The Absa Africa Financial Markets Index has released its latest report, highlighting the top 10 African countries with the most transparent financial markets. The index assesses the transparency of financial markets based on several key factors, including macroeconomic stability, institutional factors, and environmental, social, and governance (ESG) initiatives. According to the report, Mauritius, South Africa, and Egypt top the list, with scores of 95, 91, and 88, respectively.

The report notes that institutional factors, comprising governance, political stability, and cultural considerations, significantly influence the transparency of financial markets. Other factors, such as inflation, government debt, GDP, external debt, GDP per capita, and fiscal balance, also impact financial markets. The index also highlights the importance of ESG reviews and credit ratings in improving Africa's financial markets.

The top 10 African countries with the most transparent financial markets are: Mauritius (95), South Africa (91), Egypt (88), Nigeria (86), Morocco (85), Kenya (85), Rwanda (84), Zimbabwe (82), Zambia (77), and Botswana (77). These countries have made significant progress in improving their financial markets, with Mauritius standing out for its strong democratic institutions, economic diversification, and high transparency.

South Africa follows closely, benefiting from advanced infrastructure and a well-developed financial sector. Egypt, ranking third, leverages its strategic position and economic reforms to drive growth. Nigeria, Africa's largest economy, is fueled by oil, fintech, and agriculture, while Morocco maintains a stable political environment and a business-friendly economy.

The report also highlights significant market developments in 2024, including major FX reforms in Egypt, Ethiopia, and Nigeria, shifting towards more market-based regimes. Favorable global financial conditions have supported activity in securities markets, the value of pension fund assets, and foreign exchange reserve adequacy. The report notes a decline in inflation across the continent over the past year, contributing to improved macroeconomic conditions.

The key drivers of financial market transparency were assessed based on factors that promote financial market development, including regulatory frameworks, tax regimes, and market transparency. The evaluation considered several processes, such as financial stability regulation, corporate governance and reporting standards, tax environment, transparency of financial information, ESG initiatives and standards, and the existence of credit rating agencies.

The report emphasizes the ongoing importance of ESG reviews in promoting resilient and attractive financial markets across Africa. Additionally, stress testing has been introduced as a key review factor and is now implemented in eight countries, marking significant progress since 2021. Credit ratings play a crucial role in financial transparency, providing investors with in-depth analyses of the creditworthiness of sovereign and corporate entities.

In the 12 months to June 2024, 15 countries experienced a rise in the number of corporate credit ratings by international rating agencies such as S&P, Fitch, and Moody's. This increased transparency is expected to attract more investors and drive economic growth in Africa.

The Absa Africa Financial Markets Index provides valuable insights into the state of financial markets in Africa, highlighting areas of improvement and opportunities for growth. As the continent continues to develop and integrate into the global economy, the importance of transparent financial markets cannot be overstated.

In conclusion, the report's findings underscore the need for African countries to prioritize financial market transparency, ESG initiatives, and credit ratings to attract investors and drive economic growth. As the continent continues to evolve, it is essential to monitor and analyze the development of financial markets, providing insights that can inform policy decisions and drive progress.