African companies have floated 130 initial public offerings (IPOs) and raised $10.7 billion from both African and international stock exchanges over the past five years. This represents about N3.27 trillion at current official exchange rate.
A report by PwC- 2018 African Capital Markets Watch, indicated that African companies have continued to access both the continent and global stock markets to raise funds to finance their operations.
The 2018 African Capital Markets Watch analysed equity and debt capital market transactions, which took place between 2014 and 2018, as well as transactions by African companies on international exchanges.
The report listed all new primary market equity initial public offerings (IPOs) and further offers (FOs) by listed companies, where capital was raised on Africa’s principal stock markets and market segments. The report also included IPO and FO activity on international exchanges or non-African companies on African exchanges, on an annual basis.
Overall, African equity capital market (ECM) activity in 2018 declined both in volume and value in the wake of global and local economic and socio-political uncertainty. Despite 2018 starting on a positive note with some landmark transactions, capital markets activity declined year-on-year by 25 per cent in volume and 40 per cent in value.
In 2018, $2.2 billion was raised in 17 IPOs compared to $3.1 billion raised through 30 IPOs in 2017, representing a year-on-year decrease of 43 per cent and 27 per cent in volume and value of IPOs, respectively. Further offer (FO) or supplementary offer activity also declined both in volume and value as $6.1 billion was raised in 77 FO deals in 2018 compared to $10.7 billion raised in 95 deals in 2017.
The financial sector constituted 53 per cent of the total number of IPOs recorded in 2018, followed by the consumer services sector with 17 per cent. With regard to FO activity, the financial sector dominated both the number of deals and proceeds recorded, contributing 41 per cent and 47 per cent, respectively.
In the African IPO market, the report showed that South Africa continued to lead African capital markets activity despite the challenges facing the country’s economy. Since 2014, capital raised from 43 IPOs recorded on the JSE was $5.9 billion, representing 57 per cent of total African IPO capital raised, and 34 per cent in terms of transaction volume.
During 2018, four of the top 10 IPOs by proceeds were launched on domestic exchanges in North Africa, three on the Egyptian Exchange (EGX), and one on the Casablanca Stock Exchange. Three were launched on the Johannesburg Stock Exchange (JSE), and one each on the West African Bourse Régionale des Valeurs Mobilières (BRVM), the Ghana Stock Exchange and the Uganda Securities Exchange.
Over the five-year period, the JSE was followed in terms of volume and value of IPO transactions by the EGX with 17 issuances accounting for $1.6 billion. Third place in terms of volume was the Bourse de Tunis with 12 issuances, and third in terms of value was the Nigerian Stock Exchange with $571.1 million.
In the African supplementary offer market, South African companies also continued to dominate FO activity in 2018, accounting for 63 per cent of FO proceeds and 49 per cent of FO volume. The nature of these FOs reflected a mixed landscape, with a significant portion of funds raised for debt refinancing and expansion strategies.
Over the past five years, there have been 413 FOs by African companies, raising $44.7 billion on both African and international exchanges, a two per cent increase in capital raised over the preceding five-year period, 2013-2017.
PwC Capital Markets Partner, Andrew Del Boccio noted that the positive trend recorded in 2017 in overall ECM activity, in terms of an increase in volume and value, was not sustained in 2018 despite the strong market indications at the beginning of the year.
“While 2018 started with several landmark IPOs and FOs, as the year progressed, companies retreated from the capital markets or suspended listing plans as uncertainty and volatility increased across Africa and the globe,“ Del Boccio said.