There is also a significant disparity between the level of development, size and liquidity of exchanges across Africa. However, African stock exchanges as a whole continue to develop at a rapid rate. Organisations such as ASEA (Africa Securities Exchange Association) have done much to enhance governance and promote the development of all its member exchanges. ASEA’s stated goals are to improve Africa’s securities exchanges by focusing on increasing the number of listings of strong local companies; improving technology, reporting and data availability; reducing fees and other innovations to increase ease of investing.

Churn is a good indication of the liquidity of a market. South Africa’s JSE leads the way turning over close to 35% of its listed market cap annually with the remainder of the continent’s exchanges below 10%, with the exception of North African markets.

Interestingly the disparity between the actual quanta of listings amongst the exchanges is relatively small when compared to the market capitalisation, though the proportion of traded counters to the number listed does show some stagnation. This is, however, much improved over previous years.

As a result of many factors, liquidity on African stock exchanges is low when compared to international markets. This is often the result of the small number of listed companies, and the tightly-held nature of those companies that result in relatively low free floats. Whether as a result or a cause of this, high transaction fees also play their part in restricting trading activity on African exchanges. This poor liquidity is a significant inhibitor to international investment, and can also have the consequence of poor pricing of markets when only small quantities of shares trade.

NEXT: Investability of Africa’s listed markets