• US$11bn IPO and FO proceeds raised in 2014 in African equity markets
• US$37.4bn proceeds raised from 2010 to 2014
• 24 African IPO companies listed in 2014
African markets excelled in terms of capital raising for business in 2014 with a total of $11 billion raised through a total of 24 initial public offers (IPOs) and also through further offers (FOs). According to the inaugural publication IPO Watch Africa 2014, released by PwC on 1 Feb, a significant portion of the 2014 capital raising came from outside South Africa, compared to previous years.
The PwC study covers the 5 years 2010-2014 and shows that the total money raised in 2014 was equivalent to the combined total for 2012 and 2013. The sum from IPOs alone was $1.7bn in 2014, up from $0.8bn in 2013. Listings on the Johannesburg Stock Exchange accounted for 32% of total IPO capital in 2013 and 44% in 2014.
Nicholas Ganz, PwC Africa Capital Markets Leader, said in a press release: “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.”
However South Africa accounted for 87% of the capital raised through FOs offers with a 50% increase in the number of transactions and doubled in terms of capital raised to $9.3bn, from $4.6bn in 2013.
Coenraad Richardson, PwC South Africa Capital Markets Partner, said of South Africa’s share of the market for further offers: “This is a reflection of the depth and stability of the South African listed company and investor base, underpinned by a securities exchange regulatory framework ranked number one in the world by the World Economic Forum’s 2014-2015 Global Competitiveness Report.”
The excellent report can be downloaded here and includes lists of the top 10 IPOs in 2014 and 2015, performance by exchange, share performance from the IPO to 31 Dec (the Egyptian Exchange’s Arabian Cement Co raised $109m and then soared 88%) and much other useful information.
The financial services sector (including real estate) was 57% of the combined IPO and FO volume, followed by industrial products & services, and consumer products. Growth in these sectors reflects Africa’s shifting economic and social demographics, including increasing urbanization and an emergent middle class. The resources sectors were a smaller proportion of 2014 activity.
The trend also shows “increasing global integration of businesses in Africa and the interest of international investors in opportunities in Africa” according to the report. Several top 10 IPOs in 2013 and 2014 had an international component, either foreign companies raising capital directly on African exchanges, or African companies marketing shares to international investors through dual listings or sales to qualified institutional buyers abroad.
During 2010-2014, African companies raised a total of $31.1bn through FOs on African exchanges plus another $1.2bn of FO capital raised by African companies on international exchanges. This included companies expanding their investor base via a secondary listing, as with the 2011 listing of Elemental Minerals on the Toronto Stock Exchange and the 2013 listing of MiX Telematics on the New York Stock Exchange under the Jumpstart Our Business Startups (JOBS) Act, as well as those raising further funds from existing international listings. Resources transactions are more prominent in “outbound” FOs compared to the African IPOs and FOs over the period 2010-2014.
Good prospects for 2015
The report notes: Further liberalization of exchange regulations in some key territories, such as Tanzania, as well as harmonisation of regional exchanges bodes well for continued growth of ECM activity in 2015. Other positive factors include expectations for continued exits by private equity investors, reforms to certain capital markets legislation, and growing investor confidence in and familiarity with African markets.
Darrell McGraw, PwC Nigeria Capital Markets Partner, warns that commodities prices and currency depreciation could lead to some “headwinds that may affect the momentum of the capital markets in Nigeria and other territories heavily involved in resources.” However, Nigeria already had an IPO in Jan 2015 and “has a strong pipeline of listings likely to be brought to market later this year.”