US Tariffs and Market Volatility: Impact on African Investments

The Trump administration’s tariffs are expected to trigger market volatility, leading global investors to reduce exposure to emerging and frontier markets, according to Sam Dahya, Head of Investor Services at Standard Bank CIB.

African Investment Trends Remain Strong Despite Challenges

Speaking at The Network Forum’s Africa meeting in London, Dahya noted that investor flows into Africa have remained healthy. The World to Africa survey reveals that 63% of allocators invested in Africa in 2024, up from 57% in 2021.

“We’re seeing significant cross-border investment flows, with growing allocations from North America and the Middle East,” Dahya explained. “Mid-sized asset managers are particularly drawn to Africa for better yields and risk diversification.”

The Critical Need for Standardization in African Markets

Dahya emphasized that standardization is crucial for attracting foreign investment and protecting against macroeconomic challenges. Many African markets outside South Africa currently use diverse technologies and regulations, making investments complex and costly.

“Regional organizations like ECOWAS, EAC, and SADC have made it easier for foreign investors to access local markets,” Dahya noted.

Initiatives like the Africa Exchanges Linkage Project (AELP), which includes exchanges from Morocco, Egypt, South Africa, Kenya and Mauritius, are helping improve market liquidity through cross-border trading capabilities.

Progress and Challenges in Market Integration

While some African economies are shortening trade settlement cycles and connecting to SWIFT for seamless transactions, Dahya pointed out that account opening processes remain inconsistent across the region.

“Without better post-trade harmonization, liquidity challenges will persist,” she warned.

Digital Transformation Driving Operational Efficiency

Digitalization is making African markets more attractive to investors. Custodians focusing on digital transformation are seeing improved efficiency, reduced costs, and enhanced service quality.

“New operating models and platforms are helping providers scale operations, automate processes, and offer better client customization,” Dahya explained.

While African markets have made progress in standardization and digital transformation, Dahya stressed that continued efforts are needed to sustain growth and navigate global volatility.

Source: Moneyweb