Financial markets for Africa’s second largest copper producer were ranked 8th from a the 20 assessed countries. This was according to the ABSA Africa financial markets index launched in Lusaka on 06 Nov. Zambia’s financial markets improved to 8th place (from 9th in the inaugural index launch last year).
The Southern African nation scored (53) a weighted rating from the individual 5 pillars ranging from access to foreign exchange markets to capacity of local investors.
The index scores were highest in the access to foreign exchange markets (77/100) and market transparency, tax and regulatory environment (56/100). Zambia had a weak score in the macroeconomic opportunities (44/100) and capacity of local investors (14/100) pillars.
Ahead of Zambia were South Africa (93/100), Botswana (65/100), Kenya (65/100), Mauritius (62/100), Nigeria (61/100), Namibia (57/100) and Ghana (55/100).
Zambia’s strength was mainly in the area of access to foreign exchange markets given very minimal capital controls. This ranked the copper producer (4th) with Kenya, SA, Uganda and Botswana ahead. However Zambia scored poorly (17th) on the capacity of local investors pillar scoring (14/100), the 2018 ABSA Africa Index report revealed.
“Zambia’s weakest pillar as highlighted above, reflects the limited array of financial instruments restricting pension funds to bonds (risk free assets). The local market is yet to deepen to attract participation from insurance companies and other pools to mitigate concentration risk to the state pension funds. Local debt and capital markets are muted with minimal transactions supporting capital raising programs. These market shortfalls force surplus units to lock up liquidity in government debt overcrowding markets. With the weak outlook exacerbated by debt sustainability concerns and a delayed IMF program investors have shied away from the copper producers assets which are overpriced,” the Business Telegraph carried in a note on 09 Nov.
Zambia foreign exchange markets remain fairly deep, deeper than 16 of the 20 African nations surveyed.