Department, Mauritius Uganda launched its new primary
Commercial Bank, and Merj Exchange. dealer system designed to
encourage secondary market activity
Report authors
Kat Usita, Deputy Head of Research, OMFIF
Chris Papadopoullos, Economist, OMFIF
With support from

Danae Kyriakopoulou, Chief Economist and Director of Research, OMFIF
Brendan Kiy, Research Assistant, OMFIF
Natalia Ospina, Research Assistant, OMFIF

and price discovery. highest level of pension assets per to its insolvency laws, making
capita in the index. Eswatini, a new allowances for close-out netting.

Ghana rises the most in Pillar
addition to the index, has the largest Uganda has adopted the GMRA and
2: Access to foreign exchange
pension funds relative to the size of is reviewing insolvency laws to make
with its foreign exchange liquidity
its local market, which shows the close out netting enforceable.
increasing, as measured by interbank
foreign exchange turnover. Angola potential available for local investors 
Although the pandemic disrupted
implemented rules to route to propel market development. markets, it presented opportunities
more foreign currency through Survey respondents highlighted for capital market development.
its commercial banks. Survey a number of successful financial The African Development Bank
respondents said efforts in Nigeria inclusion initiatives such as Angola’s issued coronabonds in March to help
to unify its multiple exchange rates Kwenda project and Mauritius finance Covid-19 response measures.
and South Africa’s easing of capital and Nigeria’s embrace of fintech Other sustainability initiatives are
controls for the broader economy companies. gaining momentum, especially in
would increase international 
Ivory Coast rises one place in Pillar green finance. Nigeria, Kenya and
participation in the market. 5: Macroeconomic opportunity. The Egypt are among countries that have
West African nation has one of the issued sovereign green bonds in the

Collectively, countries perform best
brightest growth outlooks and is one past year. Rwanda is establishing
in Pillar 3: Market transparency,
of five countries where economic a green investment bank, while
tax and regulatory environment
growth has averaged above 5% over Uganda plans to develop a fund
where the average score is 67.
the last five years. South Africa for post-disaster environmental
Morocco gained additional corporate
restoration.
ratings from international ratings reclaims the top spot. Despite its
agencies and a higher score for worsening growth outlook, it has a
protection of minority shareholders. low non-performing loans ratio and
Kenya‘s Capital Markets Authority relatively low external debt to GDP
introduced rules for share buybacks, ratio.
potentially encouraging market 
Ghana climbs five places in Pillar
activity. Angola’s first tax treaty, 6: Legality and enforceability
which it signed with Portugal, came of standard financial markets
into force. master agreements. Ghana has

Namibia leads Pillar 4: Capacity of made the Global Master Repurchase
local investors. Its pension funds Agreement mandatory for repos and
have shown rapid growth in recent introduced rules to enforce close-
years and the country now has the out netting. Nigeria made changes

Highlights 2019-20
Sustainable financial markets The Banco Nacional de

Angola adopted a foreign
exchange electronic
Nigeria and Kenya innovate with sovereign green bonds trading system to bring
Nigeria is set to launch its third sovereign green bond. Kenya issued
its first green bond in 2019, with proceeds used to finance sustainable
greater efficiency and
student housing in Nairobi. The government has introduced financial transparency to its foreign
incentives to invest in such bonds, with investors exempt from paying exchange market.
withholding tax on interest earned. Egypt issued a green bond in
September, the first in the Middle East and North Africa.
Coronabonds made in Africa

The African Development Bank sold the world’s largest social bond
120%:
in March, a set of $3bn three-year bonds to help finance the fight
against Covid-19. The AfDB also joined the Nasdaq Sustainable Bond
Oversubscription
Network in June. of Cameroon’s
Sustainable stock exchanges Cfa25bn issue of
The Johannesburg Stock Exchange is expanding its green bond
segment to a sustainability division which will include green, social
its first 10-year
and sustainability bonds. In October 2019, the stock exchanges of T-bond on the
Nigeria and Luxembourg signed a memorandum of understanding
to allow cross listing and trading, to help expand the green bond Bank of Central
market.
African States
Private sector takes action
South Africa’s Standard Bank sold a $200m green bond, the country’s
market.
largest sale. Meanwhile, Absa was the first African corporate to
issue a social bond. Nedbank, in partnership with AfDB, introduced a
sustainable development goals-linked tier 2 bond. Last year, Nedbank The Eswatini Stock
became the first bank in South Africa on the JSE to launch a specific Exchange launched an
renewable energy bond. automated trading system
New vehicles for green growth in east and southern Africa that includes mobile
Rwanda and the Coalition for Green Capital are establishing the trading for retail investors.
Rwanda Catalytic Green Investment Bank. Uganda plans to create a
$200m fund to help finance environmental restoration from natural
disasters. The Trade and Development Bank of Eastern and Southern The Namibian Stock
Africa has signed a partnership with the French development
agency for a $150m line of credit to fund sustainable infrastructure
Exchange listed its first
in East Africa. The Development Bank of Southern Africa and the bond exchange-traded fund.
Green Climate Fund have launched a specialised climate finance
facility for South Africa, Namibia, Lesotho and Eswatini. Namibia’s
Environmental Investment Fund, designed to counter drought Uganda reformed its
effects, secured $8.4m from the UN’s green climate fund. primary dealer system to
spur secondary market
activity.

Market developments and policy changes boost
growth of financial markets across the continent
$3bn: New ceiling The Dar es Salaam

Stock Exchange
The World Bank
issued the first
of Botswana’s expanding is developing a
government bond mobile trading ever Rwandan
issuance programme. platform. franc bond.
€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.

Pictured: A brilliant round-cut Namibian diamond
Pillar 1:
Market depth
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
Product diversity Size of markets

Liquidity Depth
Primary dealer system Pillar 1 harmonised score (RHS)
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.

Pillar 1 considers the size and liquidity de Cahora Bassa, Arko Seguros and panic that struck in March and April,
of local financial markets, as well as Revimo. Mozambique has one of the and markets have mostly calmed since.
the diversity of products available. On smallest markets measured against In South Africa, however, the start of
average, countries’ scores dropped by GDP at 3%, but lands in the middle of the pandemic coincided with credit
0.6 from last year. This partly reflects the index for liquidity. ratings downgrades and the country’s
the decline in local equity indices as consequent removal from the World
Mauritius maintained third place. In
markets reacted to Covid-19. Liquidity Government Bond Index. One survey
early 2020, the Stock Exchange of
was more mixed, as a fall in foreign respondent said the downgrade had hit
investor activity in equities was partly Mauritius announced it had amended
liquidity in the secondary bond market.
offset by central banks and local trading rules to open its market up
to international central securities Sell-offs can increase liquidity, but
investors in bond markets.
depositories such as Euroclear and with many markets depending on
Market capitalisation decreased Clearstream. This allows foreign foreign participation for a large
across most markets in the index, but investors who invest in debt securities, proportion of their liquidity, less
exchanges have remained operational Eurobonds and exchange-traded funds international participation has
with staff working remotely during the on the exchange to transfer these hindered market liquidity. To promote
virus disruption. In many countries, securities directly via the ICSD to other the functioning of domestic financial
initial public offerings were put on investors. The initiative is aimed at markets, some central banks made
hold because of the pandemic. This making the market more attractive to use of the unconventional monetary
included Lesotho, where the Maseru policy tools developed over the past
international investors. Mauritius and
Securities Market was set to become decade. The South African Reserve
South Africa are the only markets in
fully operational with its first two IPOs. Bank implemented a programme of
the index with such links to ICSD.
Seychelles climbs two places in Pillar purchasing government securities in
1. The country’s Merj Exchange has Money markets the secondary market. The central
been successful in lifting the size of its banks of Botswana, Egypt and Ghana
Central banks in the region provided also conducted asset purchases.
equity market since it was rebranded
emergency liquidity to quell market The Bank of Central African States,
from Trop-x in 2019. Following a
number of listings, equity market which serves Cameroon, undertook
capitalisation rose to 89% of GDP purchases in a restricted way to ensure
from 21% to give Seychelles the third consistency with rules against direct
monetary financing.
largest stock market relative to the ‘Some survey
size of its economy in the index. It
remains behind South Africa at 275%
respondents said Authorities across the countries
featured in the index were proactive
of GDP and Botswana at 176% of GDP. that while policy in supporting money market liquidity.
As of mid-2020, the Merj Exchange
action had supported They did so in different ways, but
hosts 41 listed companies, up from finance and liquidity common policies included reducing
25 in the same period last year, with more broadly, it had repo rates, widening collateral
accepted for central bank lending
financial instruments available in less of an impact
dollars and euros. Earlier this year, the facilities, and reducing liquidity and
exchange launched a direct access
on equity markets capital requirements for banks. Survey
model, which it says limits the need where liquidity was respondents said authorities had
for brokers and has incorporated dependent on foreign overall successively managed the
distributed ledger technology into investors.’ early stages of the crisis. However,
its trading infrastructure. Survey some said that while policy action had
respondents highlighted several supported finance and liquidity more
factors that could further lift broadly, it had less of an impact on
liquidity and international activity equity markets where liquidity was
in Seychelles’ capital market, such dependent on foreign investors.
as regulatory co-operation in the
Central banks continue with efforts
International Organisation of Securities
to build yield curves in domestic
Commissions.
government securities that can be
Bolsa de Valores de Mocambique is used as the basis for pricing for other
another smaller exchange that has assets. The South African Reserve Bank
been expanding. It has 11 listed proposed in June replacing the South
equities, up from eight last year and African benchmark overnight rate with
six in the 2018 edition of the index. the South African rand overnight index
New listings include Hidroeléctrica average, known as Zaronia, which is an

unsecured overnight rate.
Figure 1.2: Market size and liquidity
Botswana is doubling its T-bill auctions
to eight per year from quarterly to
Equities Bonds
assist market price discovery. In
combination, it will issue standardised Turnover of Total sovereign Total turnover in
Market
three- and six-month T-bills. The capitalisation,
equities, % and corporate bond market, %
Bank of Botswana has extended the of market bonds listed on of listed bonds
% of GDP
capitalisation exchanges, $bn outstanding
collateral pool for its lending facilities
to corporate bonds listed on the South Africa 275.4 33.4 209.2 301.3
Botswana 178.4 0.3 1.6 16.4
Botswana Stock Exchange.
Seychelles 88.6 1.2 0.3 46.0
Uganda is nearing completion of its Morocco 45.2 10.7 0.5 6.3
Mauritius 42.4 6.6 1.2 2.3
primary dealer reforms. In September,
Rwanda 35.6 0.1 0.6 4.7
the central bank appointed seven Senegal 29.1 2.1 8.8 0.6
commercial banks that will be able to Malawi 27.9 1.7 0.4 0
take part in competitive bids above Kenya 20.0 7.8 20.4 27.5
a certain size in the primary market. Namibia 17.6 1.7 4.0 3.1
Other commercial banks will still be Uganda 16.4 0.1 3.1 0.0
Ivory Coast 15.7 2.1 8.8 0.6
able to access the primary market, but
Zambia 14.6 0.8 3.8 4.5
only for smaller bids. Ghana 13.7 0.7 19.6 90.6
Egypt 12.1 35.4 76.1 31.4
Linking exchanges Tanzania 10.3 4.6 5.2 15.2
Nigeria 7.7 8.2 65.7 94.3
The Africa Exchange Linkages Project
Eswatini 4.7 1.3 0.4 0
offers new opportunity to link Mozambique 3.0 1.9 0 0
African exchanges and boost cross- Cameroon 1.1 0.5 1.3 0
border activity. In April, it began Ethiopia - - 0 0
procurement for an order-routing Angola - - 7.5 31.8
technology platform to enable a Lesotho - - 0 0
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
Cameroon’s Douala Stock Exchange

merged with the regional Bourse
des Valeurs Mobilières de l’Afrique
Centrale last year, raising its equity
market capitalisation to 1.1% of GDP.
Mid-2019 Mid-2020
This earns Cameroon extra points for
Sources: National securities exchanges, national central banks, World Federation of Exchanges,
market size, though it loses roughly Association of African Exchanges, OMFIF analysis
the same amount for market liquidity.

Pictured: Dewdrops on a South African sunflower
Pillar 2:
Access to foreign exchange
Easing restrictions
Loosening capital controls has improved liquidity in some foreign exchange markets,
but further easing is needed to encourage greater activity.
Figure 2.1: Active foreign exchange market improves Ghana’s standing

Figure 2.1: Active foreign exchange market improves Ghana’s standing
Scores for Pillar 2 indicators, max=400; harmonised score, max=100 (RHS)
400 100
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
Net portfolio investment to reserves Interbank foreign exchange turnover

Foreign exchange capital controls Official exchange rate reporting standard
Pillar 2 harmonised score (RHS)
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.

Pillar 2 evaluates African markets’ local assets spurred market activity. interbank market. Angola introduced
openness to foreign investment based Egypt’s interbank exchange turnover new rules at the beginning of the
on the ease of moving capital, liquidity spiked in March to $15.3bn, five year that encouraged oil companies
of foreign exchange markets, rigidity times higher than its average monthly to sell foreign exchange directly to
of foreign exchange regimes and turnover of $3bn in 2019. commercial banks.
availability of reliable foreign exchange
South Africa has the highest interbank These companies will become
data. It considers countries’ resilience
foreign exchange turnover by a large another source of foreign currency
to volatility by measuring portfolio
margin, despite the fact it has been for commercial banks and reduce
flows against foreign exchange
on a steady decline for the last several the market’s reliance on the Banco
reserves. Since the first edition of
years. Turnover was $929.3bn in 2019, Nacional de Angola. This has been
the index in 2017, several countries
helping the country maintain top place undertaken alongside the introduction
have loosened capital controls and of Bloomberg trading infrastructure to
moved towards more flexible exchange in Pillar 2.
automate transaction processes on the
regimes. Nearly half the countries in the index foreign exchange market. The reforms
On average, scores in this pillar were have markets with negligible interbank should encourage greater trading in
largely unchanged. Generally, countries foreign exchange turnover, with the interbank foreign exchange market.
maintained strong reserve positions, central banks playing a large role in
although there was more variability in allocating foreign currencies. Some Portfolio flows and reserves
foreign exchange activity. are taking measures to promote the
Fluctuations in the ratio of portfolio
An increase in foreign exchange flows to foreign exchange reserves led
liquidity and a lower ratio of portfolio to several ranking changes. A higher
flows to reserves lift Ghana five ratio indicates potential difficulty
for central banks in meeting foreign
places in Pillar 2. The country’s ‘Nearly half the currency demand from investors.
interbank foreign exchange turnover
has been climbing steadily since it
countries in the index
A fall in net portfolio flows in Namibia
loosened surrender and repatriation have markets with reduced the ratio to reserves to 3.4%
requirements for exporters in 2016. negligible interbank from 8.9%, boosting the country’s
The reforms direct more foreign foreign exchange ranking in this pillar by three places.
currency through the commercial
banking system rather than through
turnover, with central Rwanda ranks third, climbing one place
due to a 61% increase in its reserves to
the central bank. Total interbank banks playing a large $1.4bn, which reduced its ratio to 0.9%
turnover reached $25.5bn in the 12 role in allocating from 2%.
months to March, the third highest in foreign currencies.’ Angola moves up one place following
the index. Interbank turnover excluding
central bank transactions gives a gauge an improvement in its reserve position.
of local foreign exchange liquidity in In 2019, its foreign exchange reserves
the two-way market. Active interbank climbed to $16.3bn from $15.4bn.
markets are an important enabler and Its net portfolio investment came
down as greater acquisition of foreign
source of pricing for broader derivative
assets increased. After being hit badly
products whose prices are linked to
by the 2014 oil price decline, Angola
market exchange rates.
had readjusted and been running
Banks based in Morocco traded current account surpluses since 2018.
$18.6bn of foreign currency in the A halving in the value of the kwanza
12 months to June, double from the against the dollar over the last three
previous year. This was despite a drop years helped in this regard.
in liquidity between March and April
This year’s oil price shock has not
as a seize-up in general trade led to
been kind to Angola or its exchange
lower demand for foreign currency. The
rate. The Angolan kwanza dropped
country’s ranking remains constant
25% between January and September.
as its boost from foreign exchange
One respondent from Angola said
turnover offset a decline in score for
that the Covid-19 crisis and oil price
its ratio of portfolio flows to reserves.
crises ‘put immense pressure on the
Covid-19 had a mixed impact on exchange rate and prevent both the
foreign exchange turnover. While it authorities and international players
declined in Morocco, it increased in from undertaking any risky or complex
markets such as Egypt as sell-offs of transactions’. The largest depreciation

Figure 2.2: Ghana, Zambia and Angola went into crisis with stronger FX
positions
Figure
Net 2.2:investment
portfolio Ghana, Zambia and%Angola went into crisis with
to reserves,
‘The largest
stronger FX positions relative to net portfolio investments depreciation has been
Net portfolio investment to reserves, % in Zambia, where the
150 87
kwacha has fallen 40%
60 against the dollar amid
a shortage of dollars
50
resulting from lower
40
copper exports.’
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
Sources: International Monetary Fund, national central banks, OMFIF analysis
Sources: International Monetary Fund, national central banks, OMFIF analysis
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

Pictured: Coils of Copper wire from a Zambian mine
Pillar 3:
Market transparency, tax
and regulatory environment
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
Financial stability regulation Reporting and accounting standards

Tax environment Financial information availability
Market development Corporate action governance structure
Protection of minority of shareholders Existence of credit rating
Source: Bank for International Settlements, International Financial Reporting Standards, Deloitte International Accounting
Standard Plus, World Bank, Standard & Poor’s, Moody’s, Fitch, GCR Ratings, OMFIF analysis. Note: Category scores (LHS)
provide the average of indicator scores within each category. The harmonised score (RHS) represents the average of all Pillar
3Source: Bank
indicators and isfor International
used to compile theSettlements, International
total scores for Pillars Financial Reporting
1-6. More information on p.38-39. Standards,
Deloitte International Accounting Standard Plus, World Bank Doing Business, Standard &
Poor’s, Moody’s, Fitch, GCR Ratings, OMFIF analysis. Note: Category scores (LHS) provide the
average of indicator scores within each category. The harmonised score (RHS) represents the
average of all Pillar 3 indicators and is used to compile the total scores for Pillars 1-6. More
information on p.38-39. Absa Africa Financial Markets Index 2020 | 23
A healthy market environment is 3, but may be nearing an inflection
key to attracting capital. Pillar 3 Figure 3.2: Ghana offers point. One survey respondent said the
scores countries based on regulatory investors generous tax rates country’s capital market development
frameworks, tax systems and market Witholding tax rates, % initiatives were beginning to bear fruit
transparency. Overall, countries perform in the form of a friendlier and simpler
Interest Dividends
best in this pillar, scoring 67 out of 100 tax system. Along with Ivory Coast,
Ghana 8 8
on average. This is unchanged from last Ivory Coast 10 10 Angola has tax discounts on income
year, but has improved from 63 in the Ethiopia 10 10 from longer-term government bonds,
inaugural 2017 edition of the index. Morocco 10 15 which could help bond market activity
Namibia 10 20 and foster the formation of a yield
Morocco rises six places, gaining points Nigeria 10 10 curve against which other assets can be
for additional corporate ratings from Tanzania 10 5
priced. Angola’s first tax treaty, which
international ratings agencies as well as Eswatini 10 12.5
Botswana
it signed with Portugal, came into force
for a higher score for the protection of 15 7.5
Kenya 15 15 in late 2019. It is no longer the only
minority shareholders. As of September,
Mauritius 15 0 country in the index without a double
there were nine corporate ratings, a
Rwanda 15 10 taxation agreement.
new high for Morocco since the index Seychelles 15 15
began. The World Bank has highlighted South Africa 15 20 Accounting standards
Morocco’s progress in strengthening Uganda 15 15
minority investor protection through Angola 15 10 There is wide adoption of International
‘expanding shareholders’ role in major Senegal 16 10 Financial Reporting Standards across
Cameroon 16.5 16.5 the index countries, with most requiring
transactions, promoting independent
Egypt 20 10
directors, increasing transparency listed firms to report according to
Mozambique 20 10
on directors’ employment in other Zambia 20 20
IFRS. The lowest-scoring countries for
companies, and making it easier to Malawi 20 10 accounting standards are Ethiopia and
request general meetings’. Lesotho 20 25 Seychelles, but it is an area of focus
among business leaders and policy-
Kenya climbs two places after scoring Source: Deloitte, OMFIF analysis.
makers in both. Larger corporates in
Note: WHT may be reduced under applicable tax
better in corporate governance treaties. Where applicable, the rate shown is for Seychelles are gradually taking up the
non-residents
structure. The Kenyan Capital Markets IFRS, and major banks and insurers have
Authority issued guidance allowing already adopted these standards. In
listed firms to purchase their own 2018, Ethiopia gave banks three years
shares. These share buybacks, which Both have low levels of withholding to transition to IFRS from Generally
can help encourage stock market taxes and a high number of double Accepted Accounting Principles. Wider
activity, boost the country’s score in taxation treaties with other countries. roll-out is planned for non-financial
this indicator. Mauritius generally has no withholding firms and small- and medium-sized
tax on dividends, but some are specified enterprises.
Tax environment
in tax treaties.
Covid-19 is making it challenging to
Tanzania and Ethiopia score highly for
Survey respondents in Ghana said its meet financial reporting requirements.
their low rates of withholding tax on
tax system was ‘broadly supportive’ of IFRS 9, which came into effect in 2018,
income from interest and dividends,
capital market development. Ghanaian requires banks to estimate expected
with Tanzania improving its score by
regulators are using tax breaks to credit losses based on historic, current
levying a lower rate of withholding tax
develop new market segments. From and forecasted economic conditions.
for dividends paid out by listed firms.
this year, the fees charged by a local The uncertain environment makes
In Tanzania, the rate of withholding tax
fund manager for the management of this more difficult and may exacerbate
falls to 5% for dividends from listed
a licensed private equity fund, venture problems in fulfilling capital adequacy
firms compared with 10% for unlisted
capital fund or mutual fund are exempt requirements.
firms. Mozambique has taken a similar
approach. Dividends from listed firms from value-added tax and the country’s Even with higher standards in place,
are subject to a 10% withholding tax health and education levies. Private survey respondents often cited a
rather than the unlisted rate of 20%. equity is increasingly being viewed as lack of audit capacity as a barrier to
Ethiopia has a low withholding tax rate a means to provide capital to smaller improvements in financial transparency.
of 10% on dividends and has the sixth- firms and create a pipeline of companies Other respondents noted that their
highest number of tax treaties in the that can list on stock exchanges. Gains markets do not tend to have a culture of
index with 18. from the realisation of securities listed transparency.
on the Ghana Stock Exchange are
On the measures used in this survey, Across the index countries, survey
exempt from tax until next year.
Morocco and Mauritius offer the most respondents said that major financial
attractive tax environments overall. Angola maintains a low ranking in Pillar institutions, often subject to additional

oversight by a specialised regulator, had the index countries, which has created include Datapro and Agusto & Co, which
high standards of financial reporting opportunities for African agencies such are both focused mostly on Nigerian
and audit capacity. Reporting varies as Johannesburg-based GCR. Most of firms. The methodology for this year’s
more in quality for non-financial GCR’s ratings are for South African index incorporates local ratings activity,
corporations. corporates, but it has also rated firms in awarding additional points for countries
While some countries have high Kenya, Tanzania, Ghana, Botswana and with corporate ratings from African
accounting standards, firms may need Uganda. Other African ratings agencies agencies.
to improve their communication on
financial results. One respondent in
Uganda said: ‘The lack of press release,
investor presentation and a narrative
section in the annual statements makes
it impossible for recipients of the data
to make informed investment decisions.’ ‘International ratings agencies generally
The quality of financial reporting in do not have a local presence in the
Mauritius and Tanzania was praised. index countries, which has created
Both rank highly in this pillar overall.
One respondent in Mauritius said the opportunities for African agencies.’
next step for regulators should be to
look at making financial reporting using
XBRL, the globally recognised format for
digital accounts filing, more efficient.
Figure 3.3: South Africa and Nigeria lead in corporate ratings
‘It should be possible to generate the
Number of corporates rated by ratings agencies
XBRL file directly from a company’s
accounting system and upload it to the
database of the registrar of companies.’ International ratings Regional
agencies ratings agency
This would make the process of
collecting data and converting them Fitch Moody's S&P GCR
into reports for regulators and other
end-users more efficient, increasing South Africa 18 45 30 274
market transparency. Nigeria 16 12 10 126
Mauritius 7 19 5 3
Corporate ratings
Morocco 8 1 0 0
Nigeria and South Africa lead Pillar
Kenya 4 3 0 52
3 overall, and both stand out in the
number of credit ratings for their Angola 2 3 1 0
corporates. Nearly all index countries Namibia 3 2 0 6
have a sovereign rating from one of
Uganda 2 1 0 9
the three major international ratings
agencies. However, with the exception Zambia 2 1 0 4
of a handful of countries, corporate Egypt 3 0 0 2
ratings from international ratings Ghana 1 1 0 11
agencies are scarce.
Botswana 0 2 0 9
While South Africa, Nigeria and
Rwanda 1 0 0 5
Mauritius have 93, 38, and 31 corporate
ratings from international ratings Cameroon 1 0 0 1
agencies, respectively, all other index Senegal 1 0 0 0
countries are in single figures. For
Tanzania 0 0 0 12
some, the number of ratings has grown
slightly. Kenya has seven corporate Malawi 0 0 0 3
ratings, up from five last year. Uganda Mozambique 0 0 0 3
has three, up from two last year, which Ivory Coast 0 0 0 2
contributed to its rise of three places in
Eswatini 0 0 0 1
Pillar 3.
The international ratings agencies Source: Refinitiv, OMFIF analysis
Note: Ethiopia, Lesotho and Seychelles have no ratings
generally do not have a local presence in

Pictured: A spool of Nile River Valley cotton thread
Pillar 4:
Capacity of local investors
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
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

200 100
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
Pension fund AUM per capita

Pension assets to domestically listed assets, accounting for market activity
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
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. Absa Africa Financial Markets Index 2020 | 27
‘Total assets are Local investors’ willingness to last year. This allocation is likely to
invest in domestic markets can go down, as Namibian funds are now
nearly twice the have a significant impact on market required to allocate at least 45% of
size of local market development and growth. Pillar 4 their portfolios to domestic assets.
measures local investor capacity based
capitalisation, on the amount of pension fund assets
Among index countries, there is high
indicating that available in the country relative to the
disparity in the amount of pension
fund assets relative to the size of the
Namibian pension population and market capitalisation.
Countries tend to perform poorly in
population. Mauritius, South Africa,
funds can play an this pillar, especially if their pension
Seychelles and Eswatini have pension
assets per capita exceeding $1,000.
important role in systems are not yet well established.
Morocco is just below at $938, while all
However, this pillar shows the greatest
spurring market improvement from last year, with other countries are significantly lower;
activity.’ country scores climbing by 3.2 on 12 have pension assets per capita
below $100.
average due to growing pension
assets. Pension funds and other institutional
Namibia tops Pillar 4. Its pension investors can play a significant role
assets rose on the back of strong in capital market development. Not
market performance in 2019. Pension only do they become large sources of
assets per capita climbed 9.6% year- capital, their long investment horizon
on-year to $4,582 at the end of 2019. allows them to move away from
Total assets are nearly twice the size of government bonds and bank deposits
local market capitalisation, indicating towards investments such as equities
that Namibian pension funds can play and corporate bonds, providing local
an important role in spurring market markets with liquidity. They are an
activity. High exposure to overseas important source of liquidity for local
markets suggests Namibian pension government debt, reducing reliance on
funds will be partly insulated from external finance.
worsening local economic conditions, Survey respondents across the index
as they invested 58.3% of their markets said pension funds remain
aggregate portfolio to foreign assets limited in their ability or desire to
invest beyond listed equities and
government bonds. One respondent in
Nigeria said local government bonds
Figure 4.2: Namibia has largest pension pool relative to population
Figure 4.2: Namibia has largest pension pool relative to population offer high returns, reducing the need
Pension fundAUM
Pension fund AUM per
per capita,
capita, $ $
to invest in higher-earning or riskier
assets. In markets such as Ethiopia,
4,500 pension funds are required to invest
4,000 a large portion of their securities in
local government debt. In Kenya, one
3,500
respondent said pension investment
3,000 practices were improving, but conflicts
between pension fund trustees and
2,500
external managers tend to hamper
2,000 longer-term approaches to investment.
1,500
Pension assets and local markets
1,000
Pillar 4 also considers the size of the
500
pension market relative to the local
0 listed market to give an indication of
Mauritius
Tanzania
Botswana
Eswatini
Ruanda
Ethiopia
Zambia
Angola
Namibia
Südafrika
Kenya
Seychelles
Nigeria
Ghana
Malawi
Egypt
Mozambique
Cameroon
Uganda
Senegal
Morocco
Lesotho
Ivory Coast
which countries could engage their

pension funds further in capital market
development. Eswatini, a new addition
to the index, has the highest pension
Sources: Sources:
Sources: National central National central
banks, national financial banks,
regulators,national financial
pension industry regulators,
trade bodies, pension
national finance industry
ministries, African assets to local market capitalisation
Development Bank, Organisation for Economic Co-operation and Development, International Monetary Fund, OMFIF analysis
trade bodies, national finance ministries, African Development Bank, Organisation for ratio. Its pension fund assets are
Economic Co-operation and Development, International Monetary Fund, OMFIF analysis three times the size of domestic listed

assets. The country’s pension funds Figure 4.3: Eswatini pension funds can boost local market activity
invest 42% of their assets locally, Figure 4.3: Eswatini pension funds can boost local market activity
which shows they are a leading source Pension fund assets, % of listed securities
Pension fund assets, % of listed securities
of capital and liquidity for the local 350
market.
300
Only 3% of Lesotho’s pension fund
assets are invested domestically,
250
with the remainder making its way
to markets in Johannesburg. In 2019, 200
Lesotho introduced a regulatory
framework for pension funds, moving 150
oversight to the central bank and
requiring a portion of pension funds to 100
be invested in Lesotho to develop the
50
domestic capital market.
While this indicator gauges the extent 0
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

Pictured: The shimmering metallic scales of a Tilapia fish
Pillar 5:
Macroeconomic opportunity
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
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
GDP growth Living standards

Growth and absolute export market share Quality of banks
Debt profile Macroeconomic data standards
Monetary policy committee outcomes transparency Budget release
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.

Pillar 5 assesses countries’ badly hit by Covid-19. This is due to determining countries’ vulnerability to
macroeconomic performance, export the fact it is not heavily dependent on crises that affect global financing and
competitiveness and banking sector oil exports and tourism. Its healthcare economic conditions. Eswatini, a new
health. It evaluates the quality of system performs well on the Global addition to the index, has low public
governance based on external debt Health Security Index, indicating that sector external debt at 11.7% of GDP,
management and financial sector it may respond to the pandemic better the second lowest in the index for
transparency. On average, country than other countries. end-2019. This helps it achieve eighth
scores improved by 1.1, subdued partly place in the pillar. Botswana has the
The relatively robust growth outlook
by adjusted growth forecasts reflecting lowest external debt at 11% of GDP.
the impact of Covid-19. lifts Ivory Coast one place in Pillar 5.
There were decreases in external debt
Tanzania, Ghana, Rwanda and Senegal
South Africa regains the lead in Pillar in Seychelles, Botswana, Ivory Coast and
all grew more than 5% over the last five
5 this year despite its poor economic Namibia, raising their scores for this
years. These countries are expected
performance. Its compound annual indicator.
to bounce back more strongly than
growth rate over the last five years others in 2021 because they are less Three countries had external debt
is the lowest in the index at just dependent on oil and commodities above 50% of GDP at the end of 2019.
under 1%. The International Monetary exports. Mozambique had the highest external
Fund expects South Africa to post debt-to-GDP ratio and last year
the weakest recovery of the index Seychelles will probably be one of restructured $900m of Eurobonds.
countries over the next two years. High the worst-hit countries. While not a Ratings agencies believe a large
living standards, a low ratio of non- commodities or oil exporter, it is more liquefied natural gas project could
performing loans to gross loans, and exposed to disruptions in tourism and revive Mozambique’s financial health,
large export market share push it to top global trade, which will weigh heavily even in the light of subdued prices. The
the pillar. on its economic growth in 2020. This other two countries with external debt
impacts its pillar ranking this year, but above 50% of GDP are Angola, which
Most economies are likely to contract
the IMF forecasts a strong economic had passed the second review of its
this year, but some will recover more
strongly than others. Ivory Coast ranks rebound for 2021. $4bn IMF economic reform programme
second for GDP growth. Over the last before the pandemic struck, and
Managing external debt Zambia, which is aiming to renegotiate
five years it achieved a CAGR of 7.4%
and is forecast to be one of the least External debt is a key factor in its debt with official creditors and
has asked private creditors for a
rescheduling of payments.
The G20 debt service suspension
Figure
Figure5.2:
5.2:Strong reboundsexpected
Strong rebounds expectedinin Rwanda
Rwanda and
and Ivory
Ivory Coast
Coast
initiative, a debt relief programme
organised by the Paris Club, IMF, World
Compound annual growth rate, five-year average and forecast, %
Compound annual growth rate, five-year average and forecast, % Bank and African Development Bank,
aims to free up money for African
10 countries to spend on healthcare. While
8 many are eligible, only a small number
have applied: Cameroon, Ivory Coast,
6
Ethiopia and Senegal. There is a general
4 reluctance to request relief owing to
2 the negative impact this could have
on credit ratings and future financing
0
conditions. The IMF has granted short-
-2 term emergency funding to 19 of the
-4 23 index countries to help sustain
finances over the pandemic.
-6
Secondary market Eurobond yields
Mosambik
Ruanda
Ivory Coast
Ghana
Tanzania
Senegal
Kenia
Cameroon
Uganda
Egypt
Malawi
Ethiopia
Morocco
Angola
Lesotho
Botswana
Eswatini
Namibia
Nigeria
Mauritius
Zambia
South Africa
Seychelles
for many African countries have

risen sharply since March, with most
more than doubling. This will present
difficulties for those trying to roll over
2014-19 2020-21
debts. This shows the importance of
developing local capital markets. Having
access to both local and offshore
Source: International
Source: International Monetary
Monetary Fund, OMFIF analysis Fund, OMFIF analysis
markets is critical in times of stress,

‘The IMF has
Figure 5.3: High external debt leaves certain countries vulnerable to
Figure granted
5.3: High external debt leaves certain countries vulnerable to crisis impact
crisis impact short-term
External debt to GDP ratio, %
External debt to GDP ratio, %
emergency funding
to 19 of the 23 index
100 countries to help
90
80
sustain finances over
70 the pandemic.’
60
50
40
30
20
10
0
Südafrika
Kamerun
Kenia
Senegal
Mozambique
Botswana
Eswatini
Mauritius
Nigeria
Namibia
Ivory Coast
Ruanda
Zambia
Uganda
Seychelles
Tanzania
Ethiopia
Malawi
Ghana
Morocco
Lesotho
Egypt
Angola 2018 2019
Source: International Monetary Fund, OMFIF analysis

Source: International Monetary Fund, OMFIF analysis
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.

Pictured: Red and gold protea flower petals
Pillar 6:
Legality and enforceability of standard
financial markets master agreements
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
Netting position enforcement Collateral position enforcement

Standard master agreements Insolvency framework
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.

Alignment with internationally by the Bank of Ghana, which have been is refined. Uganda’s efforts are part
recognised legal and contractual continuously updated. of a broader move to GMRA adoption
frameworks help mitigate risk and across the East African Community
The Bank of Ghana has announced
boost investor confidence. Pillar (other index EAC members are Rwanda,
that from October, all repo trading
6 scores countries based on the Kenya and Tanzania) to enhance cross-
in the country will be governed by
enforceability of close-out netting border activity. The EAC’s horizontal
GMRA legal documentation. This has
locally, adoption of standard master repos – repos between commercial
been developed alongside market
agreements and the strength of banks – have tended to use pledge-
infrastructure allowing real-time
insolvency frameworks. based collateral, with ownership of the
trading and mark-to-market pricing collateral not formally changing. By
The adoption of the Global Master for repo securities on the Bloomberg using repos, where collateral ownership
Repurchase Agreement and legal platform. Adoption and enforceability of changes, countries can reduce the risk
revisions to allow close-out netting the GMRA will standardise Ghana’s repo involved in money markets transactions,
helped Ghana climb five places in Pillar market by creating legal certainty and especially cross-border deals, and
6. Fidelity Bank Ghana and Société reducing risk, and encourage greater thereby reduce their cost. Frontclear,
Générale concluded the first Ghanaian participation in the repo market by local a firm that develops financial markets
repo under GMRA in early 2020 with and global financial institutions. infrastructure, is in the final stages of
a $40m trade, using Ghanaian cedi Few Ugandan banks have setting up a guarantee fund to facilitate
government bond collateral. This performed transactions using GMRA Ugandan interbank trading by insulating
followed the publishing of guidelines documentation, but wider adoption banks from credit risk exposure. Over
for the repo market and use of GMRA is expected after the legal framework the last few years, Ghana has taken a
similar route involving Frontclear.
Mauritius and South Africa lead Pillar 6
because of their adoption of the three
Figure 6.2: More countries making close-out netting enforceable
global master agreements regarding
Close out netting enforceability ISDA netting opinion derivatives, repos and securities
Mauritius Yes Yes lending. The agreements are fully
enforceable and widely used by banks
South Africa Yes Yes
and firms in both countries.
Ghana Yes ISDA in pre-commissioning process
Nigeria Yes ISDA in pre-commissioning process
Close-out netting
Zambia Yes ISDA in pre-commissioning process The enforceability of close-out netting
Egypt Under consideration No
is an important legal underpinning of
derivative and repo markets. Scoring
Morocco Under consideration No on this indicator for this year’s edition
Seychelles Under consideration No is based on data and legal opinions
from the International Securities
Uganda Under consideration No
and Derivatives Association, which
Botswana No No led to significant changes in the
Kenya No No scores of some countries, including
Tanzania No No
Kenya, Tanzania, Namibia, Angola and
Botswana.
Angola No No
To make the GMRA legally enforceable
Cameroon No No
and consistent with its domestic laws,
Eswatini No No Ghana had to pass legislation that
Ethiopia No No allowed for close-out netting. In the
event of a counterparty default, close-
Ivory Coast No No
out netting allows the solvent party to
Lesotho No No settle their remaining transactions on
Malawi No No a net basis, rather than having to make
gross payments to the counterparty
Mozambique No No
and being grouped with other creditors
Namibia No No while awaiting gross payments from the
Rwanda No No counterparty. Close-out netting reduces
systemic risk and Basel rules allow
Senegal No No
banks to apply lower risk weightings to
Source: ISDA, OMFIF analysis
assets with netting provisions on their

balance sheets, freeing up capital for laws, the efficiency of bankruptcy and ‘Mauritius and
other uses. reorganisation processes, the time and
cost of resolution, and the recovery rate South Africa lead
Nigeria enacted netting legislation
earlier this year, lifting it three places
for claimants. Pillar 6 because
in Pillar 6 to third. Its companies and Zambia climbs three places in the pillar, of their adoption
allied matters act includes provisions
for netting. FMDQ, a fixed income and
thanks to an increase in its insolvency
score. The World Bank said it had made
of the three global
derivatives exchange in Nigeria, said: business rescues easier by introducing a master agreements
‘These game-changing provisions will reorganisation procedure and granting
debtors the possibility of obtaining
regarding
cure critical legal deficiencies that
hitherto affected financial market post-commencement finance, credit derivatives, repos
development, with the netting or finance granted to a company in and securities
provisions addressing the credit risk Zambia’s business rescue process.
challenges, operational and legal According to one Zambian consultancy,
lending.’
bottlenecks of gross settlement for a lack of post-commencement finance
spot and derivatives transactions.’ can block an otherwise successful
business rescue. The consultancy
Namibia, Kenya, Egypt, Seychelles and
added that there was a lack of finance
Morocco are in the early stages of
available because prospective investors
drafting netting legislation. Enacting
were unaware of the associated risks.
netting laws is usually a prolonged
Zambia now has the seventh highest
process, as it may require changes to
insolvency score.
insolvency laws. Uganda is introducing
legislation to allow close-out netting as Mauritius and Kenya earn points for
part of its drive for greater use of repos improved resolving insolvency scores.
under GMRA. The World Bank said both had made
resolving insolvency easier by improving
Nigeria and Ghana are two of five index
the continuation of the debtor’s
countries with full netting enforceability
business during insolvency proceedings.
aimed at the netting provisions of
Mauritius and Kenya have the highest
master agreements. The others are
resolving insolvency scores in the index.
South Africa, Mauritius and Zambia,
which receive full scores for this
indicator.
Zambia has already made provisions Figure 6.3: Responsive insolvency regimes needed across the region
Strength of insolvency framework score, max=100
for close-out netting and regulators
are working with ISDA to mitigate Mauritius
Kenia
uncertainty in their netting
Ruanda
legislation, after which ISDA will begin South Africa
commissioning a legal opinion. ISDA’s Morocco
legal opinions satisfy the requirements Seychelles
for financial institutions to obtain Ivory Coast
Botswana
regulatory capital relief for netting and
Mosambik
can be the green light for international Senegal
investors waiting to enter a new market. Zambia
Currently, the only index countries Egypt
Uganda
covered by ISDA’s legal opinions are
Tansania
South Africa and Mauritius. ISDA is close Eswatini
to commissioning legal opinions in Namibia
Ghana and Nigeria. Lesotho
Kamerun
Insolvency Malawi
Äthiopien
Adequate insolvency procedures Nigeria
improve investor confidence, helping Ghana
Angola
to attract foreign investment and
0 10 20 30 40 50 60 70 80
encourage business growth. Scores
2019 2020
from the World Bank’s ‘Doing Business’
Sources: World Bank, OMFIF analysis
report consider the quality of insolvency

METHODOLOGY
The Africa Financial Markets Index in focus

Using a variety of parameters, both qualitative and quantitative, the Absa Africa Financial Markets Index
records the openness and attractiveness of countries across the continent to foreign investment. The index
countries are scored on a scale of 10-100 based on six fundamental pillars comprised of over 40 indicators,
covering market depth, openness, transparency, legal environment and macro opportunity.
Pillar 1: Market depth Quality of financial reporting

• Commitment to international accounting and reporting
Product diversity standards (GAAP, IFRS)
• Type of assets available
Tax environment
• Currency availability of stock exchange products
• Number of hedging products available • Level of withholding taxes on interest and dividends,
including discounts for dividends from listed firms
Size of market • Number of tax treaties
• Total sovereign and corporate bonds, market
capitalisation, ratio to GDP Financial information availability
• Existence of fixed dates and times for market reporting
Liquidity • Publishing of data on sector and domestic vs non-
• Total turnover of equities and bonds ratio to resident ownership of domestic assets
market capitalisation and bonds outstanding, respectively
Market development
Depth • E xistence and effectiveness of capital markets
• Ability to clear government instruments denominated in association
local currency in international markets • Existence and strength of rules protecting minority
• Existence of secondary market makers (bond market) shareholders
• Closing auction for fair tradeable market prices • Existence of sovereign rating (Fitch, Moody’s, S&P)
• Number of corporate ratings issued (Fitch,
Primary dealer system Moody’s, S&P) and coverage by local ratings agency
• Existence of system
• Size of repo market
Pillar 4: Capacity of local investors
Pillar 2: Access to foreign exchange Local investor asset concentration
Net portfolio flows, ratio to reserves • Value of pension assets per capita
• Total net portfolio flows, ratio to foreign exchange • Pension fund assets, ratio to total market capitalisation
reserves of equities and bonds listed on exchanges
Foreign exchange liquidity

• Interbank market foreign exchange turnover Pillar 5: Macroeconomic opportunity
Capital restrictions
GDP growth
• Foreign exchange capital controls
• Composite five-year historical GDP growth average
(2014-2019) and two-year forecast (2020-21)
Official exchange rate reporting
• Quality of data and frequency of publication
Living standards
• Existence of multiple or unified exchange rate
• GDP per capita
Pillar 3: Market transparency, Competitiveness

tax and regulatory environment • Absolute export market share and growth in export
market share over past five years
Financial stability regulation

Macroeconomic data standards
• Basel accords implementation stage • Publication and frequency of GDP, inflation and
interest rate data

Budget release Pillar 6: Legality and enforceability
• Regular release of budget
of standard financial markets master
Monetary policy committee outcomes transparency agreements
• Frequency and regular publishing of MPC decisions and
Netting and collateral positions
meeting schedules
• Enforced netting and collateral positions
Debt profile Use of financial market master agreements

• External debt-to-GDP • Use of ISDA master agreements, GMRA, GMSLA or own
non-standard agreements
Quality of banking sector assets
Insolvency framework
• Non-performing loans ratio
• Strength of insolvency framework
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 Group Limited Official Monetary and Financial Institutions Forum
15 Troye Street, Johannesburg, 2001, South Africa 30 Crown Place, London, EC2A 4EB, United Kingdom
T: +27 (0) 11 350 4000 T: +44 (0)20 3008 5262
www.absa.africa www.omfif.org
@Absa @OMFIF

Absa Africa Financial Market Index

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Absa Africa Financial Market Index

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Absa Africa Financial

Markets Index 2020

Pictured: The iridescent feathers

Absa Africa Financial Markets Index 2020 | 1

OMFIF Editorial, Meetings

2 | Absa Africa Financial Markets Index 2020

Jingdong Hua Hippolyte Fofack

Absa Africa Financial Markets Index 2020 | 5

During a difficult year, African countries are facing enormous

On its fourth year, the Absa Africa Financial Markets Index

The countries whose standing improved the most from

The initial impact of the pandemic was felt by countries

Central banks and financial policy-makers have responded by

6 | Absa Africa Financial Markets Index 2020

2 2 Mauritius 79 75 Market infrastructure and tax environment favourable to foreign investment

4 5 Botswana 63 64 T-bill issuance reform expected to deepen bond market

6 13 Ghana 59 50 Active foreign exchange market and stronger legal framework

7 3 Kenya 58 65 Improving corporate action governance structure

8 12 Morocco 56 51 Improving market and business environment

9 8 Zambia 53 55 Stronger framework for resolving insolvency

11 14 Seychelles 51 47 Rapid growth in market capitalisation and number of equity listings

13 9 Rwanda 50 53 Strong macroeconomic outlook and healthy banking assets

14 11 Egypt 50 51 Liquid equity and foreign exchange markets

15 - Eswatini 49 - Large pool of domestic assets and growing stock exchange

16 16 Ivory Coast 43 41 Expanding bond market and positive macroeconomic outlook

20 - Lesotho 33 - Securities exchange still awaiting inaugural listings

21 19 Cameroon 32 35 Bond and equity markets lifted by regional merger of exchanges

22 17 Angola 30 36 Debt crisis overshadows positive tax reforms

23 20 Ethiopia 27 27 Development of market infrastructure in progress

Absa Africa Financial Markets Index 2020 | 7

Building Africa’s financial markets

8 | Absa Africa Financial Markets Index 2020

South Africa 94 Namibia 92 South Africa 78 Mauritius 98

Absa Africa Financial Markets Index 2020 | 9

With support from

10 | Absa Africa Financial Markets Index 2020

Absa Africa Financial Markets Index 2020 | 11

Sustainable financial markets The Banco Nacional de

Coronabonds made in Africa

12 | Absa Africa Financial Markets Index 2020

$3bn: New ceiling The Dar es Salaam

Absa Africa Financial Markets Index 2020 | 13

Product diversity Size of markets

Absa Africa Financial Markets Index 2020 | 15

16 | Absa Africa Financial Markets Index 2020

Cameroon’s Douala Stock Exchange

Absa Africa Financial Markets Index 2020 | 17

Figure 2.1: Active foreign exchange market improves Ghana’s standing

Net portfolio investment to reserves Interbank foreign exchange turnover

Absa Africa Financial Markets Index 2020 | 19

20 | Absa Africa Financial Markets Index 2020

Sources: International Monetary Fund, national central banks, OMFIF analysis

Sources: International Monetary Fund, national central banks, OMFIF analysis

Absa Africa Financial Markets Index 2020 | 21

Financial stability regulation Reporting and accounting standards

24 | Absa Africa Financial Markets Index 2020

Absa Africa Financial Markets Index 2020 | 25

Scores for Pillar 4 indicators, max=200; harmonised score, max=100 (RHS)

Pension fund AUM per capita

Sources: African Development Bank, Organisation for Economic Co-operation and

which countries could engage their

28 | Absa Africa Financial Markets Index 2020

Absa Africa Financial Markets Index 2020 | 29

GDP growth Living standards