Africa’s first multiasset currency and commodity exchange platform, the Global Board of Trade (GBOT) was established in Mauritius by India’s global exchange creator Financial Technologies Group roughly one year ago. How has it fared so far? African Business’ Nasseem Ackbarally spoke with MD and CEO, Joseph Hadrian Bosco.
African Banker: Why did you select Mauritius to launch GBOT from?
Joseph Hadrian Bosco: GBOT was launched with a vision of creating a world-class financial marketplace in Africa. The choice of Mauritius as the location for this exchange is a corollary of the business friendliness of the island nation.
For example, the World Bank’s Ease of Doing Business Index ranks Mauritius 20th among 183 countries of the world. The country has been a democracy for decades and ranks first in the 2010 Mo Ibrahim Index of African Governance.
The low tax regime of Mauritius and zero capital gains tax gives extra incentives for global funds and companies to be based out of Mauritius and invest globally. The strategic location of Mauritius (i.e. GMT +4) with respect to the rest of the world provides the investing community the added advantage of hedging price risk movements vis-à-vis the Asian, European and American markets on GBOT.
We have been in Mauritius for nearly four years and the support and encouragement extended by the government, Bank of Mauritius, our regulator, the Financial Services Commission (FSC) and the other financial market players only reaffirms our belief in Mauritius as the best location in Africa to establish an international multiasset exchange like GBOT.
Q: What have been the benefits for Mauritius?
A: GBOT has brought to Mauritius international intellectual capital with vast experience in the global financial markets.
At GBOT, the talented young people of Mauritius work together with seasoned expats and gain immense knowledge and hands-on work experience in this niche domain.
GBOT has been slowly but surely creating a robust financial market ecosystem and bringing in traders and brokerage houses from across the globe to establish their offices in Mauritius. GBOT has added a new dimension to the financial markets of Mauritius by bringing in futures trading in commodities and currencies and inculcating a culture of risk mitigation to safeguard against volatile global markets.
Q: There is talk about Mauritius being a stepping stone for global investors to Africa? How is GBOT helping to bring this about?
A: Mauritius, with its ease of doing business, helps global investors gain proximity to Africa. While doing business in African countries, the global investors need to have a keen eye on the local currency movements vis-à-vis their home currencies or the US dollar.
GBOT is equipped on both fronts. It already facilitates hedging in two African currencies: ZAR/$ (settled in $) and MUR/$ (settled in MUR) and will offer trading in other African currency pairs.
Further, the launch of the equity segment will provide a platform for local companies to raise capital for their growth from the region and from international participants.
GBOT is implementing the Mauritian government’s vision of creating a financial market edifice like Singapore and presenting the global investors a great opportunity to partake in Africa’s growth story.
Q: What are the current offerings of GBOT and how are the local and regional investors from Africa benefiting from these?
A: GBOT is a multiasset exchange offering commodity futures in gold and silver and currency futures in international currency pairs: €/$, £/$ and JPY/$.
GBOT is the world’s first exchange to offer trading in the two African currency pairs mentioned earlier from the very first day of trading. The exchange has recently launched a crude oil (WTI) futures contract. The local and regional investors benefit because a transparent, efficient and liquid financial market is available within the continent and they do not need to look at foreign markets for some of the most liquid contracts such as the WTI. Further, the contract sizes are tailored to meet the requirements of a plethora of local and regional investors ranging from diversified conglomerates to retail investors.
Q: What role can African banks play towards the development of a more robust capital market landscape in Africa?
A: Banks in Africa have an instrumental role to play in augmenting the growth of capital markets. Capital markets offer instruments for investment to channel savings into growth as well as to mitigate risks arising in the future. Liquidity in capital markets can be ensured by broadening (enhancing participation) and deepening (through well-suited product offerings).
The banks, through their network of corporate and retail clients, possess a strong distribution channel for the capital market products. By creating a capital market division and efficiently distributing capital market products, they will create last-mile reach, enhance liquidity on capital markets, attract many global multinationals and foreign investors and cumulatively lead to substantial and sustainable economic growth of Africa.
The local and international investment banks will play a role as lead managers and underwriters in bringing new IPOs and global players, thus augmenting investments into the continent. Enhanced financial market activity will bring down cost of transactions and make capital markets of Africa more affordable, thereby leading to increased participation.
Q: What market development initiatives is GBOT carrying out across Africa and how has the market responded?
A: African markets are at a nascent stage of development but the growth prospects and entrepreneurial spirit are promising. The need of the hour is the creation of a robust financial market ecosystem supported by market awareness and education initiatives .
On a macro level, integration of the fragmented markets in required to leverage strengths and enhance efficiencies.
To realise this vision, we have been constantly interacting with regional regulators, central banks, exchanges, local banks and brokerage houses to understand the needs of the region and create products accordingly to ensure that Africans derive optimum value by trading and mitigating risks.
GBOT is sketching alliances with regional African exchanges to grant their members access to GBOT’s global products and its trading platform, thereby providing various African nations with an efficient and affordable futures market for risk mitigation.
Some of the initiatives that we have conducted in this direction include a forum called African Echoes, wherein we congregated financial market thought leaders of Africa to discuss and find solutions for key financial market issues. Through a brand called GBOT Edge, we have been conducting training programmes on risk mitigation for various factions of the Mauritian economy, strategic decision makers in the financial services space, as well as students. Through our web-based initiative called GBOT Markets, we have created an exhaustive knowledge repository on the financial markets of Africa.
We have been getting a good response across Africa for all these initiatives. We are often invited by regulators and central banks as well as key financial market leaders from Africa to share expertise on creation of tech-centric exchanges and collaborate to create liquid markets in the region.
Q: What products are GBOT planning to introduce especially for the benefit of Africa?
JB: GBOT is a part of the Financial Technologies Group which has the expertise of setting up multiasset tech-centric exchanges across geographies.
Thus, GBOT has the capability and will introduce new segments like equity and equity derivatives in a phased manner to provide regional players with an efficient medium within Africa to list their companies and raise money for expansion and development.
It will also enable the listing of emerging economy-focused funds for Africa to partake in the growth of such economies across the globe.
GBOT will continue to introduce new Africa-specific currency pairs such as Uganda shillings and Kenyan shillings against the dollar to enable international investors to invest in the region without worrying about forex volatility. GBOT will also introduce global energy products, metals and minerals in a phased manner.