DEBT, SLOW GROWTH DRIVE CAPITAL MARKET DOWNWARDS – PWC
Growing levels of debts and slow economic growth in Africa have been affecting the Nigerian and other African equity capital markets activity and dragging them down over the past three years, findings by PricewaterhouseCoopers Nigeria have shown.
The consulting firm in its 2019 African Capital Market Watch report presented at a webinar hosted by the Making Finance Work for Africa partnership and PwC Nigeria, noted that capital market value in 2019 was the lowest seen over the past decade, with the volume of deals lower only in 2012.
These, according to analysts at PwC, are findings from the review of the performance of Africa’s capital markets between 2010 and the first quarter of 2020. While exploring the impact of COVID-19 on African capital markets at the webinar, stakeholders in African capital markets noted an increase in the activities of domestic investors.
According to PwC Nigeria’s Chief Economist, Andrew Nevin, and the firm’s Director, Capital Markets, Alice Tomdio, who presented the data, African economies now face the unprecedented challenge of the COVID-19 pandemic, which has severely impacted global financial markets.
Commenting on the data and the potential impact of the COVID-19 pandemic, Chief Executive Officer, Nairobi Securities Exchange, Geoffrey Odundo, said, “Capital markets in East Africa have taken a hit, with a 20 per cent decrease in trading volume since the beginning of COVID-19.”
On the positive side, he said there was increased activity from domestic investors. The Director-General, Securities and Exchange Commission, Ghana, Daniel Tetteh, said that market activity on the Ghana stock market had remained robust, with an almost threefold increase in trading volumes between January and April 2020, compared to the same period in 2019. He added that a good proportion of these trades originated from domestic investors.
Speakers at the webinar also stressed the important role of African capital markets in supporting the post-COVID recovery, saying this could be achieved if African markets were deepened and provided with avenues for investment of the significant pools of local capital currently tied up in “dead” assets.
According to them, expanding the range of available asset classes should also include measures to attract and support new listings. The panel discussants agreed that the increased engagement of local investors in the current environment was a positive sign. They added that developing a deep pool of domestic investors was essential for African capital markets to play their full role in supporting the post-COVID economic recovery.