Listed Equity

Investability of Africa’s listed markets

Relative illiquid stock exchanges, high costs of trading and fees detract from the investability of Africa’s listed markets.

Cost of trading

It is difficult to obtain cost of trading information in Africa. Reflected above are the markets for which reliable information could be obtained. The cost of trading on African exchanges is substantially higher than developed markets, A significant portion of trading fees is made up of brokerage commissions. The substantial portion of other fees in South Africa, mostly represent Securities Transfer Tax, which is not charged in most developed markets.

The limited pool of licensed brokers in each country results in very low power to investors to switch to a more affordable competitor. However, the low volume of trades on these exchanges means that brokers charge more on each trade to cover their costs. It’s a difficult position to get out of without incentivisation for brokers to lower their fees.

The cost of trading above represents the cost of a single transaction, but in order to realise profits investors would need to also sell shares resulting in double the costs. Trading costs of up to 4% makes short-term trading strategies unviable, further reducing the liquidity in these markets.

Egypt’s relative high liquidity, in comparison with Nigeria (which has a similar free-float), can at least in part be attributed to the significantly lower cost of trading.

Commission a substantial cost Explicit costs - Total transaction fees for investing into a share Download the graph PDF (27kb)

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