the ratio of foreign - exchange debt to gdp stood at 26, 8 per cent by the first quarter of 2015, up from 12, 2 per cent in 2010. had south africa not been able to attract foreign capital inflows into rand - denominated bonds and equities, this ratio would have risen further. in sub - saharan africa, however, growth in local - currency bond markets has been stymied by the absence of a large and diversified domestic investor base, undeveloped secondary markets, and the lack of liquidity of many instruments. 5 in most cases, moreover, the issuance of local - currency bonds has been limited to the sovereign. where local bond financing consists mostly of domestic banks, the buying of government securities will tend to crowd out finance for a large number of private businesses and / or for much - needed infrastructure projects. in this respect, it would be desirable to see the growth in domestic securities markets occur alongside an expansion of the domestic investor base through incentives for longer - term savings via life insurance products, pension and provident schemes, and mutual fund investments. a deep domestic investor base can also act as a ‘ buffer ’ when non - resident investors reduce their investments. in south africa, for example, yields on ten - year rand government bonds have increased by only 30 basis points since the start of 2014, even as ( according to data from the jse ) non - residents sold domestic bonds to the tune of r60 billion over the period. if sub - saharan africa is to see a healthy expansion of both international and domestic investments in its securities markets, the region requires a strong governance structure, proper regulation and supervision, and adequate reporting and auditing standards in these markets. we should not underestimate, for instance, the impact on south africa ’ s ability to see, for instance, m mecagni et al., “ issuing international sovereign bonds : opportunities and challenges for sub - saharan africa ”, departmental paper 14 / 02, washington dc : international monetary fund, 2014. bis central bankers ’ speeches attract and retain foreign investments from our strong performance in this respect. indeed, in the 2015 global competitiveness report published this september by the world economic forum, south africa continued to score first, among 140 countries, on criteria such as “ financing through local equity market ” and “ strength of auditing and reporting standards ”. we came second in the regulation of our securities exchanges and third in the protection of minority shareholders ’ interests. conclusion in conclusion,

of regional gdp. international monetary fund, “ where are we headed? perspectives on potential output ”, world economic outlook, washington dc : international monetary fund, april 2015. j e tyson, sub - saharan africa international sovereign bonds : investor and issuer perspectives, overseas development institute, january 2015, available at http : / / www. odi. org / sites / odi. org. uk / files / odi - assets / publications - opinion - files / 9435. pdf. bis central bankers ’ speeches furthermore, development in african capital markets has not been limited to sovereign bonds. global flows into the region ’ s equity markets, while still very small compared to other regions, nonetheless grew in importance relative to the size of the recipient economies. the flow of capital into africa is critical to its ongoing development. access to capital has been greatly enhanced and a more competitively priced supply is currently offered, moving away from a reliance on official - sector financing. however, to ensure that benefits to borrowers are maximised, it is important that financing be transparent and that risk be fairly priced. furthermore, where lending is overly risk - averse, the development of corporate bond, equity or even venture capital markets can facilitate the expansion of a private, mediumsized business sector. finally, over time, as financial markets grow across the continent, one can equally expect to see increased cross - border portfolio and direct investment flows within sub - saharan africa, helping to facilitate regional economic and financial integration. these gains in hand, we need to be mindful of the risks associated with external portfolio financing. a tightening of financial conditions in the developed world can easily prompt international fund managers to reduce their exposure to frontier markets. what is then a small portfolio adjustment for a large us - or europe - based fund, however, can result in significant price action on a small and relatively illiquid sovereign debt market. rising foreigncurrency external liabilities equally expose a sovereign ’ s balance sheet to currency depreciation, limiting the benefits i described earlier of foreign - exchange adjustment as a “ shock absorber ”. in that respect, an increased focus on developing local - currency bond markets and on equity financing may present a solution to the risk of excessive foreign - currency leveraging. in south africa, the existence of a large and liquid domestic government bond market, with long - maturity instruments, has limited the rise in foreign currency - denominated debt, even as our country has experienced large current - account deficits.