Maher Asham, CEO of Egypt for Information Dissemination, said that investment expansion in African markets faces many challenges such as lack of the necessary information needed for finding investment opportunities in the target markets.
The second challenge that hinders investments in Africa is the weak infrastructure in most countries, due to the insufficient financial resources, he added.
Despite such challenges, Africa is still a prominent market which has many promising investment opportunities, because there are few investment companies in Africa, which is a good reason for other companies to expand there, he explained.
Asham divided the African stock markets into three categories. The first category includes stock markets with high-tech mechanisms and that use the latest techniques, such as the South Africa Stock Market. The second category includes stock markets with mid-level technologies and that need further development, such as the Egyptian Exchange and the Nigerian Stock Exchange, which have the same trading systems. The third category includes emerging stock markets which have no developed trading mechanisms.
The South Africa Stock Market is ranked the first among the African stock markets in terms of technological development for many reasons, including the fact that it has a larger diversity of financial products, more financial mechanisms and more listed companies than other African stock markets; it also has a commodity exchange.
Despite having a good infrastructure, the Egyptian Exchange is suffering from an unclear political and economic situation, which has been hinder its performance in many sessions, and a decrease the number of listed companies. Asham stressed the importance of drawing up a clear, applicable plan to develop the Egyptian Exchange, so it can compete with other stock markets and attract different categories of customers.
With economic and political stability, Egypt must start providing more financial products and innovative financial mechanisms to increase liquidity and improve the market, such as the short-selling mechanism which will contribute to increasing the number of institutions trading, he suggested.
Attracting new investors to the Egyptian market depends on having a strong market, good products and the effective marketing mechanisms. Egypt must work hard to achieve this. It especially needs good products, obtained through good bids, which are absent in the current period.
“Egypt has good IT infrastructure and a well-trained workforce, but the country lacks important things such as political stability,” he continued. Since the revolution of last year, ill-considered decisions have been taken, such as the decree approved by the Cabinet for imposing taxes on initial transactions of any security in the secondary market, following an initial public offering (IPO), and on investment funds that do not invest in securities.
Asham said these decisions have not been adequately studied, adding that they will undermine the stock market and the economic system in the near future, because they will deter foreign investments.
Such decisions will not increase the country’s revenues as expected, because the negatives effects outweigh the positive ones, he concluded.
“Egypt for Information Dissemination was in talks with the Kenya Stock Market to create a back-office entity for stockbrokers and was also in talks with the Nigerian Stock Exchange to develop its trading system. However, both offers were turned down as these stock markets depend on local companies to reduce costs,” he added.
Asham revealed that Egypt for Information Dissemination plans to launch an FIX hub solution in December, in order to communicate with foreign investment banks.