South Africa’s strong financial market infrastructure and robust legal framework has ensured the country remains the ultimate destination for investors in Africa, according to the Absa Africa Financial Markets Index.
The Index, produced by the Official Monetary and Financial Institutions Forum (OMFIF), provides a toolkit for countries seeking to strengthen their financial markets infrastructure.
It assesses countries according to six pillars: market depth; access to foreign exchange; tax and regulatory environment and market transparency; capacity of local investors; macroeconomic opportunity; and enforceability of financial contracts, collateral positions and insolvency frameworks.
According to the report, South Africa continues to lead the index supported by strong financial market infrastructure and a robust legal framework.
South Africa scored an impressive 93 out of 100. Its closest competitor, Botswana, lags behind with a score of 65.
However, the report noted its macroeconomic performance has worsened.
“Additionally, it no longer tops the index across all six pillars, having been overtaken by Kenya on ‘access to foreign exchange’ and by Nigeria in ‘market transparency, tax and regulatory environment,” read the report.
South Africa’s open and highly liquid foreign exchange market has exposed it to capital outflows, “reflecting concerns about the country’s macroeconomic trajectory”.
According to the Index, of the surveyed countries South Africa is the only country where the total value of listed equities is more than $100 billion, at $1.1 trillion.
It also tracks progress on financial market developments annually across a range of countries and indicators. This year’s edition extends coverage to three additional countries – Angola, Cameroon and Senegal – and pays special attention to policies to enhance market growth, including financial inclusion and investor education, OMFIF said.
The Index evaluates financial market development in 20 countries, as well as highlighting economies with clearest growth prospects.
The aim is to show not just present positions but also how economies can improve market frameworks to meet yardsticks for investor access and sustainable growth.