Africa: consolidation of the main stock exchanges seems to take shape with the African Exchanges Linkage Project go-live last November


The African Exchanges Linkage Project (AELP) has gone live in November 2022 allowing interconnexion between the 7 participating African stock exchanges in South Africa, Nigeria, Morocco, Egypt, Kenya, Côte d’Ivoire, and Mauritius, for cross-border trading.*

AELP was conceptualised by the African Securities Exchanges Association (ASEA) and the African Development Bank (AfDB). The first phase was funded by a grant from the Korea-Africa Economic Cooperation (KOAFEC) Trust Fund managed by the African Development Bank.

The mission statement of the AELP is to advance cross-border settlement and security transactions in Africa.1

To achieve this, an e-platform, The AELP Trading Link, has been established which ensures unimpaired cross-border trading between participating stock exchanges. For its initial phase, the AELP linked the following seven exchanges who signed up to the project: Bourse Régionale des Valeurs Mobilières (BRVM) comprising eight West African markets, the Casablanca Stock Exchange (CSE), The Egyptian Exchange (EGX), the Johannesburg Stock Exchange (JSE), the Nairobi Securities Exchange (NbSE), the Nigerian Stock Exchange (NiSE) and the Stock Exchange of Mauritius (SEM). These seven stock exchanges together make up 2,000 companies with a market capitalisation of about 1.5 trillion US (UNITED STATES) dollars.2

Cross-border security trading covers the trading of securities in a foreign market. An investor, in this instance, can open an account with a foreign broker in another country and place an order through contact with this foreign broker.3

This is what AELP ensures, using a framework called Sponsored Access. In accordance with this model, a registered stockbroker in one participating securities exchange takes an order from a domestic client and then requests a registered stockbroker on another exchange to execute the trade in that market. The onus is on the stockbroker who receives the request to ensure that compliance to the rules and practices of the market where the securities are bought or sold are adhered to.4

AELP is an ambitious and strategic Africa-wide project. What would be the best outcome for the continent in the medium and long term? Mr. Edoh Kossi AMENOUNVE, president of the African Securities Exchanges Association and one of the main sponsors of AELP, shares his views:

The AELP is also a useful complement to Africa’s major integration projects, notably the African Continental Free Trade Area and the Pan-African Payment & Settlement System (PAPSS). In the medium term, the platform will onboard additional stock exchanges. On a medium- and long-term vision, the AELP will reach two other phases. The second is single licensing for brokers who can go directly to any market on the continent. The third phase will be one in which African states, institutions and businesses will be able to raise resources on an African scale whatever their country of location. The continent’s savings would serve the whole of Africa. In addition, this phase will lead to the creation of a pan-African stock exchange that can be competitive and comparable to the stock markets existing in other continents.

In the face of the economic and financial heavyweight that is South Africa, what would be the role of WAEMU, Côte d'Ivoire, and the BRVM on this great African stock market?

“Indeed, among the economic heavyweights in Africa, the TOP 3 is constituted by Nigeria with GDP (Gross Domestic Product) of 504.203 billion dollars, followed by Egypt with a GDP of 469.094 billion dollars and South Africa with a GDP of $411,48 billion, all of which are AELP members. On the stock market, it is not the economic weight that counts but the potential for return. Emerging and developing market exchanges have historically outperformed developed country exchanges and attracted many investors. The WAEMU (West African Economic and Monetary Union) is an economic zone with strong potential for growth, above the continental average and a reassuring macroeconomic and fiscal framework. Those are assets to us”, States Mr. Edoh Kossi AMENOUNVE.

AELP future looks bright according to its main sponsor but what is the opinion of the actual market players? We chose to question a broker, Jean-Charles KWAO, head of Capital Markets, Societe Generale Capital Securities West Africa:

“SGCS WA (Societe Generale Capital Securities West Africa) is one of the first and most important Brokerage company into the WAEMU zone. We have 25 years of experience on the West African capital market (BRVM).

Therefore, we could not have been outside of the AELP. In fact, our will is to take an active part in the development of our stock exchange market which will have a positive impact on the Economy of African Countries. Innovation is also a key driver of Societe Generale Group.

We aim to offer to our clients (physical person or institutional investor) the possibility to diversify their investments through an access to other African Stock Exchanges.

Our middle term objective is to be a reference on this new platform Direct FN offered by AELP in terms of value of transactions, best execution of orders for our clients.

We will first start with the stock exchange of Casablanca, but we also plan to extend it to South Africa, Nigeria, Egypt, Kenya, Mauritius at a later stage”.

Among market players, investors play a key role as the final beneficial owners of the trades. How do they consider AELP? Mr. Youssef LYAMMOURI, Director of Investments at La Marocaine Vie insurance company, kindly accepted to give his testimonial:

"Insurance companies in Morocco may make investments in foreign securities up to 5% of total assets and after prior approval of the Insurance and Social Security Supervisory Authority (ACAPS). This is to stimulate the diversification of portfolios of assets in Morocco, considering risks and returns in the insurance sector.

Moroccan companies are remarkably present on the African continent. Economic growth prospects in Africa look promising. Hence the attractiveness of African stock markets for investment. Additionally, the stock markets of many African countries have attractive valuation and return levels. The launch of the African Stock Exchange Linkage Project (AELP) is a real opportunity for Moroccan insurers that compensates a relative lack of products and securities on the Casablanca Stock Exchange.

The connection of African markets would provide access to diversified products and in particular the stocks of the largest African companies. Furthermore, this project should contribute to removing certain obstacles by facilitating the free flow of information and the harmonisation of regulations”.

Of course the connection of stock exchanges poses the question of the consolidation of the custody market. Marie-Antoinette Nzebo, Head of SGSS Cote d’Ivoire highlights:

“There’s little doubt that investors will seek a single broker and a single custodian for their African holdings in the longer run. It will probably be a lengthy process, but we are already preparing ourselves -and this will probably be a good subject for our next article!"

Jean-François Marchand, Country Relationship Manager & Cyril Monney, Assistant Country Relationship Manager, Societe Generale Securities Services