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Africa’s Equity Capital Market Records 49% Growth In 2016-2017

Indications that African economies are on the path of recovery have emerged with the latest findings showing substantial growths in major segments of the continent’s bourses in 2017 over the preceding year’s performances.

The just published 2017 African Capital Markets Watch published by PricewaterHouseCoopers (PwC) reflected that African capital markets recovery in value and volume of equity capital market (ECM) transactions

The report showed that the ECM activity in 2017 was the second highest since 2013 in terms of volume with 121 issuances, up 25% over the prior year, and the highest since 2013 in terms of value

According to the report distributed by Africa Press Organisation (APO) Group, overall, African equity capital market transaction volume and value improved in 2017 over 2016.

Specifically, the report showed that in terms of value, 2017 saw the largest initial public offerings (IPOs) over the trailing five-year period, and an increase in the total value of equity capital market (ECM) transactions of 49% between 2016 and 2017 in US dollar terms.

The PwC’s report analysed equity, and debt capital market transactions that took place between 2013 and 2017 on exchanges throughout Africa, as well as transactions by African companies on international exchanges.

It also listed all new primary market equity initial public offerings (IPOs) and further offers (FOs) by listed companies, in which capital was raised on Africa’s principal stock markets and market segments.

The report also includes IPO and FO activity of African companies on international exchanges or non-African companies on African exchanges, on an annual basis.

Commenting on the report’s findings, Andrew Del Boccio, PwC Capital Markets Partner noted: “Capital markets in Africa saw a recovery in 2017 with the positive impact of commodity stabilisation on economies such as Cote d’Ivoire and Nigeria, which emerged from five successive quarters of GDP declines, and resilience in the face of economic and political uncertainty in South Africa.

“We are optimistic about the pipeline of companies seeking to access the capital markets in 2018, including cross-border IPOs of African companies, given encouraging indicators in large markets such as South Africa, Egypt, and Nigeria, and the continued economic growth in East Africa and the Francophone West African countries,” Del Boccio added.

According to the leading global research and consulting firm, African ECM activity in 2017 was largely driven by the financial services sector for FOs, and the consumer services sector for IPOs, though both of these statistics were impacted by a few very sizable transactions during the year. Businesses in sectors such as telecommunications, consumer goods and services, financials, and healthcare continued to form a significant component of African ECM activity.

It stated further: “Although levels of market capitalisation for many of Africa’s exchanges remain low in a global context, a number of initiatives have taken place to deepen liquidity and provide investment opportunities for foreign and domestic investors alike.

“Regulators in some African countries have made efforts in recent years to encourage companies in specific sectors to list shares on their domestic stock exchanges. Additionally, enhanced regulatory capital requirements have driven financial services companies to access both the debt and equity capital markets over the past year.

Since 2013, there have been 519 African ECM transactions raising a total of $52.7 billion, up 17% in terms of capital raised over the previous five-year period. Overall, ECM activity in 2017 was the second highest since 2013 in terms of volume with 121 issuances, up 25% over the prior year, and the highest since 2013 in terms of value, driven mainly by a few significant IPOs and FOs during the year.

On the IPO market, the report showed that 2017 saw the second-largest volume in IPO activity (28) over the past five years and is the largest in value, with $2.9bn raised in IPO proceeds, exceeding 2015 (the year with the next-largest value raised over the past five years) by 42%.

According to the report findings, over the past five years, there have been 134 IPOs by African companies on both African and international exchanges, raising $9.1bn, a 37% increase in capital raised over the preceding five year period, 2012-2016.

The report also indicated that in 2017 African FO activity was on a par with 2015 levels in terms of transaction volume, at 93 FOs – this represented an increase of 27% on the prior year. In terms of proceeds raised, 2017 saw an increase of 42% on the prior year, though it fell short of the highs noted in 2015.

Over the past five years, there have been 385 FOs by African companies, raising $43.6bn on both African and international exchanges.

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