[box 1] Integrating West African stock markets? Since its foundation in 1993, the African Stock Exchanges Association (ASEA) has promoted not only the development of stock exchanges, but also cooperation among them within four main regions: in East Africa among the exchanges in Kenya, Tanzania and Uganda; among the Johannesburg Stock Exchange and smaller Southern African Development Community exchanges; in North Africa, led by the Cairo and Alexandria exchanges; and in West Africa among the Nigerian and Ghanaian exchanges and the Bourse Régionale des Valeurs Mobilières, the francophone regional exchange. In West Africa, the idea of working towards further integration of stock exchanges is part of a wider push within the region toward lowering barriers to the free movement of people, goods, services and capital. This has long been a goal of the 16-member Economic Community of West African States (ECOWAS), which celebrated its 25th anniversary this year. In April, six ECOWAS members, led by Ghana and Nigeria, decided to "fast-track" plans to set up a second monetary union and common currency in the subregion by 2003, alongside the eight-member West African Economic and Monetary Union, which uses the CFA franc (pegged to the French franc). Some analysts and local officials believe that further integration of capital markets could help reinforce such plans. Others feel that the lack of a common currency, along with the need for further harmonization of regulatory, tax and policy frameworks, will hamper any rapid regionalization of West African stock markets. While there are differences over how long it actually will take to link West Africa's exchanges, many involved in the process agree that pooling the resources of these small and fragmented capital markets could boost their ability to mobilize local and international capital for private-sector and infrastructure development.

[box 2] Development finance bonds African stock market advocates see some scope for the continent's exchanges to mobilize resources for development through the issuance of bonds to fund specific industrial and social projects. Officials of the BRVM, the regional exchange in Abidjan, believe that their bond market has great potential for raising such funds. The West African Development Bank (BOAD), which helps finance regional development projects, has four separate bond issues on the Abidjan market, making it the BRVM's single biggest bond issuer, says Mr. Niamkey Tanoe, head of operations for the exchange. In Nigeria, the Securities and Exchange Commission (SEC) is stepping up efforts to promote the bond market to state and local governments as a means of raising funds for development projects. As with equity markets, lack of public awareness has hindered development of Nigeria's bond market. To try to counter this, the commission has held a series of public information sessions in recent months. SEC Director-General Mallam Suleiman Ndanusa recently urged state governments to follow the example of the Edo state government, which earlier this year issued a 500 mn naira revenue bond to fund low-income housing construction.

[box 3] Enticing small investors Financial institutions in some African countries have been trying to attract more small investors with limited means by offering ways for them to pool their funds and lower the risk of investments in shares traded on exchanges. Mr. Yinka Sanni, general manager of the asset management arm of International Banking and Trust Company, a top merchant bank in Nigeria, argues that unit trusts (mutual funds) hold "tremendous opportunity" for Nigerians. "As Nigeria makes further progress economically and there is more disposable income in people's hands, there would definitely be more savings," he told Africa Recovery. "Unit trusts would enable investors -- no matter how small they may be -- to pool funds together for investment purposes." In Ghana, Parliament is currently considering an amendment to the securities law allowing the creation of unit trusts. Already, according to Mr. Yeboa Amoa, managing director of the Ghana Stock Exchange, members of the Ghana Cocoa, Coffee and Sheanut Farmers Association (GCCSFA) have grouped together to purchase stakes in two of the six companies that have publicly divested shares on the exchange. Back in 1994, some 160,000 small investors under the GCCSFA umbrella bought shares in Ashanti Goldfields, Ghana's largest gold mining concern. And in May 2000, the association's farmers collectively bought 20 per cent of the shares on offer in the Produce Buying Company, Ghana's largest domestic buyer of cocoa. Company employees themselves purchased another 5 per cent, while the general public bought 4 per cent. The Nigerian exchange is encouraging companies to allot shares on a preferential basis to organized groups of small investors, such as market associations, cooperative societies and cooperative farmers. It also recommends that the Nigerian Labour Congress participate through the national pension fund. This echoed the suggestion by Mr. Ernest Abankroh, company secretary of Ashanti Goldfields, that Ghana's national pension fund invest some of the assets that it holds for workers in the stock market, rather than just fixed-income securities. The BRVM in Abidjan urges companies to "offer their shares in smaller values," says Mr. Diouf Birahim, head of the Central Depository at the regional exchange. "In fact, a main goal of the BRVM is to mobilize domestic savings in the eight member countries by appealing to the small investor," he adds.

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