26 May 2013

Someday, an investor in Botswana would be able through technology, to access stock markets in the Southern African Development Committee (SADC) without travelling. 

This is because the countries in the region are working towards integration of the stock exchanges through the Committee of SADC Stock Exchanges (CoSSE).

Speaking during the SWIFT African Region conference in Gaborone recently, a panelist from the region said the time frame for the integration was not yet established pending creation of enabling legislature and adaptation of technology.

The CoSSE chairperson, Ms Beatrice Nkanza said the idea started around 1996 under the auspices of the SADC Finance Protocol.  

The objective was to amplify some of the challenges faced by individual stock exchanges at the regional level.

The challenges, she said, include growth, liquidity and attracting investors. Ms Nkanza said they started with the harmonisation of bureaus, adding that so far exchanges in the region are automated from trading to depository. 

The CoSSE has membership of eight out of the 12 stock exchanges in the region and others are yet to apply. She said they are dealing with issues of investor education and have realised that there was little participation on the retail side.

Ms Nkanza, who is also the CEO of Lusaka Stock Exchange, said they want to capitalise on technological advances. She said they want the stock exchanges in the region to communicate such that an investor in one country would be able to access a market in another country.

The CoSSE has come up with policy impediments, and Ms Nkanza said they are trying to turn the legislature into an enabler but not a hindrance. On the settlement side, she said they have been talking to Srate to spearhead the project to harmonise settlements at the regional level. She said already there were some level of cross-border trading, but that it has to be harmonised so that it becomes a seamless activity.

Ms Nkanza said the CoSSE advocates what individual stock exchanges want such as the interfacing of the markets for cross-border trading, safe settlements on deposits and a strong participation from local investors.

For his part, Mr Iann Seymour-Smith, head of custody and settlements at Strate, said central security deposits are facing similar challenges to the stock exchanges as none of them are linked.

 He however said following the Financial Markets Act, they would soon link up with the Swiss depository and that two others in Europe have shown interest.

In Africa, he said there was still a challenge as there are no single CSDs connected in Africa. He said they have been appointed by CoSSE to work with other CSDs in the SADC region on the model that will enable linkages within the region.

He said they have also been working with the SADC Banking Association on the central banking side. Strate is based in South Africa and has been appointed as CSDs for Johannesburg Stock Exchange (JSE).

For his part, Botswana Stock Exchange (BSE) CEO, Mr Hiran Mendis said there are any models of integration, and that the CoSSE listing model was not accepted as each stock exchange wanted to reserve its sovereignty. He said he does not see any problems as many countries have the infrastructure to enable integration, but noted that there are impediments.

Mr Mendis said Botswana, for example, does not have foreign exchange controls while other countries in the region have them. He said going forward they would need to look at the business model of integration, the costs and benefits of integration.  

The three panelists were discussing the topic: The role of market infrastructure in attracting investment into African capital markets. ENDS