CFA-Ghana optimistic that PAPSS integration will increase trading activity and liquidity on the GSE
The African Securities Exchanges Association (ASEA) has taken a significant step towards enhancing cross-border securities transactions in Africa, signing a memorandum of understanding (MoU) with the Pan African Payments and Settlement System (PAPSS). The move is expected to foster access to capital, reduce costs, shorten processing and settlement times, and resolve issues with currency convertibility.
The integration with PAPSS is seen as a crucial development, especially considering the recent implementation of the African Continental Free Trade Area (AfCFTA), aimed at promoting trade and economic integration across the African continent. The MoU’s timing is also considered relevant, following the introduction of the African Exchanges Linkage Project (AELP) in December 2022, which aims to facilitate cross-border trading more accessible.
The MoU was signed during the African Securities Exchanges Association’s (ASEA) 73rd Executive Committee Meeting on April 14, 2023. The MoU marks a significant step towards enhancing the efficiency and liquidity of African securities exchanges, promoting trade and economic integration, and facilitating cross-border trading.
Supported by the African Union Commission, the African Export-Import Bank (Afreximbank), and the AfCFTA Secretariat, PAPSS is a financial market infrastructure that offers a dependable, secure, and efficient method of settling cross-border transactions. The platform’s primary objective is to promote trade and economic integration across Africa.
The MoU’s expected benefits include capital markets integration across the continent, increased trading activity and liquidity in the market, and attracting more foreign investment. For Ghanaians seeking to invest in foreign markets, utilising the PAPSS platform will lead to more efficient and cost-effective payment and settlement of transactions. The move is expected to attract more foreign investment and foster economic growth on the continent.
Joshua Adagbe, a Senior Research Analyst at Tesah Capital, expressed his optimism, stating that the integration with PAPSS would bring more efficiency to the Ghana Stock Exchange and attract more foreign investment. He expects to see an increase in trading activity and liquidity in the market. For Ghanaians seeking to invest in foreign markets, utilising the PAPSS platform will lead to more efficient and cost-effective payment and settlement of transactions, resolving issues with currency convertibility.
Similarly, Nana Wiafe Boamah, President of the Ghana Chapter of Chartered Financial Analysts (CFA-Ghana), expressed his optimism that the move would reduce incidents of limited liquidity on the Accra bourse. He explained that historically, the Ghanaian market has been plagued by low levels of liquidity as many institutional investors typically buy and hold. However, with the coming into play of this partnership, they should see more listings locally. With a more mature investor base, trade volumes should benefit, and liquidity should improve.
Thapelo Tsheole, the President of ASEA, also emphasised that PAPSS could be instrumental to the African Exchanges Linkage Project, which aims to facilitate cross-border trading. With nine exchanges and a market cap of US$1.5 trillion, ASEA provides an ideal umbrella for PAPSS to achieve its objectives. In the coming weeks, they will hold consultative meetings to establish an implementation plan for this collaboration.
Overall, the MoU between the Ghana Stock Exchange and PAPSS is expected to be a game-changer in the African capital market space. With increased efficiency, access to capital, reduced costs, and shorter processing and settlement times, the move is expected to foster economic growth and development on the continent.
