By Philippe Carré, Global Head of Connectivity, SunGard’s Global Trading business
As I wrote in my last blog, the session ‘New investment opportunities: trading emerging markets in Egypt and the Pan Africa region’ at this year’s SunGard London attracted a lot of interest. Having looked at Qatar, Egypt and the Middle East, I would like now to cast an eye over the vast continent of Africa, the “terra incognita” of electronic trading.
SunGard already has a considerable ‘history’ in Africa. We have been present in North Africa since the late ‘90s through a number software distribution deals with local stock exchanges. Our Valdi Trading Solutions suite already equips stock exchange members in Morocco & Tunisia, and we are looking to expand our footprint further by delivering SunGard Global Network (SGN) market data distribution and ASP capabilities to these and other exchanges.
In South Africa, we also have a strong presence through a Valdi distribution deal with the Johannesburg Stock Exchange. We have sales and support offices in Cape Town and Johannesburg, and a local hub on the SGN, our worldwide order routing and market data distribution network. Via SGN we offer managed access services to the South African markets (equities, fixed income and derivatives), and many South African financial institutions already use SunGard technology.
The next logical step will be to open sub-Saharan African markets such as Nigeria, Kenya and Ghana to the SGN community, following our long-term strategy of working with new and growing electronic markets, and expanding trading opportunities for our clients worldwide.
Sub-Saharan Africa has seen remarkable growth in economic activity over the last decade – GDP growth has consistently been over 5% on average over this period, with three or four nations now showing growth figures in excess of 10%. Of course, the region is developing from a low base, and some of the increase is due to the large rises in commodity and energy prices, but that is by no means the whole story.
There has been a considerable drive for political reform, Ghana’s doubling of its growth rate to 7% is strongly linked to a more stable political environment; there has been an increase in educational opportunities, with primary school enrolment trebling over the last decade (although 25% of children still do not attend school) and adult literacy reaching 60%+ levels. The commodities boom has helped, in terms of both revenues and also with regard to the massive increase in foreign direct investment for infrastructure projects, particularly from China, on the back of global demand for commodities.
Another game-changer has been the role of technology and, more particularly in such a vast geographical region, mobile technology. In Kenya, for example, a nation of around 40 million people, only 200,000 mobile phones were owned in 2000, though by 2010 this figure had grown to more than 22 million! Bank account numbers, which were long held back by geographical and infrastructural constraints, are of course a fundamental pre-requisite for financial market expansion. Multiple mobile phone banking initiatives have given rise to an explosion in the numbers of online bank accounts.
With a number of countries now delivering vibrant, fast-growing and generally stable economic environments, it is no surprise that Africa is tipped to become as much a driver of global economic growth over the next 20 years as the BRIC nations. For this prediction to come true the improvements in political environment, education and infrastructure must continue apace: the take-up of technological advances must be embraced, but also the financial markets structure must be in place.
This last proviso is certainly being addressed: sub-Saharan nations are increasingly using the market structure typical of capitalist economies to fund development via securities issuance. There is an enormous incentive of course to benefit from the increase in mobile users – there is now a latent interest to use mobile technology to access equities and other instruments directly, as some Exchanges (Ghana, Nigeria…etc.) are already fully electronic. These exchanges are now positioning themselves to be more appealing to local and international investors – Ghana launched ETFs (Exchange-Traded Funds) in June and Nigeria should follow shortly – and with this in mind we invited a leading provider of African trading intelligence to the London SunGard City Day: Martin Orji, Managing Director and CEO of Nex Rubica Capital (NRC).
Mr. Orji sought to answer the question of how Africa can currently be best approached as an investment destination. Africa is seeing increased investment interest, not solely because of the growth story but because of the way it correlates with global markets: it offers appreciable diversification from say the S&P 500 or MSCI World, or even the MSCI EM EMEA.
Mr. Orji noted, however, that despite the many recent developments African markets vary vastly in ease of access, liquidity, and clearing/settlement/custody characteristics. One way of dealing with the structural complexity can be the use of ETFs and ETNs, and Mr. Orji gave the example of an ETF that NRC has created, which is listed on NYSE Arca in New York. NRC has accessed markets in seven countries, with their multiple exchanges and different clearing and settlement challenges, to create a representative 30-stock basket. As well as offering diversification, ETFs of this type are tax-efficient and can be dual- or multiple-listed, giving important jurisdictional comfort.
A new dawn is breaking over Africa, heralding a brighter future. SunGard will be there to play its part in providing the technological infrastructure and connectivity to underpin the African economic and financial markets as they grow further.
