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East Africa’s capital markets scored highly on market transparency, tax and regulatory environment and access to foreign currency according to the Absa Africa Financial Markets Index for 2018, but fared badly on local investor capacity.

This finding on Kenya, Uganda, Tanzania and Rwanda reflects several weaknesses faced by domestic investors that carry out financial trades with foreign peers.

The Absa Africa Financial Markets Index was launched last year by Absa Group Ltd of South Africa, a large banking institution that recently acquired most of Barclays Bank Plc Africa’s operations.

It offers clues on policy reforms needed to raise competitiveness. The index currently tracks 20 African economies.

The 2018 index shows Rwanda scored 90 points in the area of market transparency, tax and regulatory environment followed by Tanzania and Kenya at 70 points each, and Uganda with 60 points.

The relatively high scores reflect benefits realised from past financial reforms tied to disclosure requirements for listed securities, smooth tax rules for capital markets players and harmonised regulations.


In comparison, Kenya scored 93 points for access to foreign exchange services and came top of the survey list, with South Africa in second place at 91 points. Uganda scored 83 points in this area, followed by Tanzania and Rwanda with 36 and 35 points respectively.

Key assessment indicators include ease of access to foreign currency, pricing habits and turnover levels recorded in the interbank forex markets.

Kenya’s interbank forex market turnover was valued at $34 billion in 2017, compared with $1.2 trillion posted by South Africa, and Uganda’s $17 billion.

In market depth, Kenya scored 44 points while Uganda scored 43 points. Tanzania scored 35 points and Rwanda 21 points. The fairly poor showing was blamed on low product variety in local equities and debt markets.

The stockmarkets remain dominated by financial institutions, beverage companies and telecommunications firms as well as small baskets of government securities.

Insufficient capacity among local investors driven by inability to execute frequent, large financial trades with foreign peers; low demand for sophisticated products like derivatives and weaknesses detected in anti-money laundering and financing of terrorism compliance standard, also reflected negatively on the calibre of domestic institutional investors.