Kenya has overtaken South Africa
to rank as the top African financial
market in attractiveness to foreign
investors thanks to relaxed foreign
exchange capital regime.
This is based on the second edition
of ‘Absa Africa Financial Markets
Index’ prepared by Absa Group
and Official Monetary and
Financial Institutions Forum
(OMFIF).
The report ranks markets based on
six pillars: market depth, access to
foreign exchange, market
transparency, tax and regulatory
environment, macroeconomic
opportunity and the legality and
enforceability of standard
financial markets master
agreements.
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Kenya scored 93 out of 100 points
in the access to foreign exchange
metric, improving from last year’s
sixth position and overtook South
Africa which scored 91.
“Kenya earns the highest marks in
this pillar, a significant
improvement from ranking sixth
last year. The relaxation of capital
controls boosted its performance,
as did improvement of the
country’s net portfolio flows to
reserves ratio,” says the Absa
report.
However, when all the six metrics
are considered, Kenya moved from
fifth to third with a score of 65
after South Africa (93) and
Botswana (65 points).
Forex liquidity
The report notes that investors
who were surveyed consider the
exchange rate regime and degree
of openness to the flow of capital
as crucial in shaping the foreign
investment environment.
The top score in access to foreign
exchange means that Kenya’s level
of capital controls and exchange
rate reporting standards rank high
on the continent and investors
have an easier time accessing
them.
In addition, with about $34 billion
(Sh3.4 trillion) foreign exchange
liquidity, the report ranks Kenya
as second to South Africa on
markets where foreign investors’
ability to deploy and repatriate
capital is high.
Even though the index rewards
countries with a high level of
foreign exchange liquidity, it
cautions that the risk of capital
outflows in highly open capital
markets.
“While this can be an important
element of well-functioning and
resilient markets, it is also
important that central banks
observe prudent reserve
management strategies and can
cope with sudden capital
outflows,” says the report.
to rank as the top African financial
market in attractiveness to foreign
investors thanks to relaxed foreign
exchange capital regime.
This is based on the second edition
of ‘Absa Africa Financial Markets
Index’ prepared by Absa Group
and Official Monetary and
Financial Institutions Forum
(OMFIF).
The report ranks markets based on
six pillars: market depth, access to
foreign exchange, market
transparency, tax and regulatory
environment, macroeconomic
opportunity and the legality and
enforceability of standard
financial markets master
agreements.
RELATED CONTENT
INDEPTH: Kenya’s
financial markets shine
but more work ahead
Kenya scored 93 out of 100 points
in the access to foreign exchange
metric, improving from last year’s
sixth position and overtook South
Africa which scored 91.
“Kenya earns the highest marks in
this pillar, a significant
improvement from ranking sixth
last year. The relaxation of capital
controls boosted its performance,
as did improvement of the
country’s net portfolio flows to
reserves ratio,” says the Absa
report.
However, when all the six metrics
are considered, Kenya moved from
fifth to third with a score of 65
after South Africa (93) and
Botswana (65 points).
Forex liquidity
The report notes that investors
who were surveyed consider the
exchange rate regime and degree
of openness to the flow of capital
as crucial in shaping the foreign
investment environment.
The top score in access to foreign
exchange means that Kenya’s level
of capital controls and exchange
rate reporting standards rank high
on the continent and investors
have an easier time accessing
them.
In addition, with about $34 billion
(Sh3.4 trillion) foreign exchange
liquidity, the report ranks Kenya
as second to South Africa on
markets where foreign investors’
ability to deploy and repatriate
capital is high.
Even though the index rewards
countries with a high level of
foreign exchange liquidity, it
cautions that the risk of capital
outflows in highly open capital
markets.
“While this can be an important
element of well-functioning and
resilient markets, it is also
important that central banks
observe prudent reserve
management strategies and can
cope with sudden capital
outflows,” says the report.
