Regulators seek to build capacity in African markets

African capital markets require more capacity-building. The recent conference of the International Organisation of Securities Commissions (IOSCO) resolved to give support to help markets develop strong infrastructure, more investor education, good corporate governance and the capacity to enforce market rules and regulations.
Nigeria’s THISDAY newspaper (www.thisdaylive.com) has reported from the 36th annual IOSCO conference (17-20 April, Cape Town) that Secretary-General Greg Tanzer said African markets needed to have very robust trading platforms in place to accommodate expected huge inflows of foreign investments, to encourage more local investments, and to support the rules and regulations that are in place: “You have to ensure that you have strong market infrastructure. The trading platform, the clearing and settlement system, the dealing with counterparty risk to provide a secure environment must be well in place.
“When you (have a) secure environment for investments, the business opportunities that exist in Africa would become more attractive to investors. If investors have confidence in the market, they invest in the market. If they do not have confidence, they would not invest.”
The African and Middle East Region Committee (AMERC) of IOSCO will also support capacity-building. Ms. Arunmah Oteh, AMERC Chairperson and Director-General of Nigeria’s Securities and Exchange Commission, is reported as saying that markets are becoming more sophisticated in operations and content as a result of restructuring and reforms in response to the global financial crisis. She said regulators in AMERC must sharpen their skills to meet challenges: “Regulatory capacity must constantly be developed through training and re-training. We should however not be discouraged by the huge financial cost that is usually required for capacity-building, as investing in our human capital development yields a high return on investment.”
Specifically, the capacity building efforts would be in the area of new products, including Islamic finance, derivatives, options and risk-based supervision.
IOSCO is providing technical assistance and facilitators would come from IOSCO, International Monetary Fund (IMF) and other leading financial institutions training bodies for capacity-building programmes hosted in Kenya in July 2011 and Dubai in September.
The paper reports Dr. Fratern Mboya, CEO of the Capital Markets and Securities Authority (CMSA) of Tanzania, that introducing more products markets and giving incentives to investors and companies would also help to deepen the market further: “In Tanzania for instance, the withholding tax on dividend is 5% instead of 10%. For companies coming to list more than 35%, corporate tax is 25% instead of 30%. There is no capital gain tax. For long-term debts for 3 years and above, you do not pay taxes on the profit.”
It also cites Japhet Katto, CEO of Capital Markets Authority of Uganda, saying that investor education would significantly deepen markets: “In some jurisdictions.. regulators are not sure if investor education is part of their roles in the development of our markets. In countries where regulators have not been taking investor education as their function, they should do that now and incorporate in their laws that investor education is a critical factor in the deepening of our markets.”
According to the official news release, IOSCO has resolved to ask all ordinary members and associate members, which are primarily responsible for securities regulation in their jurisdictions, to apply to become full signatories to the IOSCO Multilateral Memorandum of Understanding by 1 January 2013. This is the international benchmark for enforcement cooperation and exchange of information among regulators. So far, 80 of IOSCO’s 122 eligible member regulators meet the requirements needed to become signatories with a further 36 having committed themselves to legislative changes that will allow them to do so. IOSCO’s Regional Committees, assisted by the General Secretariat, have worked alongside jurisdictions in their regions to encourage the necessary actions to join the IOSCO MMoU and will give technical assistance and advice to all members to make the changes necessary to become signatories.
Tanzania’s CMSA was admitted into the Appendix ‘A’ category of IOSCO principles, bringing to 13 the number of AMERC countries that are in Appendix ‘A’ signatory. Nigeria and South Africa were the first to achieve this.

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