Why African Stock Exchanges Struggle With Liquidity Despite Economic Growth

From delistings and concentrated ownership to the $210 billion pension pivot—the structural paradox of Africa’s public equity markets

Executive Introduction

Africa’s economy is growing. The continent is projected to expand by 4.3 percent in 2026, nearly double the global average . Foreign direct investment is rising. The African Continental Free Trade Area (AfCFTA) is creating the world’s largest single market by population. Yet beneath this promising macroeconomic picture lies a stubborn contradiction: African stock exchanges remain small, illiquid, and largely disconnected from the real economies they are meant to serve .

The numbers tell a stark story. Africa’s 29 stock exchanges collectively host just 1,141 listed companies—a mere 2.6 percent of the global total. Their combined market capitalisation of $561 billion represents 0.4 percent of the world’s total and just one-third of the region’s GDP, compared to 113 percent globally . Most trading activity is concentrated in a few large companies, high trading costs deter participation, and domestic institutional investors remain underdeveloped .

This report examines the structural factors behind Africa’s liquidity paradox. It analyses the concentration of listings, the limited role of institutional investors, the binding constraints of trading costs and governance, and the ongoing reforms—from regional integration to pension fund reallocation—that could finally break the cycle.

Part 1: The Concentration Trap—Why a Few Stocks Dominate Most Trading

The most immediate driver of illiquidity is concentration. Across African exchanges, a handful of large companies account for the vast majority of trading activity, while hundreds of listed firms trade sporadically or not at all .

The Numbers on Concentration

The Johannesburg Stock Exchange (JSE), Africa’s largest bourse, illustrates the problem starkly. Twenty years ago, the JSE hosted about 450 companies. Today, that number has fallen to approximately 300, down from about 850 in the 1990s . The top five companies—Prosus, BHP, AB InBev, British American Tobacco, and Richemont—account for half of the JSE’s market capitalisation . Expand to the top twenty, and they dominate 80 percent.

For smaller and mid-cap firms, the situation is even more dire. The small- and micro-cap segment, which represents 70 percent of listings by number, accounts for barely 2 percent of total trades—approximately R334 million a day . Asset managers cannot meaningfully buy or sell these smaller companies without distorting their prices.

The Zimbabwean Parallel

The Zimbabwe Stock Exchange (ZSE) faces a similar dynamic. Trading activity is concentrated in a narrow cluster of counters—Econet, Delta, Tigere Property Fund, FBC, CBZ, and RTG dominate turnover, while many listed companies trade sporadically or not at all .

Analysts broadly agree that current market volumes are insufficient to sustain all 23 licensed stockbrokers, who serve only 36,747 retail investors with active accounts on direct market access platforms . As one analyst noted, “The challenge is no longer just about winning trades, but about building sustainable, diversified revenue streams. Pure brokerage is no longer enough” .

Why Concentration Persists

The reasons for this hollowing out are familiar across the continent: high compliance and reporting costs, the burden of short-term performance expectations, and easier access to capital abroad through dual listings . When companies can raise capital more cheaply in London, New York, or Johannesburg than on their home exchange, they will choose to list elsewhere—or not list at all.

Moreover, corporations own 24 percent of listed equity in Africa, compared to 19 percent in emerging markets and 9 percent globally—a sign of weaker protection for minority shareholders and a deterrent to broader participation .

Part 2: The Ownership Paradox—Concentrated Control as a Liquidity Barrier

Beyond the concentration of trading in a few stocks, the ownership structure of African listed companies presents a deeper, more structural barrier to liquidity: concentrated ownership that leaves few shares available for public trading.

The Free Float Problem

The OECD’s Africa Capital Markets Report 2025 identifies concentrated ownership as a significant challenge for African equity markets . When a small number of shareholders—often founding families, corporations, or governments—hold the majority of a company’s shares, the “free float” (shares available for public trading) is correspondingly small. This directly limits liquidity.

High corporate ownership relative to other regions signals weaker protection for minority shareholders and limits the pool of freely tradable shares .

The State-Owned Enterprise Factor

Forty-four of the largest 100 companies in Africa by turnover are state-owned, operating in strategic sectors such as mining, energy, and telecommunications . However, the legal frameworks governing these enterprises often lack comprehensive ownership rationales and objectives, while governance arrangements can be inconsistent and subject to political discretion .

The result is poor financial performance, limited transparency, and weak accountability—all of which deter investors and keep these large enterprises off public markets . Listing SOEs on domestic stock exchanges could serve as a powerful tool to deepen public equity markets, boost liquidity, and attract both institutional and retail investors, but governance reforms are a prerequisite .

The Investor Relations Gap

A related issue is the lack of structured investor engagement. The senior management of many listed companies does not regularly meet with investors and analysts to build relationships. Strategic efforts such as in-person meetings, roadshows, and investor conferences are often inconsistent or nonexistent .

Without these engagements, investors lack deep insights into business strategies, outlooks, and financial performance. The result is a higher perceived risk premium and lower trading activity. Investor relations functions remain underdeveloped across many African exchanges—a gap that can be filled through targeted capacity building .

Part 3: The Institutional Investor Gap—Domestic Capital That Is Not Yet Capital

The third structural driver of illiquidity is the limited role of institutional investors—pension funds, insurance companies, and sovereign wealth funds—as capital market participants .

The Pension Paradox

Across most African countries, insurance companies and pension funds play a much smaller role as institutional investors compared to advanced economies . The reasons are twofold:

In Ghana, pension funds have historically allocated as much as 81 percent of assets to government securities . In Nigeria, the figure is about 60 percent . This means that the money deducted from workers’ salaries is effectively being lent to the government to finance consumption, not to productive enterprises that could grow the economy.

The $210 Billion Reallocation Opportunity

This is now changing. At the All Africa Pension Summit in Kampala in November 2025, pension regulators from Nigeria, Kenya, Ghana, and South Africa reached a consensus: the status quo is indefensible .

The response has been swift:

The arithmetic is compelling. If 30 percent of Africa’s $700 billion pension base moves out of sovereign debt over five years, that’s $210 billion looking for bankable projects. As one analyst put it, “Your infrastructure project that’s been ‘almost funded’ for three years just got a $210 billion liquidity boost.”

The Implementation Risk

However, the shift carries significant risk. Without enforced governance, pension localization could become “the biggest misallocation disaster we’ve ever seen”—retirement savings financing political patronage disguised as infrastructure . Managers rushing deployment without capacity produce “failed projects and trustees who never touch alternatives again” .

The stakes are enormous: retirement security for millions of Africans meeting a massive infrastructure gap. Get it right, and Africa creates self-sustaining capital ecosystems financing growth with domestic savings. Get it wrong, and pension systems are bankrupted while nothing is built .

Part 4: The Cost Barrier—High Trading Costs That Deter Participation

Even where shares are available and investors exist, high trading costs on most African exchanges limit liquidity, distort prices, and discourage both companies and investors .

The Cost Structure Problem

Compared to other regions, African stock exchanges have:

• Higher brokerage fees (often fixed percentages rather than competitive, market-driven rates)

• Higher settlement and clearing costs

• Less competition among brokers (limited number of licensed intermediaries)

• Regulatory levies that disproportionately affect smaller trades

These costs create a vicious cycle: high trading costs deter retail and institutional participation, low participation keeps liquidity thin, thin liquidity keeps spreads wide, and wide spreads justify continued high costs .

The Digital Solution

The OECD report recommends several cost-reduction strategies: encouraging greater competition among brokers, simplifying fee structures, digitalising trading infrastructure, and supporting regional integration initiatives that expand the broker network and lower operational costs .

The Ghana Stock Exchange’s 2026 listing rules provide an example. The Exchange has introduced liquidity providers on its Ghana Alternative Market (GAX) as a market-development tool—not an admission of structural weakness—with effectiveness assessed through tighter bid-ask spreads, improved order-book depth, increased trading frequency, and higher turnover ratios .

Over time, the goal is for liquidity to become more organic as investor participation broadens .

Part 5: The Governance Deficit—Trust as the Ultimate Liquidity Driver

Investors will not trade in markets they do not trust. The corporate governance deficits across many African exchanges remain a significant drag on liquidity .

The Implementation Gap

Many African countries have aligned their corporate governance frameworks with international standards, including empowering regulators with broad oversight across all market segments . However, implementation has been uneven . The problem is not the existence of rules—it is enforcement.

The GSE’s Post-DDEP Response

The Ghana Stock Exchange’s 2026 listing rules illustrate how exchanges are responding to past crises. Following Ghana’s post-banking sector clean-up and the Domestic Debt Exchange Programme (DDEP)—events that “heightened risk awareness”—the Exchange has enhanced disclosure, governance, and continuous listing obligations to “rebuild and sustain investor confidence in a higher-risk environment” .

The Exchange has also formalised and capped share buybacks to prevent market manipulation, artificial price support, and erosion of capital buffers—particularly in regulated sectors such as banking . A public-interest clause allows discretionary approvals under exceptional circumstances, but oversight mechanisms are intended to ensure consistent application .

The Shareholder Rights Gap

Strengthening minority shareholder rights is a priority for deepening liquidity. The OECD recommends lowering the ownership threshold required to request an annual shareholder meeting and to place an item on the agenda, as well as improving the availability of digital tools for shareholders to exercise their rights properly .

Stronger board independence and improved disclosure of board composition would also support minority shareholder protection in markets where ownership concentration is high .

Part 6: The Regional Integration Solution—From Fragmentation to Scale

The most promising long-term solution to Africa’s liquidity challenge is regional integration. Individual exchanges may be small and illiquid, but a connected network of exchanges could achieve critical mass.

The African Exchanges Linkage Project (AELP)

The African Exchanges Linkage Project (AELP) is a flagship initiative of the African Securities Exchanges Association (ASEA), in partnership with the African Development Bank, designed to facilitate cross-border investment flows by enabling the trading of securities across participating exchanges .

Key facts about the AELP:

The AELP’s vision is ambitious: “provide investors with access to over 25 linked stock exchanges, representing a combined market capitalisation exceeding $1.2 trillion, once the integration is fully realised” .

The Multilingual, Multi-Regulatory Architecture

The AELP operates within existing exchange rules. Securities remain listed on their host exchanges, and brokers access them through sponsored access. Live market data is shared via the AELP Link trading terminal, enabling brokers to view and interact with multiple markets of interest .

Clearing and settlement processes continue to adhere to host exchange regulations, while the platform is designed for adaptability—available in English, French, and Arabic, with provisions for more languages as new exchanges join .

The Pan-African Payment and Settlement System (PAPSS)

A critical enabler of regional integration is the Pan-African Payment and Settlement System (PAPSS), which allows payments in local currencies without intermediary conversion to dollars or euros . This makes cross-border investment faster, cheaper, and less risky—directly addressing one of the major barriers to liquidity.

As the AELP Project Manager explained, “We have collaborated with DirectFN as our technical partner to streamline payments and fund movements across the continent, alongside PAPSS, which we expect will simplify fund transfers” .

Part 7: The AI Opportunity—Technology as a Liquidity Catalyst

Structural weaknesses long viewed as constraints in African equity markets may become a source of competitive advantage for investment managers deploying artificial intelligence .

The Information Asymmetry Argument

Kisseih Antonio, President of the Ghana Securities Industry Association (GSIA) and Managing Director of Sentinel Asset Management, argues that thin analyst coverage, limited liquidity, and slow price discovery—features typically associated with underdeveloped markets—create conditions where AI-powered strategies can generate excess returns that would be rapidly arbitraged away in more efficient markets .

“Pricing inefficiencies that would disappear within milliseconds on the New York Stock Exchange or London Stock Exchange persist for longer here,” Antonio said. “Managers deploying AI-based screening and signal generation are not competing against hundreds of quant funds running identical strategies. In many cases, they are operating in an uncrowded space” .

The Data Constraint

However, the same characteristics that create opportunity also impose constraints. Thin liquidity can limit the ability of asset managers to build or unwind positions without affecting prices, raising execution risks and capping the scale at which AI-driven strategies can be deployed .

Antonio identified data infrastructure as the most binding constraint on wider adoption. Ghana’s financial data ecosystem remains sparse, with gaps in historical datasets and limited access to real-time and alternative data streams—shortcomings that restrict the effectiveness of machine learning models, which depend on large and consistent datasets for training and validation .

Part 8: The Ghana Case Study—Liquidity in Africa’s Best-Performing Market

The Ghana Stock Exchange’s 2025–2026 performance illustrates both the potential and the persistent limitations of African equity markets.

The Equity Rally

The GSE closed 2025 with a 79.4 percent annual return and market capitalisation of GH¢172 billion . The benchmark index crossed 15,000 points for the first time in March 2026, with triple-digit gains over the preceding 12 months . As treasury bill yields fell to record lows—the 91-day bill recently dropped to 6.45 percent—lower fixed-income returns redirected capital decisively into equities .

The Concentration Persists

Yet even in this rally, the underlying structural challenges remain. On a recent trading session, MTN Ghana accounted for roughly 70 percent of value traded—highlighting liquidity concentration in a few large counters . The Ghana Alternative Market (GAX) continues to struggle with low volumes, with the Exchange introducing liquidity providers as a market-development tool .

The Strategic Response

The GSE’s 2026 listing rules reflect a dual strategy: elevate domestic standards to reinforce credibility, while leveraging regulatory flexibility to attract regional secondary listings . The Exchange views foreign secondary listings as a mechanism to deepen liquidity and mitigate concentration risk, offering recognition of disclosure equivalence for foreign issuers subject to comparable regulatory regimes .

The goal is to avoid duplicative requirements while maintaining investor protection—regulatory efficiency rather than preferential treatment .

Part 9: The Path Forward—From Diagnosis to Action

The OECD’s Africa Capital Markets Report 2025 identifies five priority policy areas for advancing and strengthening Africa’s equity markets .

Priority 1: Lower Regulatory and Cost Barriers

Encouraging listings, particularly from smaller and underrepresented companies, will require lowering regulatory and cost barriers, enhancing transparency, and boosting investor confidence . Digitalising trading infrastructure and reducing trading costs through greater competition among brokers and simplified fee structures are essential .

Priority 2: Expand the Institutional Investor Base

Pension reforms could help expand the role of domestic institutional investors. The $210 billion pension reallocation opportunity is the single most powerful lever for deepening liquidity . However, this requires not just mandates but also the project pipeline—bankable, pension-ready investments—and the expertise to evaluate them .

Priority 3: Strengthen Minority Shareholder Rights

Attracting more investors requires actions by regulators to strengthen minority shareholder rights—for example, by lowering the ownership threshold required to request an annual shareholder meeting and to place an item on the agenda . Digital tools are also key to ensuring shareholders can exercise their rights properly .

Priority 4: Regional Integration

Broader issuer participation and greater regional integration, including cross-border listings, can expand market access and make public equity a more viable financing option . The AELP and PAPSS provide the infrastructure; the challenge is regulatory harmonisation and political will .

Priority 5: List State-Owned Enterprises

Listing state-owned enterprises on domestic stock exchanges can serve as a powerful tool to deepen public equity markets, boost liquidity, and attract both institutional and retail investors . However, this requires governance reforms first—clear ownership rationales, separation of ownership and regulatory responsibilities, and transparent performance reporting .

Conclusion: The Structural Paradox and Its Resolution

The paradox of African stock exchanges is that they operate in a region of significant economic growth but remain largely disconnected from that growth. The continent’s 1,141 listed companies represent just 2.6 percent of the global total, and their combined market capitalisation is only one-third of Africa’s GDP .

The reasons are structural, not accidental. Concentration of trading in a few large stocks, concentrated ownership that leaves few shares for public trading, a limited institutional investor base, high trading costs, governance deficits, and fragmentation across 29 separate exchanges all contribute to the liquidity crunch.

Yet the forces for change are building. The $210 billion pension reallocation could transform the investor base. The AELP could integrate fragmented markets into a $1.2 trillion trading bloc. AI-powered strategies could take advantage of information asymmetries that keep prices inefficient. And reforms in governance, listing requirements, and investor protection are gradually restoring trust .

As the GSE’s Head of Listing put it, “Sustainable volume growth depends on quality. Weak or under-prepared listings may increase numbers in the short-term but undermine investor confidence and liquidity over time” .

The window is open. The capital exists. The infrastructure is being built. Whether African stock exchanges will finally achieve the liquidity their economies deserve depends on execution—moving from diagnosis to action, from pilot to scale, from fragmentation to integration.

For investors, this creates both risk and opportunity. The markets that succeed in implementing these reforms will see liquidity deepen, spreads narrow, and valuations rise. Those that do not will remain trapped in the same low-liquidity equilibrium—watched from afar but rarely entered.

The choice belongs to Africa’s policymakers, regulators, and market participants. The next decade will not be about potential. It will be about performance.

Quick Reference: Liquidity Constraints at a Glance

FAQ Section

Q1: Why are African stock exchanges so illiquid despite strong economic growth?
A: African exchanges face multiple structural constraints: a small number of listed companies (1,141 total, just 2.6% of global total), extreme concentration of trading in a few large stocks, high corporate ownership of listed equity (24% vs 9% globally), limited institutional investor participation, high trading costs, and fragmentation across 29 separate exchanges .

Q2: What is the JSE delisting problem?
A: The Johannesburg Stock Exchange has seen its listed companies fall from about 850 in the 1990s to about 300 today. The top five companies now account for half of the JSE’s market capitalisation, while the small- and micro-cap segment (70% of listings by number) accounts for barely 2% of daily traded value .

Q3: How does concentrated ownership affect liquidity?
A: When a small number of shareholders—founding families, corporations, or governments—hold the majority of shares, the “free float” available for public trading is small. Corporations own 24% of listed equity in Africa, compared to 9% globally, which directly limits liquidity and signals weaker minority shareholder protection .

Q4: What is the 210 billion pension reallocation opportunity?∗∗

A: African pension funds currently allocate 60–80% of their assets to sovereign debt. If a $700 billion pension base shifts out of sovereign debt over five years, about $210 billion could be redirected into equities, infrastructure, and private equity. .

Q5: What is the African Exchanges Linkage Project (AELP)?
A: A flagship initiative of the African Securities Exchanges Association (ASEA) to connect stock exchanges across the continent for cross-border trading. It currently links 11 exchanges with a projected combined market capitalisation of $1.2 trillion when fully integrated, covering 1,500 listed securities .

Q6: How does the GSE 2026 listing rules address liquidity?
A: The Ghana Stock Exchange’s new rules elevate domestic standards while offering flexibility for foreign secondary listings. The Exchange has introduced liquidity providers on the Ghana Alternative Market (GAX), formalised share buyback rules to prevent manipulation, and strengthened disclosure requirements following the post-DDEP heightened risk environment .

Q7: What is the role of state-owned enterprises in African stock exchanges?
A: Forty-four of the largest 100 companies in Africa by turnover are state-owned, yet most are not listed. Listing SOEs could significantly deepen public equity markets, but governance reforms—clear ownership rationales, separation of ownership and regulatory responsibilities, transparent performance reporting—are prerequisites .

Q8: How can AI improve African stock market liquidity?
A: Thin analyst coverage, limited liquidity, and slow price discovery create information asymmetries that AI-powered strategies can exploit for excess returns. However, data infrastructure remains a binding constraint, with gaps in historical datasets and limited access to real-time alternative data streams .

Q9: What is the AELP’s current status?
A: Eleven exchanges are connected, 33 brokers have joined the system, and the AELP Link trading terminal is operational. Phase 2 will onboard more exchanges and brokers. Discussions with the Pan-African Payment and Settlement System (PAPSS) aim to streamline cross-border fund transfers .

Q10: Will African stock exchanges ever achieve developed-market liquidity?
A: The path to deeper liquidity requires multiple reforms: pension reallocation ($210 billion potential), regional integration (AELP), lower trading costs, stronger governance, minority shareholder protection, and SOE listings. Progress is being made, but the transformation will take years, not months 

Source: Accra Street Journal 

Last Updated on May 23, 2026 by Samuel Kwame Boadu

Samuel Kwame Boadu

Samuel Kwame Boadu is a Ghanaian media entrepreneur and storyteller with a passion for amplifying urban voices and uncovering everyday truths. He is the Editor-in-Chief and Founder of Accra Street Journal, a dynamic digital platform dedicated to capturing the pulse of Ghana’s capital—its people, culture, challenges, business, sports and innovations.

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