Africa has taken the lead where others, especially Europe expect to follow. Emmanuel Moors de Giorgio describes the setting up of the world's first regional stock exchange, in Abidjan and explains its significance to the regional economy.

It's mid-November 1998 and the French Ministry of Finance is witnessing a flurry of activity. People are running left and right as if this bastion of perennial power had been ravaged by hurricane Mitch. In a moment, the Minister in charge will announce the possible creation of a pan-European market for shares that would dwarf the proposed alliance between the London and Frankfurt stock exchanges.

Oh mon Dieu! France is prepared to relinquish sovereignty on the listing of the family jewels when most politicians still have to accept foreign portfolio investment and the conflicting demands of new classes of shareholders. A small revolution? Not if one considers that Europe is only following the example set by seven countries in francophone West Africa whose combined efforts resulted in the opening, on 16 September 1998, of the world's first regional bourse.

Things happened in a different sequence, though, with the Bourse Regionale de Valeurs MobiliŠres (BRVM) located in Abidjan (Cote d'Ivoire). Its members (Benin, Burkina Faso, Cote d'Ivoire, Mali, Niger, Senegal and Togo) have shared a common currency, the CFA franc, for over 50 years. On the other side of the Mediterranean sea, the European Monetary Union (EMU) is yet to happen - although fixing of parities between currencies of participating countries, the biggest step towards EMU, occurs on 1st January 1999.

But as much as a common currency is useful for comparison and practical purposes, it is not essential for a stockmarket alliance. This is at any rate the hope of the London Stock Exchange, since the United Kingdom declined joining the first round of European countries bound to share a common currency. What the regional bourse of Abidjan shares with an eventual European stock exchange is the support of a common economic market. All seven members of the regional bourse are also members of the Economic and Monetary Union of West Africa (UEMOA) and are more loosely tied up through the Economic Community of West African States (ECOWAS), a wider market shared by Anglophone and Francophone countries.

The regional stock exchange of Abidjan has many advantages. Its first asset is its small size, Cfa999bn (around US$1.8 bn), as of mid-November. Secondly, there isn't going to be a fierce battle to decide which already listed companies are going to be listed on the regional bourse and which not, since only one stock exchange existed before the establishment of the regional bourse : the Bourse des Valeurs d'Abidjan (BVA).

The decision to transform the BVA into a regional stock exchange was natural. After all, the country had become the undisputed regional leader thanks to its good standards in health and education, a well developed and reliable infrastructure, political stability and economic superiority, boosted by its position as the world's largest producer of cocoa.

All companies listed on the regional stock exchange are Ivorian, except for Senegal's recently privatised Sonatel. The last and perhaps most important aspect of the regional bourse of Abidjan is that this almost greenfield situation translates into standardised and centralised quotation, trading, settlement, payment and custody arrangements across member countries -something that would take years to harmonise within European countries, if ever.

Not having to deal with established practices also means that the regional bourse was able to set the mark higher. Says Dr Christian Delmotte, General Manager of Afribourse, a company whose objective is the promotion of the BRMV and which provides free and detailed information on listed companies (http://www.afribourse.com), "a share from an Ivorian company purchased by an investor located in Togo through the national office of Mali will have to be settled in five days."

The sophistication and standardisation of listing requirements and market regulations will inescapably lead to harmonisation of accounting rules, taxation, legal practices, and so on. In a nutshell, the regional bourse of Abidjan may just become a formidable step toward a much deeper economic integration of member countries. A different path than that trodden by European countries, yet in both cases ahead of any real political union.

In practice, share prices are determined electronically in Abidjan once bids, gathered from their clients by the 14 brokerage firms (SGI), are transmitted by the national offices of member countries to the headquarters in Abidjan. Half of the SGIs are in Cote d'Ivoire, with the remaining split between three in Benin, and one each in Burkina Faso, Mali, Senegal and Togo.

Information is currently transmitted by telex or fax but both bids and orders will eventually be executed via satellite. Once criticised by a well known fund manager because "it does take an age to transact any business and one gets a feeling that the depth of local buying is extremely shallow", the Abidjan stock exchange is indeed bracing itself for tomorrow's challenges: successfully bringing to the market newly privatised companies from all seven countries, representing the bulk of all initial public offerings, as well as shares and bond issues from companies listed on either the primary or secondary market.

Next on the list is likely to be the Societe des Mines d'Ity, a gold mining company in which the government indirectly holds 49%. Despite all this sophistication, the market remains thin. For example, on November 19 last year only 723 shares changed hands, with almost two-third consisting of shares from Sonatel, Senegal's telecommunication company. On the same day, not one deal was recorded on either the bond or the rights market. Even on good days when, say, around 5,000 shares are traded, these figures translate into a few hundred thousand dollars at best.

Explains the fund manager, "the `French' flavour of business means that the role of equity capital is not yet fully understood and so accepted." This may not be the opinion of Afribourse's Dr Delmotte, whose objective is to increase the number of companies listed from 36 today to 65 in two years. Investors may be comforted by the fact that the CFA franc will be linked to the euro from 1 January 1999, under the responsibility of the French treasury. Some may worry that if the euro appreciates too much against the US dollar, the consequence may be another CFA franc devaluation if the region wants its exports to remain competitive.

The regional stock exchange is the cherry on the cake for the efforts and performance of its members since the beginning of the decade. Steadily but surely moving away from being the private hunting grounds of France, the region has embraced the medicine of the Bretton Woods institutions, devaluing its common currency in 1994, restructuring its economy and embarking on a massive privatisation programme. Business and political representatives of Cote d'Ivoire went as far as learning to speak English in order to woo a larger range of foreign investors. This strategy has been to a large extent successful, at least in the oil and gold mining sectors, and last October, the Ivoirein Finance Minister announced that GDP was forecast at 6% for 1998, at least two percentage points above the African average. A page has turned on the negative real growth the country experienced in the five years up to 1994.

The creation of the regional bourse of Abidjan was in line with the stated objective of the African Stock Exchanges Association (ASEA), which is to promote integration and growth of African capital markets. But did ASEA really matter here, since the institution failed to prevent the opening in 1998 of a national stock exchange in both Tanzania and Uganda, when the 45-year old Nairobi Stock Exchange could easily have become the regional bourse of East Africa? Especially in light of the fact that the three countries had just signed a treaty to harmonise their economy? This shows how difficult it is for countries to resist the appeal of a national stock exchange - which today replaces a national airline or a refinery as a country's flagship, especially when donors are rushing in to help finance its establishment.

The regional stock exchange of Abidjan is certainly a pioneer and altogether a good omen for the region. But relatively happy times should not veil the fact that economic performance of member countries, and thus of the regional stock exchange, hinges on continued financial support from the IMF and other external creditors (eg, recent London Club restructuring) - a condition last overcome by European countries some fifty years ago.