A tiny tea-service bell rings delicately in a glass-walled conference room here in Botswana's capital. It's the small but significant sound of the country's stock and bond market springing to life - and of Africa's growing emergence into the globalized world of stocks, bonds, foreign investment, and, perhaps, into an era of less dependence on foreign-aid handouts.
This is hardly Goldman Sachs's bustling New York trading floor. But in a concrete-and-glass office park that's straight out of suburban America, three or four brokers meet twice a day to trade stocks and bonds. In doing so, they're also helping to tackle one of Africa's most persistent problems: the flight of domestic money to foreign markets.
An estimated 70 percent of Botswana's pension-fund investments - and roughly 40 percent of Africans' personal savings - go overseas. The United Nations estimates sub-Saharan Africa lost $187 billion in capital between 1976 and 2003. One reason: Investments in the US, Britain, and elsewhere are safe and profitable. But another big reason has been a lack of things to invest in here.
Yet with more and more stocks and bonds becoming available, Africa's money may increasingly stay home - and help jump-start everything from banks to airlines to manufacturing firms. All of which could lead to greater self-sufficiency - and to fighting poverty more often with economic growth than with foreign aid.
"The biggest problem in Africa is that people here don't reinvest in their own countries," says Rob Walker of Andisa Capital, a firm based in Gaborone. "But that's starting to change."
Indeed, countries are increasingly developing capital markets, which facilitate stock and bond trades.
• In 1996, Kenya had its first non-government bond offering. It now has scores of government and nongovernment bonds trading on its exchange. The East Africa Development Bank, for instance, has issued three sets of bonds - and is using the money to build houses for the poor and develop economic initiatives.
• In October, the West African country of Sierra Leone issued its first government bonds since the official end of its civil war. The bonds were hugely popular, generating pledges of $71.3 million, which will help the government start to recover after 10 years of turmoil.
• South Africa's robust bond market is one of the most "liquid" in the world - meaning many buyers and sellers are executing trades often, making it easy to get into and out of the market. (Illiquid markets are more risky, because investors may not be able to sell their bonds.)
• A new push by the United Nations and the US State Department to get credit ratings for African countries is a big step toward developing capital markets and attracting international investment.
On Nov. 26, Standard & Poor's gave Cameroon a B rating for its short-term bonds, putting it on par with Brazil, India, and Jordan. Such ratings help international investors judge a country's risk - thus letting them invest with more confidence. Ratings also provide a benchmark for judging the government's credibility, openness, and fiscal policies. Four more nations are expected to get credit ratings soon.
In the past decade, Africa's stock markets have prospered mightily. Outside South Africa, the number of African stock exchanges went from six in 1998 to 19 in 2002. Total market capitalization during that period grew to $66 billion, from $5.5 billion. Total market capitalization of New York Stock Exchange firms, by comparison, is about $15 trillion.
Now bonds are starting to grow. For instance, the government of Botswana - which has the same long-term credit rating as Saudi Arabia - issued its first government bonds earlier this year. Next year, it may issue bonds in US-dollar amounts, which would be even more attractive to international investors. Not that Botswana needs the cash; its diamond reserves provide plenty of income.
But with Botswana's government blazing the trail, there's speculation that companies like Air Botswana may issue their own bonds. By doing so, the airline could raise money to buy new planes and thus become a bigger carrier that's more competitive in the regional air market.
One sign that a critical mass in bonds is being reached is that LiquidAfrica, a financial-news provider based in Johannesburg, will soon aim to list all of Africa's bonds on its website, thus creating a kind of virtual ticker that provides easy access to investors.
Indeed, foreign investment in Africa is on the rise, according to UN data.
For example, average annual investment in Uganda in 1997-2002 was 251 percent higher than in the period of 1991-96.
The impact of capital-market expansion on Africa and its poor is still small, says Alan Gelb, chief Africa economist at the World Bank. But issuing bonds, getting credit ratings, and creating greater transparency, raise "the competitiveness of financial markets." And that, he says, "is a good thing."