The CFA Institute, in conjunction with the African Stock Exchanges Association (ASEA), has put together a book on the challenges and opportunities in the African capital markets.

In Africa as elsewhere, fortune favors the bold. For example—and this is not an example from the ASEA and CFA Institute’s book—the Enko Debt Fund, a fund of Enko Capital, has been remarkably successful over the last three years with a debt-driven strategy of value investing, debt sustainability, asymmetric returns and active risk management.

The president of the ASEA, Karim Hajji, has written the introduction for the new CFA/ASEA booklet. He observes that Africa’s first stock exchange began operations in 1861, and that the continent now hosts 36 stock exchanges, which represent 1,400 listed companies.

Hajji also references the fact that the African Development Bank (AfDB), in 2014, raised approximately $80 million through its maiden local currency issuance in the Nigerian capital market. It used this money to fund local small- and medium-sized enterprises, as well as some infrastructure projects. This illustrates, he says, the growth and capacity of such exchanges.

We will abstract three sections of the report: South Africa; the East African Community; and Egypt.

South Africa

The material on South Africa has been prepared by Adrian Saville and Ronak Golpaldas. Saville teaches at the Gordon Institute of Business Science; Golpaldas is director of Signal Risk.

Saville and Golpaldas tell us that the Johannesburg Stock Exchange, with a capitalization of $1 trillion, is the largest such institution on the continent. It now has some smaller rivals, including notably ZAR X, a low-cost exchange created three years ago “to provide lower-income individuals with access to stocks.”

South Africa has adopted from Australia the so-called “twin peaks” model of regulation of the financial sector. This means that there are two key regulators, one focusing on system stability, the other on deterring fraud and misconduct. The idea is that this is superior to a many-peaked or patchwork system of regulation and that it is superior to a single peak, because if there were only a single central regulatory that authority would have to weigh financial stability against law enforcement. This balancing act is seen as so untenable that the regulators with each goal are separated precisely in order to avoid it.

In terms of debt, it is well to note that South Africa has a debt market capitalization of $200.29 billion. It has 125 bond issuers. This is a marked contrast to its neighbor, Namibia, which has a debt market cap of a relatively modest $2.72 billion and only 10 bond issuers.

East Africa

This book’s section on East Africa looks at six countries: Kenya, Tanzania, Uganda, Rwanda, Burundi, and South Sudan.

This area has a combined population of 172 million and a combined GDP of $172 billion.

The dominant equity market in the region is Kenya’s Nairobi Stock Exchange (NSE), which includes not only a main market but an alternative investments market and a growth enterprise market. It also lists a wide range of debt securities including REITS and a gold bullion-based ETF.

NSE also lists two derivatives: equity index futures and single-stock futures.

Kenya has an equity market cap of $20.64 billion and a debt market cap of $15.55 billion. Its neighbor Uganda, by contrast, has an equity market cap of only $6.4 billion and a debt market cap of $0.67 billion. Kenya has 16 bond issuers and Uganda has only 2.


Egypt’s standing with the international credit rating agencies has been improving since 2013. Moody’s, Fitch, and S&P have each upgraded its sovereign bonds since that year.

The book attributes these improved ratings to economic reforms that have steadied the nerves of international investors and sent critical economic indicators moving in the right direction. Real GDP growth was 5.3% in 2017-18, and inflation had been brought down to 12.7%.

The country’s debt market cap is $38.29 billion; equity market cap $41.85 billion.

Among those reforms, the country has increased the liquidity of its financial markets through a new IPO system, a new market maker mechanism; and the expansion of intraday trading. It also floated the Egyptian currency, which in the words of the report has “normalized the foreign exchange market and eliminated the parallel and black markets for foreign currencies.”

Egypt’s bond market includes 66 Treasury bonds, 19 housing bonds, 39 issued corporate bonds, and securitized bonds.