Regional cooperation in SADC stock exchanges: … Increasing the availability of shares?

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The Namibia Stock Exchange (NSX) was launched in 1992, almost 90 years after the first stock exchange was founded in the country in 1904. It closed six years later following the end of the diamond boom at Lüderitz.
The NSX has grown substantially from its humble beginnings with just one dual-listed company in 1992. It has now developed into the second largest stock exchange on the continent after the Johannesburg Stock Exchange (JSE) in terms of market capitalisation.

Currently 34 companies and four Exchange Traded Funds are listed on the NSX, with a combined market capitalisation of N$1,68 billion in 2014. The market capitalisation of companies with a primary listing on the NSX amounted to N$22.3 billion.

Dual-listed companies (companies listed on more than one stock exchange) accounted for 99 percent of total market capitalisation. Most of the dual-listed companies have a primary listing on the JSE.

Stock Exchanges play an important role in channelling funds to productive sectors and in providing companies with funding by issuing shares.

The SADC Protocol on Finance and Investment (FIP) aims at diversifying and expanding the productive sectors of the economies, which requires investment and hence financial resources. The cooperation of SADC Stock Exchanges could be one way of providing the necessary funding and was, therefore, covered in Annex 11 to the FIP.

The Committee of SADC Stock Exchanges (CoSSE) was established to facilitate the cooperation and consists of ten stock exchanges from the region. Angola, Democratic Republic of Congo, Lesotho, Madagascar and Seychelles are not yet members.

It is expected that improvements in the regulatory environment and in operational and technical capacities will attract more financial investors to the region. The Annex places a strong focus not only on training and development of professionals but also on information sharing among stock exchanges.

Sharing of information covers a broad range of topics, including information regarding changes to the regulatory environment in order to encourage harmonisation of practices on financial transactions and trading activities by members and customers of the Stock Exchanges.

Furthermore Annex 11 aims at cross-border listings, meaning that companies of one SADC country list their shares on the Stock Exchange of another SADC country. The benefits include access to greater liquidity in other markets and potentially lower capital costs.

The harmonisation of the regulatory environment to the extent possible is central in order to align listing requirements, which might require changes to the company act.

Regulatory harmonisation and its alignment to international standards will strengthen the confidence of companies on the one hand to list on another Stock Exchange and of financial investors to invest in shares offered on SADC Stock Exchanges.

The NSX is an affiliated, but not yet full member of the World Federation of Exchanges (WFE). It can apply for full membership once certain legal requirements are fulfilled that are being addressed in the Financial Institutions and Market Bill (FIM Bill).

It is expected that the FIM Bill will be passed during the current session of parliament, which would also pave the way for the Namibia Financial Institutions Supervisory Authority (Namfisa) to become a full member of the International Organisation of Securities Commission (IOSCO).

Namfisa’s IOSCO membership in turn would open the door for the NSX to join Mauritius and South Africa as a full member of WFE.

Cross-border listings could make Stock Exchanges more attractive for domestic and foreign investors, because of a more diversified range of shares available and hence a spread of risks. The Namibia Financial Sector Strategy’s call to encourage more Namibian companies, including SOEs, to list on the NSX and offering shares to the public would increase the pool of available financial instruments in the Namibian capital market.

Furthermore, the implementation of an electronic Central Securities Depository (CSD), which would replace the current, traditional transfer of physical certificates would speed up and ease the process of transferring ownership of securities. Progress has been made regarding the CSD, but the regulations have to be finalised in consultation with the regulator, Namfisa.

* Festus Nghifenwa is the SADC FIP Implementation Coordinator at the Ministry of Finance. He can be contacted for comments and further information by email at info.sadc-fip@gov.mof.na or see www.sadc-fip.gov.na for more info.

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