10 June 2022

Written by Jamela Hoveni - Senior Lecturer: School of Investment & Banking

Capital markets fulfil a vital function in channelling funds from surplus economic units (savers) to deficit economic units (borrowers). This function is facilitated by the money, bond and stock markets. Capital markets in many parts of the world are mature, which reflects economic developments over decades. In the African context, the Johannesburg Stock Exchange (JSE) is the largest stock exchange (19th in the world), and the most developed and liquid market in Africa.

A recent study shows that, except for the JSE, capital markets in most African countries are still underdeveloped. Using stock market capitalisations as a percentage of GDP data from 2020 and as a measure of market development, the JSE ranked first in Africa at over 300% of GDP (World Bank, n.d.). Other markets in the region, such as Mauritius (56%), Kenya (21%), Botswana (22%), Nigeria (13%) and Zimbabwe (59%), are small in comparison. In addition to the small size, African stock markets are plagued by problems related to illiquidity and the dominance of small issues. This generally impedes the markets’ ability to raise and channel equity capital in critical areas such as infrastructure, health and education. This means that, while in many parts of the world equity markets are coming of age, in Africa, significant challenges to growth and development still exist in these markets.

Despite the challenges faced by individual stock markets at the regional and continental level, African markets have made great strides towards regional and continental integration. At the regional level, Southern African stock markets are members of the Committee of Southern African Development Community (SADC) Stock Exchanges (CoSSE), while at the continental level, the African Securities Exchanges Association (ASEA) plays a critical role. The benefits of this regional and continental integration includes greater cooperation and coordination. Over time, these initiatives will also help to deepen the markets and improve liquidity.


World Bank. Not dated. World Development Indicators. [Online] Available from:
https://databank.worldbank.org/source/world-development-indicators [Accessed: 2022-06-10].