Frontier Markets in Africa - 0 views
started by Kirk Farley on 08 May 12
started by Kirk Farley on 08 May 12
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started by Kirk Farley on 08 May 12
Although efficient equity markets force corporations to compete while on an equal basis for the funds of people, they can end up blamed for favouring good sized firms, suffer from high volatility, and consentrate on short term financial return rather then long-term economic return.
In a variety of countries where internal bond markets are in existence, these are typically dominated by government treasury funding which often crowds out that private sector must have for fixed interest rate funding. With limited exceptions, the international predetermined rate bond markets are generally closed to African corporations. Thus the development of an active market with regard to equities could provide an alternative to that banking system.
The development of financial markets may help to strengthen company capital structure together with efficient and competitive financial system. The capital composition of firms within Southern African countries where you can find no viable equity markets are generally characterized by heavy reliance on intrinsic finance and lender borrowings which usually tend to raise the debt/equity ratios. The undercapitalization with firms with high debt/equity ratios will lower the viability and solvency of both the corporate sector and also the banking system especially during economic downturn.
Case studies in picked countries of Northern Africa
In all of the countries under examine, both the historic background, the amount of financial system development along with the importance of finance markets structure and operations have considerably affected the nature of the regulatory framework. However, there are few countries in whose objectives of economical market liberalization were the foundation for the development on the modern regulatory process. Mauritius and Botswana are examples which, together with South Africa together with Zimbabwe, have developed everyday materials developed and varied financial markets solutions in Sub-Saharan Africa. There is inevitably that economic together with financial conditions of the economies of individual Southern African nations have played serious roles in shaping their financial market's regulating framework.
1. Financial Markets in Botswana
An informal stock market has been established in 1989, managed and operated by a private stockbroking corporation (Stockbrokers Botswana limited). In 1995, a formal stock exchange was established beneath the Botswana Stock Exchange Act. The BSE accomplished remarkably well with regard to the level associated with capitalization, the value with the shares and the returns to the shares. The BSE contributed on the promotion of Botswana as a destination for international investment.
Within 2004, the number of domestic companies listed was 18 although foreign companies listed were 7, and two inside venture capital market. A major challenge concerning this Financial Markets in the Southern African region could be the harmonization of this national financial regulation along with the compliance with world requirements, including the SADC criteria and also the international standards set by international organizations like the International Organization involving securities Commissions (IOSCO), your International Accounting Standards Committee (IASC), the Basel Panel on Banking Supervision (BCBS) and also the obligations resulting from the WTO Agreement with financial Services (GATS). These key world instruments are getting to be enforced and individual countries ought to keep updating their financial markets regulations and upgrade that technical skills health of their staff in control of regulatory and supervisory operations.
BIBLIOGRAPHY
-Faure, A. P. An overview of the South African Economic climate, in the Securities Markets, Johanesbourg, Sec Research, No. 3, 1987
-Dougall, H. E. [1970], Capital Markets and Associations, Second Edition, New jersey, Prentice Hall;
-Furness, Orite. L. [1972] An introduction to Fiscal Economics, Heinenmann, Manchester.
-Smith, P. F. [1971], Economics of Financial institutions and Markets, Il, Irwin;