Download ESMID, Program for Fostering Securities Markets

Association of African Stock Exchanges
Johannesburg
September 20, 2006
Alison Harwood
International Finance Corporation
Agenda
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What is ESMID?
ESMID and Regionalization
Partnerships and Alliances
Comments and Reactions
ESMID: What Is It?
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“Efficient Securities Market Institutional Development”
3 year, $5 million program to strengthen securities markets
and products in Africa
Partnership of SIDA, IFC, World Bank, OMX
Promotes long term local currency financing to support
mainly housing and infrastructure development
Improves securities markets and facilitates individual
transactions
The ability to do a transaction is the beacon
guiding ESMID’s operations
Need for Securities Markets/Products
Rising with Economic Growth
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The demand for housing and infrastructure is rising rapidly in EMCs
from economic growth
Infrastructure alone requires an estimated 5.5% of EMC annual
GDP (over $.5 billion per year).
Public sector financing only covers 2-4% of GDP. Significant
additional funding is needed.
Much of this funding in industrialized countries comes from
securities markets--bonds, structured finance, equity—which
provide long term, local currency funding.
Most African’s securities markets/products need to be
significantly strengthened to meet these rising demands
Domestic Government Securities
Short Term Maturities Dominate
Simple average
Botsw ana
South Af rica
Mauritius
Sw aziland
< 1 year
Kenya
Namibia
1-5 years
Zambia
> 5 years
Tanzania
Ghana
Nigeria
Uganda
0%
20%
40%
60%
80%
100%
Note: Data for 2002 except Tanzania, Uganda, South Africa, Swaziland, Botswana 2003, Nigeria 2001
Investor Base
Banks are the primary holders of GS in the region
100%
Other
80%
Insurance
60%
Pension
40%
NBFI
20%
South Africa
Ghana
Nigeria
Kenya
Mauritius
Tanzania
Swaziland
Zambia
Uganda
0%
Central Bank &
other public
institutions
Commercial
banks
Note: Kenya includes government stocks (mainly held by “Other”), Swaziland – Other holders are
primarily institutional investors
Building Markets, Facilitating Transactions
What does ESMID Do?
Regulators
Government
Market Infrastructure
Rating
Agencies
Marketplace
(trading, clearing, depository)
Issuers
Market Participants
Investors
Securities Firms
Direct:
Indirect:
Facilitate Transactions
Build Securities Markets
Provide TA to:
• Create enabling environments
• Build market Infrastructure
• Strengthen market participants
Markets to be supported:
• Primary – public, private
• Secondary
+
Provide $ to create workable, replicable
transactions
• Structuring
• Documentation
• Ratings
• Legal fees
Transactions examples:
• Bonds: straight, covered
• Securitization/Structured finance
• Government / non-government
How ESMID Operates
Project Selection
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Country Diagnostics
Programs
Projects
Outside proposals that fit ESMID’s strategic focus and goals
Key Guidelines
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Focus on few targets with high potential impact
Create long term, integrated programs of reinforcing activity
Build strong local partnerships and alliances
Complement related efforts of others. No redundancies.
The goal: have a small number of high impact projects that
demonstrate possibilities and are replicable
ESMID Operating Structure
Advisory Group
Steering Committee
Strategic Focus
Governance
PEP- Africa
• Overall supervision
• Back office
PROGRAM MANAGER
Manages all program operations
Country Program/
Project team
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IFC/ WB specialists
IFC/ WB regional staff
Partner staff
Technical Country Staff
Consultants
Technical Country Staff
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Support country projects
Prepare materials for SC
Maintain Consultants Info
Coordinate Donor/Info
Success Factors:
Inputs, Approach, Impact
• World Class Expertise
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Industry and Government Practitioners
Global Product Specialists
Global Emerging Market Experience
Global Alliances (Exchanges, etc.)
Local Knowledge Presence
Local Alliances
• Integrated, Comprehensive Programs
• Longterm Commitment
• Practical
• Transaction Geared
Improved ability to
finance Infrastructure
and housing +
through securities
markets and products
Regionalization
Regionalization and integration are key operating
themes for ESMID
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Though not exclusively, ESMID will largely work with clusters of
countries where changes have the potential to reverberate across
several nations, i.e. East Africa, West Africa CFA
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Regionalization remains a difficult task but seems more probable
today, largely due to changes in technology and attitude
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We will seek out the most appropriate form of regionalization for
the work underway:
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Cross-listings
Linking local brokers electronically to facilitate cross-border trading
Sharing operating platforms and retaining local regulation over areas
such as issuing securities and licensing intermediaries
Designing transactions that suit the needs of a sub-region
Etc.
Local Alliances
One Point:
Local alliances and partnerships
are critical to ESMID’s success:
• Industry Associations
• Development Banks
• Government Regulators
Current Status
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Currently setting up core field team
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First Steering Committee Meeting tomorrow
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Identifying first group of target countries to begin
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East Africa?
Nigeria?
Other
End
We welcome your comments and suggestions.
Thank you very much!