Title: Status Report on Regional Integration of African Markets East Africa Session 3: African Capital Markets
1Status Report on Regional Integration of African
MarketsEast AfricaSession 3 African Capital
Markets The Next Decade1430 1530 11th
ASEA Conference Accra Ghana30 October 2007
- Chris Mwebesa
- Chief Executive
2An Overview of Capital Markets Integration in the
East African Community
3Recent Efforts at EAC Financial Markets
Integration
4Capital Markets Integration Journey
- Nairobi Stock Exchange was established in 1954.
- During the first East African Community was
considered the bourse for all East African
companies. - In 1977 Collapse of East African Community
- Non- Kenyan companies de-listed
- Capital Markets Authority (K) -1990
- Capital Markets and Securities Authority (T)
-1994 - Capital Markets Authority (U) 1996
- Dar es Salaam Stock Exchange was established
in1996. NSE was involved in a consulting
capacity. - Uganda Securities Exchange was established in
1997. NSE involved in a consulting capacity. - Rwanda is currently considering the establishment
of a stock exchange possibly as a satellite of
the Nairobi Stock Exchange.
5 EAC Treaty and Capital Markets Integration
- Articles 85, 86, 87 of the Treaty for the
Establishment of the East African Community (EAC)
provide the main framework for integration of the
regional capital markets. The provisions of the
Articles call for - Capital market development programs and a
conducive environment for the movement of capital
within the EAC - Harmonized capital markets policies on cross
border listing, foreign portfolio investors,
taxation of capital market transactions,
accounting, auditing and financial reporting
standards, commissions and other charges - The establishment of a regional stock exchange
within the EAC with trading floors in each of the
Partner States - Adherence by the appropriate national authorities
to harmonized stock trading systems, and
permitting residents of the Partner States to
freely acquire and negotiate monetary instruments
within the EAC - The unimpeded flow of capital within the EAC.
6Current Areas of Co-operation
- Policy Formulation
- Capital Markets Development Committee (CMDC) of
the East African Community established -2001 - Securities Markets Regulators
- Ministries of Finance/Treasuries
- Stock Exchanges
- Insurance Sector Regulators
- Pension Sector Regulators
- Market Infrastructure
- - Common market structure (3-tier)
- - Cross border listings (3 companies)
- East African Breweries
- Kenya Airways and
- Jubilee Holdings.
- The three securities exchanges CDS and ATS
software have been supplied by Millennium
Information Technologies (MIT). So a single East
African securities exchange based on the
integration of trading, clearing and settlement
systems is now possible.
7Infrastructure and Regulation
- Vision
- A fully integrated capital market with one
regional stock exchange (by Dec. 2009) - Embodies the new thinking and agreed way forward
- between the regulators and the stock exchanges.
8Infrastructure and Regulation
- Action Steps
- Infrastructure
- ATS/CDS in Uganda by June 2008
- Single access point for issuers and investors
through a common trading platform by December
2008 - Explore integration of the trading platforms
either through an interface or through an order
routing system - CDS connected to Payment Systems for Real
Delivery versus Payment (DvP) by December 2009. - Corporate Structure of the Securities Exchanges
- Demutualization of each Exchange by December
2008 - Merger of the Securities Exchanges and subsequent
listing of a regional securities exchange by June
2009.
9Challenges to Integration
10Challenges to Integration
- Differentials in key macro economic indicators
(interest rates, inflation, currencies) - The capital account of Tanzania is only partially
open - Lack of depth and liquidity pension sectors in
Uganda and Tanzania are dominated by public
pension schemes - Multiplicity of regional blocks-
- Kenya is a member of Common Market of Eastern and
Southern Africa (COMESA) and the East African
Community (EAC) - Uganda is a member of COMESA and the EAC
- Tanzania is a member of EAC and Southern African
Development Community (SADC).
11Benefits of Integration
12Benefits of Integration
- Increased regionalization of capital markets has
the potential to address the thinness and
illiquidity of the regional capital markets. - Offer East African Residents single access to all
securities listed in the region. - Bring Rwanda and Burundi on stream without them
having to re-invent the wheel.
13End