Countries across Africa have weathered the shocks from the pandemic, geopolitical tensions and rising global interest rates over the past few years and are now on a path to recovery. The more favourable global financial conditions have supported activity in securities markets, the value of pension fund assets and foreign reserve adequacy. The macroeconomic environment in most economies has also stabilised.
This clear and widespread improvement is reflected in progress made by the majority of countries in the Absa Africa Financial Markets Index 2024. Scores have risen for 23 countries (82%), which is the highest share since the index was first published in 2017.
Now in its eighth year, the index evaluates countries’ financial development based on measures of market accessibility, openness and transparency. With support from the United Nations Economic Commission for Africa, coverage in the index has grown to 29 countries this year with the addition of Benin, encompassing approximately 80% of the population and gross domestic product of Africa.
To construct the index, OMFIF conducted quantitative analysis and surveys of over 50 organisations across Africa, including central banks, securities exchanges and regulators, for their data and insights. The aim is to provide the investment community with a benchmark of market infrastructure across the continent. Yasmin Masithela, interim chief executive, Absa Corporate and Investment Banking, emphasised: ‘The core of the Absa AFMI is about African countries actively building a fit-for-purpose financial market ecosystem, and perhaps the most important developments are those that reflect direct changes in policy-making and regulation’.
Key findings
Environmental, social and governance factors have been introduced into market frameworks for 23 AFMI countries to broaden their investment appeal. Rwanda is the highest riser in the index this year, as new ESG assets and climate-related financial regulation were introduced in the country alongside an improving macroeconomic environment.
Major foreign exchange reforms have been implemented in Egypt, Ethiopia and Nigeria to move towards more market-based regimes. While this does not directly improve scores for the 2024 index, these reforms – if sustained – are likely to bolster transparency and activity in foreign exchange markets in the coming years. In addition, new assets are becoming available on domestic exchanges, including ESG assets, sukuk bonds and diaspora bonds.
This year, improvements can also be seen at the pillar level. In each of the six pillars, more countries improved than reduced their scores. Taking a longer view, 20 countries have higher scores this year than when they were first introduced to the index. According to survey participants, key developments since the index was first introduced include expanded domestic markets, better access to financial services and enhanced market infrastructure.
As David Marsh, OMFIF chairman and chief executive officer, highlighted: ‘anxieties about Africa’s vulnerability have not disappeared, but have been mitigated by strong evidence of robustness in capital market structures’. Despite recent global economic challenges, the continued advancement in developing local financial markets suggests a promising outlook for Africa’s economic resilience and its ability to attract investment.
Download the Absa Africa Financial Markets Index 2024 here.
Register for our upcoming virtual roundtable discussing sustainable investment and infrastructure in Africa here.
