The Absa Group recently released its Africa Financial Markets Index 2022 Report that in its 6th edition evaluates the financial development performances of 26 African countries based on measures of market accessibility, openness, and transparency.
The report is developed in association with the Official Monetary and Financial Institutions Forum (OMFIF), an independent think tank organization concerned with central banking, economic policy, and public investment.
The aim of the report is to show how economies can reduce the barriers to investment which can, in turn, boost sustainable growth.
The scores in the Index are determined by the relative rather than the absolute performance of each country across six key pillars: market depth; access to foreign exchange; market transparency, tax and regulatory environment; capacity of local investors; macroeconomic environment and transparency; and legal standards and enforceability.
The 2022 Report finds that:
• South Africa, Mauritius, and Nigeria maintain their positions in the top three this year, as they continue to score highly on measures of market depth, transparency and enforceability of legal agreements.
• Uganda rises two places to fourth, while Namibia and Kenya improve their ranking within the top 10. Scores for these three countries rose due to progress in adopting environmental, social, and governance(ESG) policies and frameworks.
Tanzania maintained its overall ranking at 11th place this year, with an overall score of 55 versus 54 in 2021.
However, it improved its score on most of the six key pillars, particularly in terms of the enforceability of legal standards.
Market depth score is 46 in 2022 versus 45 in 2021; access to foreign exchange is 64 vs 59; market transparency, tax and regulatory environment is 75 vs 66; capacity of local investors is 17 vs 23; macroeconomic environment and transparency is 75 vs 65; and legal standards and enforceability is 55 vs 10.
Tanzania also consolidates its ranking in 7th place for macroeconomic environment and transparency in Africa (and 2nd in East Africa after Uganda), and moves up to 9th for legal standards and enforceability from 13th in 2021.
However, Tanzania also dropped from 5th in 2021 to 14th in 2022 for access to foreign exchange, although its score improved from 59 to 64 thanks to the fact that Tanzania has also moved to liberalize its capital account with the Foreign Exchange Regulation Act 2022.
This opened up access to foreign investors in the domestic debt market, including allowing investors from Southern African Development Community member states to participate in the government bonds market at the primary market level. The new regulations also give domestic residents easier access to regional financial markets to diversify their investment portfolios.