(Ecofin Agency) - The total value of bonds issued on African markets by governments and companies reached $536.1 billion over the first half of this year. The figure is provided by the South African banking group ABSA in its African Financial Market Index.

In South Africa alone, the value of listed bonds stood at $258 billion over the period; $116.9 billion was estimated for those in Egypt and $49 billion for those in Nigeria. On the regional BRVM market, the value was estimated at $$12.5 billion. According to the report, higher budget deficits and lower tax revenues due to covid-19 continue to inflate public debt and impact the economy. The exacerbated dependence of governments on local stock exchanges has increased the size of the bond markets in most of the countries included in the index. Morocco, despite a stock market representing 62.8% of GDP over the period, has only $800 million in listed bonds. Ghana for its part has $26.5 billion worth of listed bonds.

The report suggests that investors invested in bonds, as a precautionary measure. The overall value of transactions in listed companies fell by 5% points to just 26% of the total valuation of listed companies in Africa. South Africa, which remains the largest market with a stock market worth 4.2 times its GDP, was severely affected by covid-19, which put corporate earnings at risk.

The African Financial Market Index said stock market activity in most of the countries in the index continued to be affected by the pandemic. New waves of infections and lockdown measures, as well as a slow rollout of vaccines, are thwarting efforts to boost economic activity. However, the risk in Africa seems to be increasing for investors, particularly foreign investors.

This overall analysis is different from the perception of some stock funds, including Allan Gray Africa Equity Fund, the best performing fund in the region today. "Zenith Bank in Nigeria, for example, has over the past decade grown its earnings by 9% per year in U.S. dollar terms, with an average return on equity (ROE) of 20%, but its stock market value trades at only 3.2 times its earnings. By comparison, Bank of America has had an average ROE of less than half over the same period, but its value trades at 17 times its earnings," analysts recently reported.

The African Stock Exchange Index published by Absa Group is in its fifth year. Of the 23 countries included in the index, 19 scored lower than the previous year. "This decline reflects more difficult market conditions, methodological changes, and the inclusion of environmental, social, and governance (ESG) indicators in the index. Despite the decline in scores, few examples reveal an underlying deterioration in the policy, regulatory, or development environment in any of the countries in the index," the report authors explained.

The ranking this time was affected by the inclusion of ESG initiatives. Only 13 countries in the index have ESG-focused stock market policies and 9 have introduced sustainable finance products. South Africa, Mauritius, and Nigeria retain their top positions in order, although the scores have dropped in 2021 for all of them. As a reminder, 6 criteria are examined in the framework of this report.