Tawiah: Technology has Contributed to Overall Development of African Capital Markets
The CEO and Co-founder of SecondSTAX, Mr. Eugene Tawiah in this exclusive interview with Kayode Tokede stated that technology has contributed to the overall growth and development of African capital markets amidst uncertain in the global and domestic economic environments. He also spoke about his trading app that has incorporated the Nigeria Exchange Group, Ghana Stock Exchange and Nairobi Securities Exchange. Excerpts
On October 6, 2023, SecondSTAX was introduced to Nigeria’s capital market community. Take us through the success stories far?
Nigeria’s capital markets represent a significant and growing opportunity for investors across the continent. Especially when you consider the outstanding performance over the last few years. At SecondSTAX, we are excited by this opportunity and we have been working with various market players (pension funds, large broker-dealers, asset managers, etc) to enable easier access to these opportunities. Our process typically involves two stages - putting the infrastructure in place to enable visibility and trading across all markets, and working with market participants to take full advantage of the tools that are now available to them.
Our platform is designed to give market participants a single view of opportunities across the continent to inform and enable effective trading. We are also compiling market news and research from credible sources with local expertise to enable informed decision-making. By combining this with our capabilities on execution, market players can now access reliable information on what is happening locally, see what analysts are saying and effectively execute a trade on one platform. Our users across the continent now have access to these services and they can better position themselves and their clients to access more lucrative investment opportunities from Nigeria and across the continent.
How many Exchanges have been onboarded so far and the prospect of expanding to other countries?
SecondSTAX has partnered with three prominent exchanges, Nigeria Exchange Group (NGX), Ghana Stock Exchange (GSE), and Nairobi Securities Exchange (NSE). These collaborations mark the beginning of our efforts to unite all of Africa’s capital markets. As we continue to expand our reach, we are actively pursuing additional partnerships across the continent, to effectively connect and create an efficient and accessible framework across Africa’s vibrant financial ecosystem. Despite having some of the best-performing stocks and bonds globally, Africa’s exchanges are largely inaccessible to investors outside the jurisdictions where they have been listed. Over the last decade, African capital markets have raised more than US$ 246 billion in debt capital markets. More than US$ 87 billion has been raised in equity capital markets and equity indices have peaked at over 50% growth across the major regional exchanges. However, the siloed nature of these exchanges and insufficient data on the risk profiles of assets have led to limited access to capital for markets and access to high-growth assets for investors.
How has SecondSTAX been able to navigate foreign exchange differences with Stock Exchanges currently on your platform?
The SecondSTAX portal offers users the convenience of investing in their local currency. Our platform allows investors to seamlessly engage in transactions using their native currency, eliminating the need for complex foreign exchange conversions. This feature not only enhances accessibility for users across the continent but also fosters a more intuitive and user-friendly investment experience. Whilst we are waiting to be integrated into the PAPSS infrastructure to be available for us to plug into, we have partnered with licensed forex liquidity providers in each of our operational jurisdictions, which are allowed to exchange local currency for our investment firm clients e.g., for a Ghanaian broker who wants to purchase DANGCEM on the NGX, the licensed FX liquidity provider can transfer their Cedis in Ghana from the originating broker, and settle the executing broker with Naira in Nigeria for the trade without the need to touch any other intermediary currency like USD.
In connecting Africa’s capital markets, how is SecondSTAX sourcing for capital and meeting the regulatory requirements of each country?
Our existing funding was secured from Private and Venture Capital investors to develop technology solutions to enhance intra-Africa capital and investment flows across the continent, with an initial B2B focus. Regarding meeting regulatory requirements in each country, partnerships with large established licensed brokers in each jurisdiction have helped. We have been able to present to the regulators a pathway to understanding our technology as an enabler, so we can effectively operate within the rules for that particular exchange. With that clarity, we satisfy the regulators’ needs especially when it comes to KYC verification for client onboarding and also settling with designated banks and custodians that the partner brokers already work with regularly. Since the role of the capital markets regulators is to manage and assess the risks of new ideas, innovations, and processes, it has been part of our mandate to be transparent in our operations and technology, which facilitates trade by routing orders to existing mature exchange infrastructure. As such, are not introducing features or functions that will present potential risks to the ecosystem. So as we remain open and place a premium on educating them on our approach to integration, they get more comfortable with the concept of using technology to drive more volumes and price discovery across the ecosystem. As we continue to get approvals in conjunction with our partner brokers in multiple jurisdictions, other regulators are more comfortable that initial thorough due diligence has been done elsewhere. They can then apply whatever additional nuances they have within their respective market, and we can move through the certification processes as we prepare for launch. That partnership with large established brokers has been essential and has helped us grow quickly in multiple markets that we are in.
How has your product crystallized institutional investors trading across Africa into Nigeria’s capital markets, which is currently the bestperforming market in Africa?
Investment firms on the SecondSTAX platform in Ghana and Kenya (and others in our business development pipeline from other regions) are quite excited about having the Nigeria market access currently. It is much bigger than both Ghana and Kenya combined when it comes to market capitalization and also provides more options for investors in major sectors like financials, telecommunications, consumer goods, industrials, and energy (oil & gas).