01 Mar 2013

The economic activity in emerging markets and developing economies expanded by 4.8 per cent and it is expected to grow by 5.5 per cent in 2013, Finance and Development Planning assistant minister, Mr Vincent Seretse, has said.

“Supportive policies have underpinned much of the acceleration in economic activity. Activity in Sub-Saharan Africa grew by 4.8 per cent and economic activity is expected to remain robust with a rebound from flood related output disruptions in Nigeria contributing to an acceleration of overall growth in the region in 2013,” he added.

Giving a keynote address at the official opening of Loans and Bonds Africa Conference in Cape Town, South Africa, Mr Seretse said this was per the International Monetary Fund World Economic Outlook update of January 2013.

The growth of African economies, Mr Seretse said was underpinned primarily by the exploitation of natural resources.

“Because this leaves Africa economies vulnerable, diversification has become a priority in our countries. Amid the constrained fiscal positions of most governments, it has become imperative to source alternative development finance from capital markets,” he added.

In this regard, Mr Seretse said the rapid development of African capital markets and the increasing capital flows into the markets presented an opportunity to access finance for development projects.

Further, he said the local debt markets were comparatively small and were also faced with various structural challenges. He said in most countries, debt markets were dominated by government, while corporate issuance market had not developed in tandem with the government debt market.

Other challenges includes; inadequate benchmarks and underdeveloped yield curves, onerous bureaucratic regulation, illiquidity of debt instruments and low financial literacy amongst majority of people in the African continent and consequently low retail investor participation.

The conference themed: Financing strategies of governments to support continued GDP growth and infrastructure development, provided an opportunity to understand how Africa can use its debt capital markets to support growth. END