Companies raise N6.2trn in 4 years by IPO across African Exchanges

Companies across Africa raised about N6.2 tril- lion ($37.4 billion) between 2010 and last year by way of initial public offering (IPO) across African Exchanges, accord- ing to a report by PwC is- sued at the weekend. The report further showed that 2014 wit- nessed the highest level of activity in African equity capital markets (ECM) in the last five years, with a significant increase in both transaction volume and capital raised during 2014 compared to the prior year. The PwC’s inaugural publication entitled, ‘IPO Watch Africa 2014’, re- vealed that the $11 billion raised in 2014 in the African equity markets across the continent, almost equaled the combined money raised in the whole of 2012 and 2013, which totalled $11.1 billion. Also, it said that during the year under review, IPO activities also increased overall in number, from 20 to 24 as well as doubled in terms of capital raised to $1.7 billion from $8 million in 2013. The report analyses eq- uity capital market trans- actions that took place between 2010 and 2014 on exchanges throughout Africa, as well as transac- tions by African companies on international exchanges. Consequently, twenty- four IPOs companies were listed in 2014 alone while 90 IPOs companies were listed between 2010 and 2014. Nicholas Ganz, PwC Africa capital markets leader, says: “The performance of African markets was strong in 2014, with an increase in equity capital market activity of 40% in terms of volume of offers and 100% in terms of capital raised, when compared with prior year activity. “We noted a few in- stances of management following a dual-track approach aimed at max- imising value for existing shareholders, and consist- ent with the growth in other forms of capital rais- ing activity across Africa.” The report shows a sig- nificant share of capital was raised in markets outside of South Africa, with Johan- nesburg listings accounting for only 32% and 44% of total IPO capital raised in 2013 and 2014, respectively, a notable departure from its more prominent position in prior years. Coenraad Richardson, PwC South Africa capital markets partner, notes a counterpoint in respect of further offers (FOs), “While IPO activity across the con- tinent increased its share vis-à-vis the JSE , FOs re- mained dominated by capi- tal raising in South Africa, which accounted for 87% of proceeds in 2014. This is a reflection of the depth and stability of the South African listed company and investor base, underpinned by a securities exchange regulatory frame- work ranked number one in the world by the World Economic Forum’s 2014- 2015 Global Competitive- ness Report.” Overall, FO activity dur- ing 2014 increased by 50% in terms of the volume of transactions and doubled in terms of capital raised to $9.3 billion from $4.6 billion in 2013. On a sector basis, the financial services sector (which includes real estate), industrial products & services, and consumer products dominated the market, with the financial services sector representing 57% of combined IPO and FO volume during 2014. Growth in these sectors reflects shifting economic and social demographics, namely an increase in ur- banisation and an emer- gent middle class across the African continent. By con- trast, the resources sectors collectively represented a comparatively smaller proportion of 2014 activity. In addition, a total of $1.2 billion of FO capital was raised by African com- panies on international exchanges since 2010. FOs in this context include those companies seeking to ex- pand their investor base by way of secondary listing, as well as those raising further funds from existing inter- national listings. The sector profile of these outbound FOs differs to that of Afri- can IPOs and FOs, in that the resources sector plays a more prominent role, when analysing both the number and size of the offer. The JSE safely retained its position in 2014 as the most active African market in terms of both total ECM transaction volume and proceeds. The Tunis and Nigerian Stock Exchanges held the second position on the continent in terms of volume and proceeds raised, respectively.