Connectivity is at the heart of Kenya’s growth agenda

By  George Duffield

Head of Sub-Saharan Africa

Bloomberg L.P.

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It has been a turbulent year for the global economy. Persistent headwinds, from conflict to trade disruptions, have created a tighter financial climate globally.

Yet amid the global gloom, bright spots remain – not least in East Africa. The region has been the fastest growing on the continent and has been for the last two years, with the African Development Bank forecasting growth of 5.9 per cent this year. At the centre of this growth agenda sits Kenya.

It is undoubtedly an economic success story. But the focus must now be on sustaining that momentum. This means economies across the region continuing to attract international investment and mobilise domestic capital.

That requires modern financial infrastructure capable of absorbing and deploying capital efficiently, securely and transparently. And this is why the next stage of financial-market modernisation is not simply about digitalisation, but connectivity.

Kenya has already set out an ambitious agenda to deepen and modernise its financial markets. Its “Silicon Savannah” digitalisation drive points to the country’s technological ambition, while different parts of its digital ecosystem, from payments and government services to financial-market infrastructure, have continued to evolve.

But digitalisation alone does not necessarily create a connected market. Investors can still rely on separate systems to understand market developments, discover prices and execute trades. Moving between those systems can create delays and operational friction at precisely the moment when speed and access to information matter most.

Market participants

The next step is therefore to connect these different parts of the investment process, bringing information, price discovery and execution closer together so market participants can move more efficiently from understanding what is happening to acting on it.

For Kenya, the need for this infrastructure is increasing as the country’s capital markets grow more active and outward-looking. Foreign-exchange reserves climbed to historic highs above $15 billion, the shilling maintained notable stability, and domestic markets continued to demonstrate robust liquidity alongside active secondary market growth.

With increased growth comes increased exposure to developments outside Kenya’s borders. Technology cannot insulate investors from market risk. But access to real-time data, analysis and global reporting alongside efficient execution can help them evaluate exposure, navigate volatility and make better-informed decisions.

Progress is already being made in Kenya. We have been working with the Central Bank of Kenya (CBK) to support the adoption of Bloomberg’s BMatch platform for the interbank foreign exchange market, designed to improve price discovery, transparency and execution efficiency in local currency markets. Critically, the platform also connects execution with the Bloomberg Terminal’s broader suite of data, news, and technical analytics.

The important thing in this instance is matching the digitisation that drives efficiency and transparency with the connectivity that reduces operational friction. And there is an opportunity to apply the same principles beyond foreign exchange, particularly in bond markets. Deep and efficient bond markets are critical to mobilising capital, and they too benefit from greater transparency, stronger price discovery and more efficient execution. As Kenya’s financial markets continue to develop, extending these principles across asset classes can help broaden participation, deepen liquidity and create a more connected financial system.

Foreign-exchange

Kenya is not an isolated example. It is part of a wider modernisation of financial-market infrastructure taking place across Africa, with Bloomberg working alongside market participants and institutions across the continent. Bloomberg’s BMatch technology has also been adopted in markets including Nigeria and Angola, while FXGO, Bloomberg’s multi-bank foreign-exchange trading platform, is used in 21 African countries by more than 700 users, who have traded in excess of $1 trillion through the platform. Together, these developments point to a broader shift towards financial markets that are more electronic, transparent and connected.

This is by no means a silver bullet. Technology alone cannot resolve every source of market fragmentation. However, it does show how technology can integrate previously fragmented workflows into a single process rather than leaving information and execution to sit in isolation. Fragmented liquidity across domestic markets remains one of the constraints on the development of Sub-Saharan Africa’s capital markets. Greater regional integration can help investors access market data and execute trades across multiple countries more efficiently, opening access to otherwise fragmented pools of liquidity.

NSE CEO Frank Mwiti recently challenged the East African Community (EAC) to fast-track a shared regional trading infrastructure to reduce cross-border trading friction. Common financial technology can be the required accelerant.

For Kenya, the opportunity is to modernise its domestic infrastructure and help shape how increasingly connected East African capital markets operate. As one of East Africa’s most developed financial centres, continued progress in the country can demonstrate how common financial technology can reduce friction between markets and support deeper regional participation.

Kenya’s financial trajectory demonstrates that digitisation is just the first step of market modernisation. The defining factor for enduring stability and growth will be connectivity. The markets that successfully connect access to high-quality information with seamless execution will be best positioned to mobilise domestic capital, attract international investment and support sustainable economic growth.

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The writer is the Head of Sub-Saharan Africa, Bloomberg L.P.