Eswatini financial markets remain among the top five in Africa. This is according to this year’s Absa Africa Financial Markets Index, which measured the performance of financial markets in 28 countries.
The index that Eswatini was 14th among the surveyed countries in Africa with a score of 46. The country, therefore, maintained last year’s position, signifying good progress in ensuring financial markets stability.
South Africa has the best financial markets, with a score of 88, followed by Mauritius with 77, Nigeria with 67, Uganda with 63 and Kenya rounds off the top five with a score of 59.
The index highlighted that Eswatini had some higher pension fund assets, but limited market activity.
According to Ministry of Finance Principal Secretary, Sizakele Dlamini, the value of assets stood at E44.89 billion by the end of June, adding that the value of locally allocated assets was E21.24 billion, meaning the value of locally allocated assets were 47.32 per cent of the sector’s assets.
“In terms of the 30 per cent local asset requirement, the sector is in full compliance,” said the PS.
“Statutory funds contributed 84.31 per cent of the sector’s assets valued at E37.85 billion, signifying their anchor role in the sector and the wider economy by extension,” added Dlamini.
Retirement funds assets had played a pivotal role in the growth of the economy, having been channelled to projects positively impacting the local economy, while ensuring optimal returns for retirement funds in conformity with the Retirement Funds Act, 2005.
“Despite the value of pension assets, there has been a disconnect with market activity as market capitalisation of the exchange has been at just E4.3 billion, of which pension funds investment in listed equities is valued at close to E1 billion,” said Dlamini.
However, retirement fund assets had fuelled the development of the capital markets sector through portfolio investments, providing over 70 per cent of the assets held by local asset managers.
With regards to whether the state was pleased with ranking and the index’s findings, Dlamini said government would prefer that the sector’s assets be heavily invested locally for economic development purposes, but underscored the importance of diversification to match liability needs.
“Over exposure to the local market is bound to create risks in the future,” she emphasised, adding that the challenge regulators and policymakers found themselves in was the overarching slow economic growth and limited investment instruments that could generate consistent positive returns to match funds future liabilities in the market coupled with the illiquid exchange.
While the exchange has limited market activity, pension funds are by value of assets the largest investors in the economy with assets held in treasury bills and corporate bonds and across the various economic industries,” said the PS.
She added that government was mulling over creating incentives for companies to list on the local stock exchange via taxes or any other means, as more listings on the stock exchange encouraged local investment and increased market activity.
With regards to the environmental, social and governance factors indicated in the report, the PS said the discretion was with funds’ trustees to ensure that their investments incorporate the principles of responsible investing in their investment decision-making.
“While the local exchange has introduced environmental, social and governance requirements for listed entities, we have equally seen commitment from funds to align their investment policies with these global standards and practices,” she said.
