The bond market is considered to play a key role in channeling savings towards productive investments returns which in turn can be used to drive economic growth. Giving a presentation on Thursday morning at GICC during the bond market conference, Head of Debt Primary Markets – Southern Africa, Standard Bank, Zoya Sisulu said a number of factors make the case for deepening local bond markets in Africa. Sisulu said the bond market allows investors such as pension funds to invest funds in long term assets to match their liabilities and provides funding that may otherwise be inaccessible to enable growth. Other factors that emphasize the need for bond markets, she said, include increased demand for breadth and sources of financing, further explaining that due to increased urbanisation and sophistication of middle class, leading to demand for better infrastructure, a sound bond market should be in place. She said that other existing source of financing such as banks are becoming increasingly constrained.
Sisulu also highlighted factors impacting the bond market in Africa, and by extension Botswana and among them she said is lack of supply. Local currency markets in Africa are said to be dominated by government securities with limited supply of corporate notes. The other problem is reportedly lack of understanding of the bond market as most corporates in Africa are reportedly comfortable with bank lending products and bond notes represent new instruments to them. Issuance fees are as well considered an impediment to the development of a robust bond market, particularly for firm time issuers looking to issue relatively small nominal amounts. To address such challenges affecting the bond market in the continent, Sisulu suggested supply could be improved through optimised issuance processes and procedures and promotion of economic policies which can be done through regional integration whereby regulators approve the same documentation procedure to allow an issuer to issue across a region under the same programme.
Another way through which efficiency and effectiveness of the bond market in Africa is broadening investor base which Sisulu said could be done by improving the investor value proposition via reforms such as tax regimes, strengthen legal and regulatory frameworks and strong corporate governance frameworks. Improving market access and efficiency, according to Sisulu, could go a long way in improving the status of the bond market in Africa. She explained that this could be done through improving data collection and dissemination; enhance competitiveness of the market infrastructure and financial intermediation industry and develop standard types of products.