Stock markets in Africa: Emerging lions or white elephants?

The number of stock markets in African countries has doubled over the last 7 years. Although these markets remain small and illiquid, they are growing rapidly, and will become an increasingly important part of many African economies. Using examples taken from experience in other developing regions and Africa's recent past, this paper evaluates the common economic criticisms of stock markets and the political pitfalls involved in their operation. It concludes that the positive economic effects of bourses on African economies are far larger than any negative effects, and argues that the political costs can be mitigated while political benefits can also be gained. It finishes by suggesting reforms that can be put in place to reap more benefits and further reduce costs from stock markets on the continent.