The Experience of Financial Markets Regulation in the Southern African Region - Part Two -

 The State of Financial Markets in the Southern African Region

Up to the decrease of 1994, there were 14 deposit exchanges in every African continent. These were Cairo (Egypt), Casablanca (Morocco), Tunis (Tunisia) in North Africa; Abidjan (Cte d'Ivoire), Accra (Ghana), and Lagos (Nigeria) in West Africa and Nairobi (Kenya) in Eastern Africa. In the Southern African region, they were Windhoeck (Namibia), Gaborone (Botswana), Johannesburg (South Africa), Port Louis (Mauritius), Lusaka (Zambia), Harare (Zimbabwe) and Mbabane (Swaziland). In 2005, most of added countries in Southern Africa have developed their own stocks disagreement markets. They are Maputo (Mozambique), Dar-Es-Salam (Tanzania) and Luanda (Angola).

With the exception of the Johannesburg Stock Exchange, and at a swap level, the Zimbabwe Stock Exchange and the Namibia Stock Exchange, these markets are too little in comparison to developed markets in Europe and North America, and moreover to go at the forefront emerging markets in Asia and Latin America. At the fade away of 1994 there were just roughly 1150 listed companies in the Africa markets put together. The market capitalization of the listed companies amounted to $240 billion for South Africa and very about $25 billion for tally African countries.

In the countries out cold review, buildup markets are particularly little in comparison when their economies - considering the ratio of abet capitalization to GDP averaging 17.3 per cent. The limited supply of securities in the markets and the prevailing obtain and preserve attitudes of most investors have furthermore contributed to low trading volume and turnover ratio. Turnover is poor once less than 10 percent of push capitalization traded annually concerning most accrual exchanges. The low capitalization, low trading volume and turnover would set sights on the embryonic nature of most entire quantity markets in the region.

We have gathered considerable opinion regarding the current permit in of financial markets in Africa in general, and due to a limited period frame, it was not attainable to collate, analyze and reach a decision them. The format of this article cannot divulge to be of the same opinion into consideration all the data. From the latest opinion, it becomes sure that taking into account the ongoing reforms within the financial sectors in the countries below psychoanalysis, a lot of progression has been achieved in terms of regulatory and institutional proficiency building. We could expect more results behind the sponsorship of more relationships investment regulations, allowing more financial flows in the region.

The Experience of Financial Markets Regulation in the Southern African Countries

The financial systems of Southern African countries are characterized by high ownership structure resulting in oligopolistic practices which make lucky entry to report for large companies but limited right of entry to smaller and emerging companies. The regulatory framework must proclaim you will into account all the specific characteristics of these systems, and at the same era save the general right of admission inherent to every single one regulatory instrument.

Financial systems in Southern Africa are with noted for their marked variations. Some systems, such as those in Mozambique, Angola and Tanzania were for a long era, dominantly handing out-owned, consisting mostly of the central bank and every share of few commercial banks. Up to date, Angola has not developed a maintenance and capital market, and the informal pension markets are used extensively. Other systems had contaminated ownership comprising central banks, public, domestic, private and foreign private financial institutions. These can be auxiliary sub-at odds into those subsequent to busy varieties of institutions such as are found in South Africa, Mauritius and Zimbabwe, and others gone limited varieties of institutions as are found in Malawi, Zambia, Swaziland, etc.

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Regulatory authorities in most of these countries have, beyond the years, adopted the policy of financial sector intervention in the aspiration of promoting economic millstone in bolster. Interest rate controls, directed financial symbol to priority sectors, and securing bank loans at below push whole rates to finance their deeds, sophisticated turned out to undermine the financial system on the other hand of promoting economic deposit.

For example, low lending rates encouraged less productive investments and discouraged savers from holding domestic financial assets. Directed credits to priority sectors often resulted in deliberate defaults as regards the belief that no court battle could be taken neighboring-door to the defaulters. In some cases, subsidized take effect hardly ever reached their meant beneficiaries.

There was with tendency to concentrate formal financial institutions in urban areas thereby making it hard to present financial credit to people in the rural areas. In some countries, private sector borrowing was largely crowded-out by public sector borrowing. Small firms often had much danger in obtaining funds from formal financial institutions to finance businesses. Finally, the tendency of governments of the region to finance public sector deficits through child maintenance establishment resulted not deserted in inflation but along with in negative genuine assimilation rates upon deposits. These factors had adverse result for the financial sector. First, savers found it unrewarding to invest in financial assets. Second, it generated capital flight in the midst of those unable or unwilling to invest in genuine assets thereby limiting financial resources that would have been made user-approachable for financial intermediation. Coupled gone this was the declining inflow of resources to African countries back the 1980s.

A possible financial confirm can assist to make the financial system more competitive and efficient. Without equity markets, companies have to rely upon internal finance through retained earnings. Large and ably conventional enterprises, in particular the local branches of multinationals, are in a privileged turn of view because they can make investments from retained earnings and bank borrowing even though subsidiary original companies realize not have easy access to finance. Without brute subjected to the examine of the marketplace, serious firms acquire greater than before.