[ M A R K E T R E V I E W | A F R I C A ] number of available direct sub-custody providers becomes very limited.” Like any industry sector, this situation comes down to whether there is enough sustainable business to warrant the time and resources to set up a sub-custody business.“ With the exception of South Africa- and maybe Nigeria and Kenya- the markets are not sizeable enough to have multiple competitors and active competition as global custodians may prefer,” says Bogart Miheaye, regional head of network management for Western Europe, Middle East and Africa for BNP Paribas Securities Services.“ It is essentially a matter of volume. In smaller markets, we could argue that it does not make sense to have more than one provider and it may not prove to be beneficial for clients in a small market.” It would, however, be unfair to ascribe the relative underperformance of sub-Saharan markets as due to inertia on the part of the relevant stakeholders. Indeed many of the markets are taking steps to upgrade their market infrastructure to meet the requirements set out by institutional investors. This should, in principle, enable existing sub-custodians to enhance their offering, while nurturing greater competition. In the case of Nigeria, for example, the authorities are have been working on implementing the automation of issuance, storage and administration of the Certificate of Capital Importation( CCI), the document governing inflows and outflows of FX for investment purposes.
“ The enthusiasm exists across the region to adopt and implement internationally recognised best practice, e. g., shortening settlement cycles to T + 3, introducing new CSD systems to reduce manual processing and associated risks,” says Roy. Legislative and infrastructural innovation is not, however, limited to the larger African markets. In Botswana, for example, the BSE is considering the introduction of market making on the bourse and have come up with market making rules. These rules have been framed to provide liquidity in listed securities by submitting both bids and offers for a designated security during the designated Market Making session. The rules are currently awaiting regulatory approval.
“ The markets are not sizeable enough to have multiple competitors and active competition as global custodians may prefer.”
BOGART MIHEAYE, REGIONAL HEAD OF NETWORK MANAGEMENT FOR WESTERN EUROPE, MIDDLE EAST AND AFRICA FOR
BNP PARIBAS SECURITIES SERVICES
Summer 2017 globalcustodian. com 51