Technology: Cultivating saving culture through retail investment in Africa’s bourses

Technology: Cultivating saving culture through retail investment in Africa’s bourses

By Muathi Kilonzo

IT goes without saying that savings are an important way to grow economies and boost individual self-actualisation goals. Despite various instruments and policies put in place to boost the investment culture in Africa, such as social security funds or private pension plans, there remains significant room for improvement to keep up with other regions.

A key investment instrument that has yet to be explored on the continent is securities trading for retail. Apart from the Johannesburg Stock Exchange, institutional investors make up more than 80 per cent of the volume, leaving the retail market with huge potential to become a top asset class for a growing middle class and other income groups.

According to a recent World Bank report, most African countries’ savings rates are relatively low, around 17 per cent of gross domestic product, GDP. Kenya, for example, ranks lower than many of its peers, with around 9-11 per cent of GDP over the last five years. In Nigeria, another key market in West Africa, savings accounted for about 17-21 per cent of the nation’s GDP over the same period.

The focus for many African economists and policymakers is, therefore, on how to tap into the growing stock markets to promote a vibrant savings culture in the continent, while also availing funds for many companies to accelerate economic growth.

As the popularity and penetration of mobile communication technology continues to grow, it presents a very viable entry point to improve retail investors’ participation in trading equities. In terms of accessibility, Global System for Mobile Communications, GSMA, estimates that the average annual growth rate in smartphone connections in sub-Saharan Africa has been 28 per cent since 2015, and smartphones now account for almost half of total connections, making a strong case for Mobile App retail trading.

Thus, creating a conducive environment by leveraging new technologies and an already existing strong mobile and internet penetration in the continent will fast-track many benefits from the stock market that have perhaps just been lucid dreams in the past. Simply put, equity and bond markets are a liquid way for individual investors to put aside some money and diversify their investments beyond traditional asset classes such as land, cars, or other “get rich quick” schemes.

Implementing new technologies should be done without losing sight of the main goal: encouraging a savings and investment culture to develop across all income groups. Having a vibrant retail investor base […]

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