Wednesday, April 11, 2012

TED talk on the African Capital Markets

This 2011 You Tube link is a video of Yale World Fellow, Nicky Newton-King, the Deputy CEO of the  Johannesburg Stock Exchange (JSE) talking about the "Elephant in the Room", referring to strategies to move African Exchanges forward and African Exchanges refusal to adopt them. She listed three important strategies to attract more investors to African Exchanges.

1) Harmonisation of laws
2) Cross-listing of Securities
3) Creation of Regional or Pan-African Exchanges

The talk was exceedingly rudimentary-I am not sure what qualifies one as a Yale World Fellow- but interesting. I did agree with her last two points. Cross-listing of securities may be feared but will increase liquidity for the company and all boats will rise with that tide. Exchanges do serve issuers by providing the facility for raising capital. Cross-listing helps facilitate investors finding new, emerging market companies by appearing several places, ideally on a large exchange and on a smaller one.

I also agree that the development of more regional exchanges can only help. East Africa is well on its way toward a regional exchange, even though that has been true for awhile. Ms. Newton-King did not mention this but did use East Africa as an example of where a regional exchange might work.

Finally, I disagree that Harmonisation of laws in Africa, whether exchange procedure or governance, will help anyone. Once again we must remember the poor Southern African Development Community (SADC) Tribunal. 15 African states are members of SADC and yet when the Tribunal ruled against Zimbabwe in the Land Reform case of Ben Freeth and Luke Tembani in 2008, a decision upheld by the South African Supreme Court, it was ignored and then ultimately disbanded in 2011. For Harmonisation of laws to work among even a few exchanges, there needs to be a dispute resolution process in place that functions in a reliable way. Just like African Exchanges don't want to be part of an African Board in SA, they don't want to end up in court there either. So there will need to be a dispute resolution body for exchanges, investors and issuers to take their disputes to.

SADC is not the only alternative for resolution of disputes but for Southern Africa a SADC-like organisation could be developed. Harmonisation is always tricky, in my opinion, because of the potential power imbalances that cannot be rectified. It is usually the laws of the dominant party which are adopted and that is not always good for everybody involved.

More on SADC soon. Watch the video if you can. It is interesting and has some good slides!              

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