Impact of Brexit on African capital markets

African exchanges and companies that are closely tied to the European markets are expected to weather the storm of Brexit, according to Ibukun Adebayo, Co-Head of Emerging Markets Strategy at the London Stock Exchange. Adebayo believes that despite the uncertainties surrounding Brexit, European investors will continue to utilize Africa as a conduit for investment, maintaining the flow of capital and opportunities across both regions. This optimism stems from the strong foundation of 115 African companies listed on the London Stock Exchange, which have collectively raised over $155 billion in capital. The interconnectedness between African and European markets is poised to remain resilient, ensuring minimal disruption to the African capital markets. Adebayo emphasizes that the key lies in fostering collaborations and strengthening linkages between exchanges to facilitate the seamless flow of investments. One such example is the scenario of a dual-listed company in Nigeria and London, which may not be significantly impacted by Brexit due to continued support from diverse investor groups globally. The reassurance extends to European funds, which are expected to persist in investing in African securities on both markets as third countries, further mitigating any adverse effects on African markets. Adebayo also highlights the potential for a collective approach within regions, such as the East African Community (EAC), which could enhance the attractiveness of African asset classes to global investors. He suggests that the collaborative efforts of countries within the EAC could present a more compelling investment opportunity compared to individual markets. Kenya, in particular, holds a pivotal role in spearheading regional initiatives and fostering a conducive environment for investment. Adebayo underscores the importance of international support, including funding and technical assistance, to actualize the innovative ideas and opportunities emerging in the region. Looking ahead to 2017, Adebayo remains optimistic about the investment prospects in African markets, citing the inherent alpha opportunity for investors, especially in early-stage companies. While acknowledging the risk-averse sentiment prevailing in global markets, he underscores the need for increased liquidity in African markets to accommodate the influx of capital seeking higher yields. Initiatives in countries like Kenya, Nigeria, and Morocco to deepen secondary markets for equities and bonds are deemed critical in bolstering the sustainability of investments. The London Stock Exchange also plays a pivotal role in facilitating international liquidity flows to African markets, further enhancing their investment appeal in the global landscape.