Kenya rankings in the Africa Financial Markets Index drop

An employee points to stock information displayed on an electronic screen inside the Nairobi Securities Exchange Ltd. (NSE), in Nairobi, Kenya./COURTESY

Kenya’s ranking in the Africa Financial Markets Index dropped again this year.

According to the AFMI report by Absa bank, Kenya moved four positions down to 11 this year, compared to seven last year.

The index focused on six pillars to rank the countries in terms of ease in doing business for investors.

These pillars are: Market depth, Access to foreign exchange, Market transparency, tax and regulatory environment, Capacity of local investors, Macroeconomic opportunity and Enforceability of standard master agreements.

Kenya scored 47 percent in the overall performance landing it to position 11. This was the first time it was outside the top 10 in the rankings.

South Africa, Mauritius and Nigeria maintained the top three positions as last year with South Africa scoring 86 percent, Mauritius 70 percent and Nigeria 63 percent.

Even though they maintained their positions, their overall scores in the 2021 AFMI dropped compared to the 2020 AFMI.

Ghana and Uganda were among countries whose scores improved to join the top five.

Performance in the different pillars

In pillar one, which was Market depth, Kenya was at position seven with 46 percent. South Africa had the highest points at 97 percent with the least being Ethiopia with 11 percent.

“Nearly all countries’ scores dropped in Pillar 3: Market transparency, tax and regulatory, mainly due to weak scores in sustainability indicators. South Africa is the only country to have adopted climate risk as part of its macroprudential stress testing framework. Nine countries have policies that incentivize the issuance of sustainable financial products, including Kenya,
whose Green Bonds Programme is encouraging the development of a green bond market domestically as well as across East Africa,” read the report.

The country garnered over 50 percent in Pillar 3: Market transparency, tax and regulatory environment with 79 percent and Pillar 5: Macroeconomic opportunity where it scored 62 percent.

According to the report “Majority of countries are not using internationally recognized agreements for derivatives, repos and securities lending.”

Countries are tapping into infrastructure development, tech and favorable regulations to make them more attractive to investors even in the midst of the COVID-19 pandemic. For example;

Kenya raised $740m through the issuance of a 21-year infrastructure bond.

Uganda is linking together the central securities depository of the central bank and the stock exchange to facilitate retail trading of government securities.

Mozambique’s investment law was amended to increase the minimum value required for foreign direct investments.

Tanzania launched a new Treasury bond with a 25-year maturity, lengthening its yield curve.

Cameroon extended the three-year tax breaks for companies listed on the Bourse des Valeurs Mobilières de l’Afrique Centrale to last for as long as they are still on the exchange.

South Africa is reforming its regulatory framework for OTC derivatives.

The Ethiopian parliament enacted the capital markets establishment proclamation to pave the way for the creation of a securities exchange.