Africa: Market reforms to trigger increased investment flows to continent – Study reveals
A study by the Standard Bank Group, has revealed that 53 percent of global investors believe reforms in the continent’s markets will trigger increased investment inflows to the continent.
Per the study, investors mainly want reforms undertaken in the continent’s capital markets particularly in the areas of pension funds, mutual funds and hedge funds management as well as private equity and venture capital.
Aside market reforms being a hindrance to increased investment inflows to the continent, country and currency risks are among the other factors inhibiting global investors from increasing or making new investments on the continent.
According to the Standard Bank Group, forex liquidity and restrictions, limited investment vehicles, country-risk (socio-political factors) and operational risks are among the major factors stopping new investors from investing on Continent.
For existing investors, currency controls (including repatriation), limited investment returns, market regulatory as well as forex liquidity and restrictions are among factors holding them back from increasing investments on the continent.
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Meanwhile, equities or stocks listed on the Ghana Stock Exchange (GSE) is the most preferred investment instrument for portfolio investors investing in the country.
Per the study conducted by the Standard Bank Group, 43% of portfolio investors prefer to invest in listed equities on the local bourse.
Following listed equities as the next most preferred investment instrument is government bonds issued in the local currency.
Eurobonds, American Depository Receipts (ADRs) and corporate bonds issued in the local currency were the third, fourth and fifth most preferred investment instruments by global portfolio investors.
American Depository Receipts (ADRs) offer US investors a means to gain exposure to non-US stocks without dealing with the complexities of foreign stock markets.
Private equity was the least preferred investment for investors.
In a sharp contrast, majority of strategic investors involved in the country’s capital market, prefer to invest in private equity to the other forms of investment instruments.
Only a few number of strategic investors were interested in investing in government bonds issued in the local currency, Eurobonds and listed equities on the local bourse.
The World to Africa report, is an industry-wide study conducted by Standard Bank Group and the ValueExchange, in cooperation with the Bank of New York Mellon, Africa Venture Capital Association (AVCA), South African Venture Capital Association (SAVCA), Global Custodian and MiDA.
According to the report, global investors are set to see a significant increase in their African investments, with 76% either studying the markets, preparing for entry or readying to deploy additional investments into the continent.
Although volumes of Africa-bound investments are yet to return to pre-pandemic levels, the study reveals that 34% of investors plan to increase their investments into Africa in 2022 – creating a major injection of liquidity into key markets.
