The Significance of Unifying Africa’s Financial Markets to Attract Foreign Investment

The tariffs implemented by the Trump administration are likely to trigger market volatility, prompting global investors to reduce their involvement in emerging and frontier markets.

Sam Dahya, head of investor services, custody, and investment administration at Standard Bank Corporate and Investment Banking (CIB) stated this.

During her speech at The Network Forum’s (TNF) Africa meeting in London, she noted that investor engagement in Africa remains strong.

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The World to Africa survey from The Value Exchange, in partnership with Standard Bank, reveals that 63% of allocators invested in Africa in 2024, up from 57% in 2021.

“In addition to significant cross-border investment flows, Africa is experiencing increased allocations from North America and the Middle East, particularly from mid-sized asset managers and owners seeking better yields and risk diversification.”

However, she cautioned that the continent faces challenges, particularly due to recent uncertainties surrounding US tariffs.

Standardization for Growth

Dahya underscores the importance of standardization in attracting foreign investment to Africa and protecting the continent from macroeconomic risks.

From a custody perspective, there are significant opportunities for standardization in Africa. Many markets, particularly outside South Africa, employ diverse technologies, regulations, and frameworks, complicating investments and increasing costs.

Efforts aimed at standardization can help align regulations and infrastructure, creating a unified system and enhancing operational efficiencies, according to Dahya.

There have been notable advancements in regional integration, highlighted by organizations such as the Economic Community of West African States (Ecowas), the East African Community (EAC), and the Southern African Development Community (SADC).

“These organizations have indeed eased access for foreign investors to local markets.”

Dahya references regional stock exchange initiatives, such as the Africa Exchanges Linkage Project (AELP), which assists markets in attracting crucial liquidity.

The AELP includes stock exchanges from several African countries, including Morocco, Egypt, South Africa, Kenya, and Mauritius.

Its goal is to facilitate cross-border investing, provide access to capital markets, and support the initiation of initial public offerings. Through the sponsored access model, investors can set up brokerage accounts in other AELP markets and begin trading on those exchanges.

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Several African economies are also working to shorten trade settlement cycles, which improves liquidity, while others are connecting to Swift, the international payments system, to enable seamless cross-border transactions.

However, a need for better integration among participants, including central banks and central securities depositories, remains.

“The processes for account opening are still far from being standardized. Without improved post-trade harmonization, liquidity challenges will continue across the region,” she emphasizes.

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Operational Efficiencies

Digitalization is enhancing Africa’s attractiveness to investors. By focusing on digital transformation, custodians can increase efficiency, reduce costs, and elevate service quality.

This shift can lead to enhanced transparency and greater client satisfaction. Innovative operating models and platforms will allow providers to scale, relieve bottlenecks, automate processes, and accommodate client customization.

African markets have made significant progress in standardization and digital advancement; however, further improvement is required. Ongoing efforts are essential for growth and for managing global volatility, according to Dahya.

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