When diamonds and gold were found in South Africa in the late 1800s, the economy was transformed. Following that, a large amount of global money was invested.

The nation has grown a well-developed industrial base in the years after World War II, and it has undergone extremely volatile growth rates, including several years when it was among the highest in the world.

South Africa, on the other hand, has had persistent economic difficulties since the late 1970s, owing to its apartheid policies, which caused many countries to suspend foreign investment and enforce more harsh trade restrictions against it.

Namibia has been classified as a lower-middle-income country with a per capita gross domestic product (GDP) that is slightly higher than the average for Sub-Saharan African countries.

However, the summary is deceptive. Only one-quarter of all Namibians and one-sixth of black Namibians have decent incomes; up to two-thirds of the population lives in abject poverty with inadequate access to public services. Because of a declining productive industry, a shortage of capital stock and serious world market problems for base metals and uranium oxide, economic development remains a challenge.

Furthermore, unless foreign assistance investments quickly turn into significant real inflows and private external investment in mining, manufacturing, and fisheries occurs, the one segment of the GDP that expanded steadily in the 1980s would decrease.

South Africa

The South African Reserve Bank, which is the sole issuing authority for the rand, the national currency, has a well-developed financial structure. It is in charge of monetary policy formulation and implementation, as well as managing foreign exchange trades.

There are several licensed banking institutions, many of which focus on commercial banking, as well as merchant, deposit, and investment banking, to name a few.

The Development Bank of Southern Africa, for example, is a quasi-governmental organization that promotes development programs. The banking market is dominated by private pension and provident funds, as well as more than two dozen insurance providers. The Johannesburg Stock Exchange is the centre of an active capital market.

South Africa, Africa’s second-largest economy after Nigeria, has a GDP that is far greater than that of its sub-Saharan neighbours. The Johannesburg Stock Exchange (JSE), which is 132 years old and has a market capitalization of more than USD1 trillion, is the biggest stock exchange in Africa.

The JSE is a comprehensive and cutting-edge exchange that offers complete electronic trading, clearing, and settlement of stocks, shares, and interest-rate securities, as well as financial, asset, and currency trading in South Africa.

On the JSE, there are approximately 350 companies listed, with industrials being the largest grouping, led by energy companies such as mines and oil companies.

The JSE, on the other hand, is facing strong headwinds. After decades with little competition, the JSE is now being tested by smaller competitors such as ZAR X, a low-cost model launched in 2016 to offer stock access to lower-income individuals.

Since then, new entrants have entered the ring, including A2X, 4AX, and the Equity Express Securities Exchange, which focuses on black economic empowerment. The market is currently focused on the newly implemented ‘twin peaks’ regulatory model, which response to weak financial sector policies and insufficient regulatory supervision.

It is intended to promote consumer trust and stimulate capital formation, much as it was in Australia, where the concept first debuted.

Namibia Profile

The majority of banking activity is handled by two commercial banks, First National Bank of Southern Africa and Standard Bank Namibia (both branches of South African parent companies). Following independence, land, infrastructure, and development banks were reorganized. In the mid-1990s, the Central Bank of Namibia introduced the Namibian dollar as an independent currency to replace the South African rand.

The Namibian Stock Exchange (NSX) currently has 50 listed companies. Namibia has the second-lowest population density of any sovereign nation, with just 2.6 million people.

The NSX was established in 1904 to help finance the country’s diamond rush. The rush was over by 1910, and the exchange was suddenly closed. The NSX did not reopen until 1992, 82 years later, with start-up funding from 36 Namibian companies.

Despite the fact that agriculture and tourism are important parts of the economy, other industries dominate the stock exchange. In reality, three industries account for half of the NSX’s listings: banking (four companies), mining (seven companies), and finance (three companies).

It is only recently that debt has been issued and listed. Namibia had virtually no public debt until 2011. In reality, the nation had one of the lowest debt-to-GDP ratios in the world, at just 16 per cent of GDP. International rating agencies downgraded the country to a sub-investment rating in 2017 due to the dramatic increase in public debt.

Namibian state-owned corporations and private businesses have floated bonds worth more than NAD33 billion (approximately £1.73 billion) on the NSX. As traditional financing sources dry up, more Namibian firms are expected to issue bonds in the immediate future. Because of the economic crisis, banks’ balance sheets and loan-to-deposit ratios have been strained, and they are less likely to lend to corporations.

The withdrawal of traditional finance provides an incentive for small businesses to raise money from their balance sheets, collateralized or government-guaranteed debt securities, or stock offerings on the local exchange.

The Report

From a small lunch party in New York City in 1937 to a vast array of 170,000 members and 157 societies in 2019, the Investment Club has grown to become the world’s largest investment organization, dedicated to leading the investment profession internationally for the ultimate good of society.

Early colonial times saw the establishment of several African exchanges. After the diamond and gold rush, South Africa led the way, followed by Zimbabwe, Egypt, and Namibia (at the time, a German colony) – all before 1905. Some businesses did not survive the commodity boom, but most are flourishing despite being significantly diversified and modernized.

Nigeria in the 1960s; Botswana, Mauritius, and Ghana in 1989; Namibia after its independence from South Africa in the 1990s.

Others, especially the East African exchanges, are relatively recent and are rapidly growing in popularity. All of these examples show how regulation, trading technologies, and fintech are allowing more market players to participate in finance and investing in a fairer, quicker, and lower-cost manner.

The African Securities Exchanges Association collaborated on the CFA Institute Research Foundation brief (ASEA).