Thursday, October 24, 2013

African Capital Markets I

The 10th IMN South African and African Capital Markets Conference attracted over 600 delegates from across the globe in on the 22nd of November 2012. Converging at the Westin Grand in Cape Town, were the brains and pockets behind chiseling into shape, Africa’s capital markets which for decades have remained generally untapped.

Still experiencing growing pains, African capital markets akin to the continent’s economy have drawn the world’s attention as fertile hunting ground for higher returns.

“There has been strong development of local currency debt capital markets  in many countries in Africa as well as unprecedented interest by offshore investors for African credit risk as they turn away from near zero interest rates environments in the developed world and search for yields elsewhere.” Megan McDonald, Head  - Debt Primary Markets, Standard Bank

 Around this period last year, the word on issuers, bankers and investors' lips what “Eurobond”. The IMN Conference coincidentally fell just about two months after the historic Zambian sovereign Eurobond.  A USD denominated 10 year bond which raised $750million and was oversubscribed resulting in an order book value of $12billion. Excitement at the prospect of more sovereign and corporate issuances in Namibia, South Africa, Angola and Nigeria was in the air.

Fast-forward, one year later, the IMN conference goes into its 11th year. Taking a look back at the past 12 months, economic tremors of varying magnitudes have swept the globe but Africa continues to register growth. Critics would render Africa’s growth story nothing to write home about but with liquidity in the capital markets seeking crevices through which to match assets, Africa is on track to catch up with the rest of the world.
Marking the beginning of the 10th IMN conference for emerging markets in Africa questions that lingered above the meeting revolved around:
  • ·         Africa’s institutional capacity
  • ·         Underdeveloped markets with relatively undeveloped yield curves
  • ·         High interest rates – a deterrent of poverty eradication

In a week, a wider pool of delegates will converge in Cape Town to behold and review the progress made over the past twelve months and project into the future.

·         Are Africa’s capital markets developing too quick too soon?
·         Is Africa transformed institutionally to make current and future investments worthwhile for investors?
·         If Africa has seen inflows of funds in other forms and failed to realise tangible growth over the decades, will the story change now?
·         With many African countries healing from the debt burden lifted under the HIPC debt review initiative, is Africa ready to take on more debt?
·         Africa needs approximately $100billion worth of investment per annum to develop her infrastructure, are capital markets the only solution?  

These are questions I hope we can all explore as we take a close look at financing Africa’s development  at The 11th Annual South African & African Capital Markets Conference.

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