Securities exchange deals with buying and selling of shares (Equities Capital Markets- ECM), bonds (Debt Capital Markets- DCM), commodities, and associated derivatives (options, futures, swaps, forwards).
Firms may list shares to raise funding to scale the expansion of the company by raising low-cost capital to finance growth.
Companies list their shares for price discovery. Investopedia defines price discovery as’’ the process in marketplaces where buyers and sellers interact to agree on a price for a security, commodity, or currency, influenced by factors like supply and demand, market structure, and the economic environment’’.
Listing also serves as an exit strategy for shareholders of closely held companies or family-owned enterprises by offering them liquidity for their shares.
Listing helps corporations to attract Social Responsible Investors (SRIs) to provide patient long-term capital and also support the company’s Triple Bottom Line (TBL) business model, which seeks to maximize stakeholders’ social (people), environmental (planet), and financial (profits; economic) value.
Listing opens doors for cross-listing of the shares in other countries’ securities exchanges to diversify the pool of investors.
Listed companies also able to offer their shares as payment in merger and acquisition (M&A) transactions.
The ultimate measure of a company’s achievement for shareholders over the long term is maximization of Total Shareholders Return (TSR). Hatch Invest notes that TSR, ‘’ shows the combined returns an investor receives from owning shares in a company from capital gains and (for dividend-paying companies) dividends’’.
TSR is calculated a percentage of the sum of both share appreciation (ending stock price minus beginning stock price) plus dividends paid per share with the result of the summation being divided by the ending stock price. Companies listing shares and investors buying those shares hopes that the share will hit a Home Run.
NASDAQ defines a Home Run as ‘’ Large capital gain in a stock in a short period of time’’. Home Runs are investments that generate exceptionally high returns (for instance, multiples of 10x for an IPO- Initial Public Offering) or greater return on capital within a short period, or an investment with a large capital gain in a stock (for instance, 100% in one year).
Firms also seek cheaper and easier access to debt funding through listed status.
Also Read: Opinion | Why Africa’s Twin Crisis of Energy Poverty and Climate Change Needs Partners Like the UAE
Enterprises may be expected to adopt higher levels of world-class corporate governance as investors are prepared to pay a premium for well-governed companies.
Effective corporate governance enhances public disclosure and transparency. Businesses seek to attract and retain customers through increased publicity, corporate brand recognition, better corporate image and reputation.
Positioning the company to be able to set up an Employee Share Ownership Program (ESOP) is key to attracting and retaining staff in the war for world-class talent.
ESOP helps companies solve the Principal-Agency Problem as it align interests of shareholders and employees who become owner-managers.
Paying staff both annual salaries and bonuses with ESOP shares ensures staff overcome the challenge of short-termism to take a long-term view of the company.
The Four Securities Exchange Listing Segments
Main Investment Market Segment (MIMS) targets large (share capital and total assets base), mature, seasoned, stable, and proven profitable corporates. The Alternative Investment Market Segment (AIMS) targets Small and Medium Enterprises (SMEs) with relatively lower share capital and total asset base than in the Main Investment Market Segment. Growth Enterprises Market Segment (GEMS) enables SMEs to get lower-cost capital market financing under an environment of higher regulation, effective corporate governance, and market disclosures. For corporate bonds and government Treasury Securities (Govvies), the listing and secondary market trading is done via the Fixed Income Securities Market Segment (FISMS).
The Four Types of Equities Listing.
The US Securities Exchange Commission defines Initial Public Offer (IPO) as ‘’ the first time a company offers its shares of capital stock to the general public’’ with its prospectus providing, ‘’ information regarding the terms of the securities being offered as well as disclosure regarding the company’s business, financial condition, management and other matters that are key to deciding whether the offering is a good investment’’.
Hong Kong Exchanges and Clearing Limited (HKEX) expounds Listing by Introduction as ‘’an application for listing of securities already in issue where no marketing arrangements are required because the securities for which listing is sought are already of such an amount and so widely held that their adequate marketability when listed can be assumed’’ HKEX notes Listing by introduction is thus appropriate if it meets any of three conditions, ‘’securities for which listing is sought are already listed on another stock exchange; the securities of an issuer are distributed in specie by a listed issuer to the shareholders of that listed issuer or to the shareholders of another listed issuer; or where a holding company is formed and its securities are issued in exchange for those of one or more listed issuers’’.
Financier Worldwide defines Cross-Listing as, ‘‘when an issuer lists its shares on stock exchanges in two or more countries with the goal that the shares traded on each exchange are fungible with the shares traded on the other exchanges.
To effect a cross-listing, an issuer needs to develop a share structure that complies with the laws of the jurisdiction of its organization, the rules and regulations of each stock exchange where its shares will be listed and traded and applicable securities laws.
To be fully fungible, the shares traded on each exchange must be denominated in the same currency and the holders of the shares must have the same economic and voting rights and the ability to purchase shares on one exchange and sell them on another exchange’’.
Thompson Reuters Practical Law defines Reverse Listing or Backdoor Listing as, ‘’a Reverse Takeover which results in the shareholder(s) of an unlisted company becoming, as a group, the majority shareholder(s) of a publicly listed company’’.
Africa’s Shallow Capital Markets
African securities exchanges have relatively fewer listed companies and bonds, daily turnovers are comparatively low, and their market capitalization as a share of GDP is well below the global benchmark target of at east 100% of their country’s GDP, with South Africa being the only outlier.
There are many African countries without a securities exchange as their capital markets remain largely underdeveloped.
In 2023, the market capitalization of listed domestic companies in Botswana totaled USD$3.59bn for 25 listed companies (18.52 % of GDP). Cote d’Ivoire market capitalization stood at USD$7.3bn in 2020 for 47 listed companies (11.63 % of GDP).
In 2024, Egypt’s market capitalization had a high value of USD$ 42.59bn but a lower percentage of GDP at 10.95%. Ghana’s value grossed at USD$7.57bn for 31 listed companies (9.15 % of GDP).
Kenya’s market cap amounted to USD$15bn for 61 listed enterprises (12.05 % of GDP). Mauritius market cap grossed USD$9.12bn for 89 listed corporates and had a relatively higher share of GDP at 61.03%, indicating more maturity and depth of capital markets in the country.
In 2024, Namibia’s market cap stood at USD$2.48bn (18.55 % of GDP). Nigeria’s market cap grossed USD$54.4bn for 155 listed firms (28.97% of GDP).
Rwanda market cap reached USD$2.75bn (19.33% of GDP). South Africa remains the most mature and deepest capital markets in Africa with its market cap dwarfing all the other countries combined at USD$985.69bn in 2024 for 904 listed companies and the second highest market cap percent of GDP ratios globally at 246.26%.
Tanzania market value totaled USD$7.3bn for 22 listed companies (9.29% of GDP). Tunisia market value summed to USD$8.3bn for 77 listed companies (15.54 % of GDP). Zambia’s market capitalization reached USD$7.76bn for 21 listed companies (29.5% of GDP).
Global Comparative Benchmarking of Listings and Market Capitalization % of GDP Best of Breed Practices
Data by World Bank WDI and Market Screener shows Hong Kong SAR-China leads globally with the highest market cap % of GDP of 1,117.57% (2,552 listings valued at USD$ 4.54 trillion). South Africa is second.
Third is Saudi Arabia, with a market cap-to-GDP ratio of 220.35% (385 listings worth USD 2.72 trillion). The USA is 4th with a market cap share of GDP of 213.07% (11,213 listings, valued at USD 62.18 Trillion).
Switzerland is 5th with a market cap share of GDP of 210.49% (267 listings valued at USD$1.97 Trillion).
UAE is 6th with a market cap share of GDP of 196.27% (267 listings totaling USD$1.05 Trillion).
Japan is ranked 7th worldwide with a market cap share of GDP of 156.73% (267 listings worth USD$6.31 Trillion). Canada is ranked 8th with a market cap share of GDP of 150.56% (3, 275 listings valued at USD$3.37 Trillion). ).
India ranks 9th with a market cap-to-GDP ratio of 131.14% (5,588 listings grossing USD 5.13 Trillion). Singapore is ranked 10th with a market cap share of GDP of 116.45% (5,588 listings valued at USD$637.63bn).
Malaysia is ranked 11th with a market cap share of GDP of 106.52% (1,076 listings totaling USD$449.47bn).
Current Trends of Ethiopia, Somalia and Kenyan Capital Markets
The Ethiopian Securities Exchange was launched in January 2025. The ESX will have both an Equities Market (Shares Buy/ Sell) and Debt Markets (Buy/ Sell Treasury Bonds; Corporate Bonds).
Wegagen Bank offered equity on the ESX. Ethiopia’s 400,000 commercial bank shareholders are expected to leverage the price discovery mechanism to unlock selling and buying shares on ESX once they get listed.
Ethio Telecom’s 10 percent stake offering is slated to go live on ESX. Four SOEs-State Owned Enterprises under the Ethiopian Investment Holdings (EIH) are expected to list. The ESX is expected to host at least 90 Initial Public Offerings (IPOs) in the coming years.
National Securities Exchange of Somalia (NSES) was launched in June 2025, operating as a private Self-Regulatory Organization (SRO).
It targets to list 10 companies in two years’ time (2026- 2027), principally in telecom, banking, real estate, energy, and agriculture sectors, tapping into the USD$2bn of Somali diaspora remittances annual inflow. Its Fixed Income Securities Market Segment (FISMS) targets issuing and trading of government Sharia-compliant Sukuk Bonds for CAPEX infrastructure (roads, bridges, railways, airports, seaports, ICT, energy, WASH).
The Kenyan government plans to privatize state corporations through IPOs to raise money to fund public budget.
Also Read: Mainstream Replication of Corporate Venture Capital in the Business Models of African Corporates
The first SOE proposed for listing is 65 percent of the strategic Kenya Pipeline Company (KPC) worth between KES 100bn to KES 145bn and ESOP for KPC employees while the NSE estimates KES 500bn windfall gain on NSE’s market cap.
The government also plans to sell part of its stake in Safaricom via a secondary IPO or block trade to investors.
The nine members of the East African Securities Exchanges Association (EASEA- NSE-Nairobi, USE-Uganda, DSE-Dar Es Salaam, RSE- Rwanda, SSE- Somalia, BSE- Burundi, ESX-Ethiopia, NSES- Somalia, and CDSC-Kenya) have launched the East Africa Exchanges- EAE 20 Share Index.
There 5 companies meeting the criteria in Tanzania (CRDB, NMB, Tanzania Breweries, Tanga Cement, Tanzania Cigarette), Rwanda (Braliwa, Bank of Kigali, I&M Rwanda, Cimerwa, MTN Rwandacell), Kenya (Safaricom, KCB, Equity, Coop Bank, ABSA), and Uganda (MTN Uganda, Stanbic Uganda, Bank of Baroda Uganda, Airtel Uganda, Quality Chemicals).
Call to Action for African Securities Exchange Listings and Market Capitalization Depth
All stakeholders in Africa’s capital markets (government ministries, central banks, and other regulators, private sector, Pension Funds, PE&VC, World Bank, IMF, IFC, and other DFIs, UNCDF, etc.) need to set up securities exchanges and fixed income government securities markets in countries without.
For countries with securities exchanges and fixed income markets, the top priorities include increasing the number of listed companies and bonds, and increasing the number of domestic and foreign investors.
They also need to put a heavy premium on raising the daily equities turnover and bonds turnover, reducing concentration risk of one or very few companies dominating the exchange, growing market cap % of GDP to over 100%, enforcing high effective corporate governance standards and adopting global best of breed practices like ESG.
