William Sowah, Head of Investor Services at Stanbic Bank Ghana, has lauded the pivotal role played by Ghana’s capital market in attracting long-term investments for financing economic activities in the country.

According to him, it is therefore necessary for stakeholders within the market to constantly dialogue to come up with innovative ways of making the market more effective so as to harness its full potential for national development.

William Sowah was commenting on a recent report that found that Global investors are ready to boost their investment portfolios in Africa this year, with 76% either studying the markets, preparing for entry or ready to deploy additional investments onto the continent.

“This survey draws on views from over 220 institutions to give a uniquely comprehensive view of the drivers, challenges and triggers that Global Portfolio Investors face when looking at African markets. Ghana’s capital market is steadily developing and increasingly playing a pivotal role in attracting long-term capital for financing economic activities.

“To continue on the upward trajectory, stakeholders from the industry need to collaborate to discover new horizons that will deliver prospects for Ghana’s Capital Market. The survey findings awaken our market to the need to focus on removing liquidity impediments and hasten the pace of reforms”.
William Sowah

‘World to Africa’ report

The ‘World to Africa’ report is an industry-wide study conducted by Standard Bank Group and the ValueExchange in collaboration with the Bank of New York Mellon, Africa Venture Capital Association (AVCA), South African Venture Capital Association (SAVCA), Global Custodian and MiDA.

The report stated that investing in Africa is already a core activity for almost half of all global investors, particularly those in Europe. The report found that 36% of global investors are getting ready to enter African markets – either through planned market entries or account activation in the region – highlighting the growing appeal of African markets to overseas investors.

The fact that this development is driven mostly by long-term, institutional investors is evidence that this growth is strategic more than opportunistic, the report stated.

Although volumes of Africa-bound investments are yet to return to pre-pandemic levels, the study revealed that 34% of investors plan to increase their investments into Africa in 2022 – creating a major injection of liquidity into key markets.

While the majority of investors are focusing on South Africa, Nigeria and Kenya for these increased flows, sub-Saharan markets such as Botswana, Zambia and Namibia look set to benefit from growing investor confidence, according to the report.

Fintech seen as major driver, FX liquidity as a core challenge

Projected investment returns from African markets is the key driver for foreign investment flows, but the notion of Africa as an ESG-friendly destination is also driving increased interest. European investors and those from the Asia-Pacific region, who see ESG as the second-most important driver of Africa flows today, lead the way in this trend.

These investments are being directed into Africa’s rapidly growing technology and fintech sectors. While portfolio investors are focused on government bonds and a basket of technology, infrastructure and natural resource stocks, the appeal of fintech as the main target for all profiles of investment is clear – particularly for large North American investors seeking global diversification.

Despite the increased attention on Africa, not all global investors are ready to turn to the continent. The report found that 41% of new investors to Africa (and 27% of existing Africa-investors) see the current state of the continent’s foreign exchange regimes as being a core obstacle to investing.

The research is clear that global investors will be strongly drawn toward countries that take action to drive local market reforms to increase and stabilize liquidity in the near future.