Eswatini Moves Up The Absa Africa Financial Market Index

By Avite Mbabazi

The Official Monetary and Financial Institutions Forum (OMFIF) notes that alongside other Southern African countries, Eswatini’s pool of pension assets relative to the population leads the way on the continent.

The Absa Africa Financial Market Index 2022 has ranked the Kingdom of Eswatini as the 5th out of 26 countries when it comes to the potential for institutional investors to drive capital market growth based on the size of the pension fund markets both in per capita terms and relative to listed securities.

The OMFIF is an independent think tank for central banking, economic policy, and public investment, providing a neutral platform for public and private sector engagement worldwide. The OMFIF in partnership with ABSA Group Limited has compiled The Absa Africa Financial Market Index 2022; an indicator of the attractiveness of Africa’s capital markets for use by policymakers, investors, and asset managers around the world.

It sheds crucial light on the opportunities for investment in the region. The report focuses on 26 African countries on the continent.

The Absa Africa Financial Market Index gives scores based on six pillars namely; market depth, access to foreign exchange, market transparency, tax and regulatory environment, the capacity of local investors, macroeconomic environment and transparency as well as legal standards and enforceability.

This year, Eswatini has seen its standing especially boosted by pillar 4 of the index which evaluates the potential for institutional investors, such as pension funds, to drive capital market growth based on the size of pension fund markets, both in per capita terms and relative to locally listed securities.

In Eswatini, the size of pension assets relative to the population is reported by the OMFIF to be over E27 000($1500) per head. The OMFIF attributes this large figure to the early establishment of pension fund systems in most Southern African countries which has seen the region lead the rest of Africa in pension fund assets per head with Namibia leading most of Africa with over E81 000 ($4500) pension fund assets per head.

Given the typically large pool of assets held, pension funds are a great facilitator of investment in high-yielding securities as well as real estate.

More encouraging is that pension funds in Southern Africa are relatively more diversified and, in the case of Namibia, are overall increasingly moving into local assets which according to the OMFIF could help foster market development.

Eswatini’s relatively better position is apparently in contrast with most of the other African countries observed that generally have limited pension fund assets largely due to the fact that they are limited to investing in government securities that reduce possible gains from diversification.

On the other hand, however, the OMFIF has noted that the falling reserves in the country have contributed to a relatively low placing and continue to put the country in a vulnerable position that could make it difficult to sufficiently protect itself from external shocks.

According to the Central Bank of Eswatini (CBE), the country’s foreign reserves stood at E7 Billion at the end of September 2022, which was enough to cover 2.5 months of imports, falling short of the recommended 3 months of import cover.

With an aggregate score of 46 out of 100, Eswatini moved one place up to sit at 14th out of 26 countries and 13 places behind our neighbors South Africa who are leading the index this year with a score of 88. Lesotho on the other hand occupies 25th place with a score of 34 out of 100.

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