by Bayano Valy – SANF 04 no 60
SADC stock exchanges have resolved to concentrate on loose cooperation after clarifying the sticky issues that seemed to slow down progress towards an integrated real-time network of the region’s national bourses by 2006.
The capital market is one area where integration is yet to be realised and the chiefs of the region’s bourses are in the process of building closer collaboration, which will eventually lead to integration of stock exchanges in the region.
Given the different levels of development in SADC countries, concerns were raised over a regional stock exchange that might be dominated by the largest stock exchange in the region, the Johannesburg Stock Exchange. Member states have therefore resolved to begin with loose cooperation. This will likely pave way for smooth transition into integration.
Some member states have argued that dominance by one stock exchange was likely to decrease the number of issuers and investors on national stock exchanges, as well as diminishing trading volumes and leading to capital flight to Johannesburg.
As part of a series of quarterly meetings held in rotation throughout the region, the Committee of SADC Stock Exchanges (COSSE) met this June in Maputo to discuss measures to overcome these concerns and achieve the region’s goals, namely to find a common strategy for the development of capital markets, as well as pore over the region’s stock exchange reports.
In addition, the different levels of development in SADC countries should not be a distraction from the main goal of creating a well-developed and robust financial system that will improve the liquidity and attractiveness of small national stock exchanges.
During the Maputo meeting, COSSE members agreed to pursue measures towards the development of a central processing platform. This central processing platform will enable the bourses to keep their individual identity while doing cross border trade in company shares and other stocks.
Rodrigues Paruque, a representative of Mozambique Stock Exchange (BVM), said that Mauritius, South Africa, Zambia and Zimbabwe were already part of a pilot project established to implement the central processing platform. These countries will have to report back to the committee on the levels of implementation and operation of the platform by September this year in Malawi.
Although COSSE, according to the RISDP, is to play a major role in the development of the region’s financial and capital markets, and by extension increase the flow of Foreign Direct Investment, it is not yet recognised formally as it still has to go through SADC’s legal procedures. “COSSE is still not recognised officially as a private sector action tool for the development of capital markets for the clearing and settlement of transactions,” he said.
It is hoped that official recognition will boost COSSE’s chances of securing financial assistance in order to implement the project. A fully operational regional capital market will serve as a good example of how a central processing platform can work in other African regions. So far, according to Paruque, Ghana has shown an interest in this initiative.
Mozambican Prime Minister Luisa Diogo, who also holds the portfolio of Planning and Finance Minister, said, “the regionalisation of capital markets cannot be limited only to SADC level.”
She said there was a need to find partnerships within the context of continental initiatives like the New Partnership for Africa’s Development (NEPAD), with a view to attract more players to sub-Saharan Africa.
The current scenario is that most stock exchanges in the region are small and they mostly deal with large businesses, but there is need to involve small and medium enterprises. “We feel that the recognition given to Stock Exchange Markets cannot be limited only to large businesses, because it is well known that the engine of development of economies is also based on small and medium enterprises,” Diogo said.
COSSE’s vision is to gradually move towards integration using inter-connectedness of stock markets in the region as a starting point.
(SARDC)
