International capital flows, stock markets, and uneven development: The case of Sub-Saharan Africa and the Sustainable Stock Exchanges Initiative (SSEI)

Abstract

While for a long time only regarded as subordinate factors, it is meanwhile accepted that financial systems and capital flows play a key role for economic development and growth. Against this background many countries of the Global South founded new, or liberalised existing, stock exchanges, albeit with different results. Whereas in various Asian countries these markets have attracted sizable amounts of investment capital for domestic companies, this is not the case for most stock exchanges in Africa and especially Sub-Saharan Africa. Although there is an increasing number of Sub-Saharan African stock exchanges, the majority is institutionally weak, small, illiquid and thus unattractive to most international investors, resulting in low portfolio investment inflows to Sub-Saharan Africa. Nonetheless, Africa is becoming increasingly portrayed as continent of opportunities with immense growth prospects which led to a new and growing appetite for investment in Africa in general and Sub-Saharan Africa in particular. In this situation the new UN-supported Sustainable Stock Exchanges Initiative (SSEI) comes into play which aims at transforming stock markets into instruments for supporting sustainable development and green growth. Based on conceptual considerations surrounding the development-through-stock-exchanges argument, this exploratory research addresses the actors involved in this initiative and takes their rationales under closer scrutiny. We argue that the initiative not only serves as a tool for sustainable development, but also as a promoter and facilitator of new international investment opportunities, specifically for international and institutional investors in their drive to enlarge and diversify their portfolios - resulting in various challenges for Sub-Saharan stock exchanges and their local stakeholders.