Siobhan Cleary on Privatizing Africa

December 4, 2011 • Blogs, The World at Yale • Views: 919

by Jade Shao:


Yale World Fellow Siobhan Cleary from the Johannesburg Stock Exchange joined an eager audience in Luce Hall for a discussion on “Privatizing Africa” at a “Brown Bag Lunch” event hosted by the African Studies Council. Now, by the phrase “Privatizing Africa,” we mean the role of the private sector on African economic development, or in other words—stock exchanges.

Ms. Cleary began with words of optimism by quoting the IMF GDP outlook for Africa, which accounted for “decent growth after two decades of virtual stagnation” and mentioned “that while Africa’s growth is not the same as China’s or India’s,” it was “still quite positive.” It is encouraging to see a more varied picture of the continent’s growth drivers (to include more than just its resources) due to reduction in political conflict, which Ms. Cleary notes, “Has been resolved in some measure or other”, greater fiscal stability, and an opening up to greater private sector activity.

“It is wrong to lump Africa together as if it were this homogenous thing. It’s not,” Ms. Cleary goes on to clarify, as this common misconception fuels her subsequent statistical analysis. Through a series of charts and graphs, it becomes apparent that while Africa only contributes two percent of the global GDP, twenty-two percent of that comes from South Africa and countries like Nairobi account for less than one percent of the African GDP. Today, South Africa clearly continues to dominate African economy, but even so, the distribution is much better than it was few years ago when South Africa was at an overwhelming 90%. It seems that the rest of the emerging African economies have finally decided to rise to the challenge and make their presence known.

Prior to 1995, Africa only had 8 stock exchanges with as little as 2 companies in Mozambique, but today the continent is boasting 25 exchanges with a record of 409 companies. To someone unfamiliar with the world of stock (like me), these numbers may seem impressive, but they still pale in comparison to the 2000 or 3000 companies in say, the London Stock Exchange. Africa obviously has a great deal of progress to make and according to Ms. Clearly, “needs to dramatically improve efficiency of capital allocation, reduce information costs and, enhance investment opportunities to increase an influx of foreign capital.” In order to transform into a “well-functioning market,” a phrase repeatedly used by Ms. Cleary, African stock exchanges need to resolve their issues with illiquid markets and lack of automation, which debilitates the system and makes it more vulnerable to fraud.

Suggested solutions from Ms. Cleary all use integration as a model, but she emphasizes the creation of a regional exchange as the most feasible answer. For example, that would mean an East African Exchange which would include all the countries in the regional bloc and create linkages between the various exchanges to “get more eyes looking at the screen.” The end goal here is that we want these markets to be more attractive to potential investors, and convince the financial world that “emerging does not equal inferior.”

One Response to Siobhan Cleary on Privatizing Africa

  1. Jack says:

    Interesting and at points inspiring, but Nairobi is not a country.