The money markets and bond markets in Southern Africa are serviced mainly by large, prime grade borrowers due to the stringent minimum bid prices and high yields. Lack of sufficient public information has been a deterrent to the growth of the bond markets in the region. In order to broaden the capital and money markets in the region and promote better capital allocation, member states have put in place measures to sensitize the public on opportunities within the debt markets and achieve more market harmony.
Recognizing the need for the pooling of financial resources, member states are beginning to support regional capital market initiatives to overcome the limitations of their fragmented capital markets and consolidate their markets as a vehicle for promoting economic development in the region.
However, the Southern African Development Committee (SADC) member countries face challenges to regional integration , which include different approaches towards macro-economic stability (in both monetary and fiscal policy), tax and foreign investment policies which are not fully harmonized, lack of depth and liquidity in the stock markets and disparities in trading, clearing and settlement procedures and infrastructure. Other challenges include lack of a fully harmonized legal and regulatory regime, lack of political will especially in the passing of legislation necessary for integration and multiplicity of regional blocks.
As such, various initiatives aimed at achieving capital market integration have been put in place over the recent years within the SADC region. The SADC and the Committee of Insurance, Securities and Non-Banking Financial Authorities (CISNA) have embarked on strategies to harmonize the regulatory framework for securities markets across the region.
Furthermore, the Committee of SADC Stock Exchanges (COSSE), a private sector initiative within the SADC framework, was established in January 1997 with the aim of promoting the transfer of securities markets’ intellectual capital and technical expertise among member countries of COSSE, encouraging the development of a harmonized securities market environment within the SADC region, maximizing co-operation among the member stock exchanges and improving the operational, regulatory and technical underpinnings and capabilities of SADCExchanges. COSSE is also keen to promote the development of efficient, fair and transparent securities markets within the SADC region and make their securities markets more attractive to both regional and international investors. It also seeks to increase market liquidity and enhance trading in various securities and financial instruments.
A major catalyst for the growth of domestic bond market is the existence of domestic savings and an established financial system. Regional concerted efforts are therefore necessary in order to hasten the development of the fixed income markets Already some of the capital markets have taken steps to realize the above. Those exchanges that still use manual trading systems have taken steps towards implementing an automated trading platform. A good number of stock exchanges within the SADC region now operate on electronic platforms. The exchanges have also been trying to attract more indigenous firms by setting up over-the-counter markets and/or secondary and tertiary markets with less strict listing requirements. Increasing attention has also been given to public educational and promotional programs to attract more investors.
It is expected that the integration will result a number of benefits to the region as a whole. Some of the benefits include:
- Promotion, strengthening and supporting of the private sector by providing platforms for the mobilization of productive financial capital;
- Economies of scale, increased competition and a wider range of instruments available for both investors and savers, thus improved liquidity within the regions;
- Increased efficiency due to more streamlined operations;
- Vehicle for the mobilization of domestic resources, foreign investment and remittances, and reverse capital flight, and hence, enhanced market liquidity;
- Avenue for financing regional projects such as infrastructure projects;
- Facilitation of capacity building in countries with less developed capital markets;
- Promote competitiveness of the region’s exchanges
- Lower transaction and capital costs;
- Governments gain a larger set of monetary and fiscal policy instruments;
- Better allocation of capital, thereby allowing for the efficient allocation of capital and financial resources for investments and production;
- Opportunities for long-term investment financing; and
- Deepening of financial development and economic integration, key strategies for accelerating economic growth and reducing poverty in Africa.
Regional Bond Market Initiatives
- Committee of Insurance, Securities and Non-Banking Financial Authorities (CISNA):
- Reviewing and reforming the existing legal and regulatory regimes;
- Ensuring capacity building among market participants;
- Enhancing the dissemination of information on bond trading;
- Establishing links between trading activities for government bonds and stock exchanges; and
- Coming up with initiatives aimed at promoting bond issuance
- COSSE works under the ambit of the draft SADC Finance and Investment Protocol (FIP) to:
- Co-ordinate central banking and nonbanking institutions and harmonize regulatory frameworks and practices;
- Mobilize intra-regional savings and investment and facilitate foreign investment;
- Harmonize fiscal and monetary policies;
- Achieve macroeconomic convergence;
- Co-operate in managing international capital flows; and
- Promote effective functioning of Development Finance Institutions
Regional Events and Meetings
Committee of Central Bank Governors in SADC:
- 17-19 March, 2014: Meeting of the Committee of Central Bank Governors Officials
- 4-6 Feb, 2014: Committee of Central Bank Governors- Financial Markets Sub-Committee
- 4-6 Jan, 2014: Committee of Central Bank Governors- Financial Markets Sub-Committee
Links to regional institutions
Summary table of the countries
|Country||GDP (US$ million) 2012||GDP growth (yoy)||External Debt (US$ million)||External Debt (as % of GDP)||Domestic public debt (US$ million)||Domestic public debt (as % of GDP)|