Widespread progress in African financial markets

There have been clear improvements across countries in the Absa Africa Financial Markets Index 2024. Scores have risen for 23 countries (82%), which is the highest share since the index was first published in 2017.

In its eighth year, the Absa Africa Financial Markets Index evaluates countries’ financial development based on measures of market accessibility, openness and transparency. With support from the United Nations Economic Commission for Africa, coverage in the index has grown to 29 countries this year with the addition of Benin, encompassing approximately 80% of the population and gross domestic product of Africa.

To construct the index, OMFIF conducted quantitative analysis and surveys of over 50 organisations across Africa, including central banks, securities exchanges and regulators, for their data and insights. The aim is to provide the investment community with a benchmark of market infrastructure across the continent, as emphasised by Yasmin Masithela, interim chief executive, Absa Corporate and Investment Banking: ‘The core of the Absa AFMI is about African countries actively building a fit-for-purpose financial market ecosystem, and perhaps the most important developments, are those that reflect direct changes in policy-making and regulation’.

Key findings from the 2024 index include:

• ESG has been introduced into market frameworks for 23 AFMI countries to broaden their investment appeal.
• Rwanda is the highest riser in the index this year, as new ESG assets and climate-related financial regulation was introduced in the country alongside an improving macroeconomic environment.
• Major foreign exchange reforms have been implemented in Egypt, Ethiopia and Nigeria to move towards more market-based regimes. While this does not directly improve scores for the 2024 index, these reforms – if sustained – are likely to bolster transparency and activity in FX markets in the coming years.
• New assets are becoming available on domestic exchanges, including ESG assets, sukuk bonds and diaspora bonds.

This year, the breadth of improvement can also be seen at the pillar level. In each of the six pillars, more countries improved than reduced their scores. Taking a longer view, there is evidence of notable improvement in Africa’s financial markets, as 20 countries have higher scores this year than when they were first introduced to the index. According to survey participants, key developments since the index was first introduced in 2017 include expanded domestic markets, better access to financial services and enhanced market infrastructure.

As David Marsh, chairman and chief executive officer, OMFIF highlighted ‘anxieties about Africa’s vulnerability have not disappeared, but have been mitigated by strong evidence of robustness in capital market structures’. Despite recent global economic challenges, the continued advancement in developing local financial markets suggests a promising outlook for Africa’s economic resilience and its ability to attract investment.