AfDB $400,000 seed equity to central depositories link Africlear Global

The central depositories of Kenya and Nigeria, two of the most dynamic in Africa, have formed a joint venture with Altree Financial Group. The African Development provided $400,000 in seed equity capital to the new Africlear Global venture, which aims to boost the efficiency of African capital markets by supporting modernizing the infrastructure of the central securities depositories.

The partners are Kenya’s Central Depository and Settlement Corporation (CDSC), Nigeria’s Central Securities Clearing System (CSCS) and Altree. However, several more African central depositories are interested in joining.

Africlear will help the depositories to pool their resources and boost buying power on equipment. They will work together to identify, acquire and maintain critical systems and technology, for instance for corporate actions, recording shareholder votes and other investor support services. The depositories will also share information and expertise.

The African Development Bank (AfDB) invested $400,000 in seed capital through the Fund for Africa Private Sector Assistance in an agreement signed 5 March in Abidjan. This may inspire more investors to join in building the company.

Africlear will use the money to improve the infrastructure used for post-trading processes such as settlements after a sale is done. According to AfDB press release: “The goal of the investment is to enhance the efficiency of capital markets by supporting the modernisation of central securities depository infrastructure in African securities markets.” Solomon Asamoah, AfDB Vice-President, Infrastructure, Private Sector and Regional Integration, and Anthony Fischli, Director, Africlear Global, signed the Shareholder and Subscription agreements on behalf of the Bank and Africlear Global, respectively.

Rose Mambo, CEO of CDSC, is the chairperson of Africlear. She was reported in Standard news in Kenya saying: “Africlear members will be able to realise significant cost savings via collective bargaining with industry participants and technology vendors. Africlear will also allow its members to offer more services ranging from corporate actions processing and collateral management to clearing and settlement.”

Kyari Bukar of CSCS said Africlear will accelerate process standardization and promote system integration across the borders. “By employing industry best practices, Africlear will facilitate improved levels of transparency and corporate governance within the African capital markets. This will enable local market practitioners to effectively compete for domestic and international capital.”

The board of Africlear held its first meeting in Nairobi on 24 April 2015. The members also include Altree Financial Group chairman Anthony Fischli and a representative from the AfDB to be named. Fischli said: “Africlear supports an open marketplace where scale and connectivity serve as the company’s competitive strengths” Benefits for investors should include improved access to securities services, collaboration between countries and cost-effective pricing of infrastructure.

Fischli told AfricanCapitalMarketsNews on 11 May that Africlear could also help the different countries’ and exchanges’ central depositories in future if they want to establish links. Fischli said in a press release “The AfDB investment in Africlear Global supports the improvement of securities market infrastructure through promotion of industry-leading technologies designed to enhance the underlying efficiency and overall functioning of the African capital markets.”

Kenya’s Business Daily reports that CDSC expects to gain revenue from its investment in Africlear by being able to charge for corporate actions such as reconciling investors on share splits, dividend declaration and payments. Revenues are particularly expected from international investors who mostly make the bulk of the traders on the Nairobi Securities Exchange.

Central Depository and Settlement Corporation (CDSC) Kenya is approved by the Capital Markets Authority of Kenya as provider of clearing and settlement services to the Kenyan capital markets. Central Securities Clearing System (CSCS) Nigeria is licensed by the Securities and Exchange Commission of Nigeria and serves as the clearing and settlement house for the Nigerian capital markets and The Nigerian Stock Exchange. Altree Financial Group is an integrated financial-services company licensed to conduct Investment Business by the Bermuda Monetary Authority.

The AfDB’s FAPA fund is a multi-donor thematic trust fund that provides grant funding for capacity building, seed capital and advisory services to support implementation of the Bank’s Private Sector Development Strategy. AfDB and the Governments of Japan and Austria have contributed to the fund, which to date has provided over $60m to 56 projects in 38 countries across Africa. The portfolio includes regional and national projects aimed at improving the business environment, strengthening financial systems, building private-sector infrastructure, promotion of trade and development of micro, small and medium enterprises

COMMENT – African nations seem keen on having national exchanges and central depositories under domestic regulation. However, they are working hard on harmonizing regulations, including to global standards, particularly within regional associations of regulators.

Africa is also looking for ways to increase links between the exchanges, eventually pushing to the point where a broker in one country can route orders to other exchanges, meaning that investors all over Africa have access to different exchanges, boosting liquidity and achieving more cross-border communications, trading, cross listings and remote memberships.

Africlear can be a key part of this. Getting post-trade “plumbing” for payments, clearing and settlement is key to ensuring African exchanges. Africlear is set to be an important step forward.

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