African equity markets raised $11 billion dollars from company’s Initial Public Offerings (IPO) and Follow ups (FO) proceeds, a report by research firm PricewaterhouseCoopers (PwC) has revealed. The London-headquartered firm said 2014 saw the highest level of activity in African equity capital markets (ECM) over the previous five years, and a significant increase in both transaction volume and capital raised compared to the year before.
The continent’s capital market gained $37.4 billion in proceeds raised from 2010 to 2014, with PwC saying it expects 2015 to be another positive year for Equity Capital Markets activity in Africa. The company’s inaugural publication entitled, IPO Watch Africa 2014, says it found out found that the $11 billion raised last year in the African equity markets across the continent was almost equal to the combined money raised in the whole of 2012 and 2013, which totalled $11.1 billion. During 2014, IPO activity also increased overall in number from 20 to 24 IPOs, and doubled in terms of capital raised to $1.7 billion from $0.8 billion in 2013.
“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 instances of management following a dual-track approach aimed at maximising value for existing shareholders, and consistent with the growth in other forms of capital raising activity across Africa,” said Nicholas Ganz, PwC Africa Capital Markets Leader, in a press statement. The report analyses equity capital market transactions that took place between 2010-2014 on exchanges throughout Africa, as well as transactions by African companies on international exchanges.
Overall, FO activity during 2014 increased by 50 percent 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 percent of combined IPO and FO volume during 2014. Growth in these sectors reflects shifting economic and social demographics, namely an increase in urbanisation and an emergent middle class across the African continent. By contrast, the resources sectors collectively represented a comparatively smaller proportion of 2014 activity.
In addition, a total of $1.2 billon of FO capital was raised by African companies on international exchanges since 2010. FOs in this context include those companies seeking to expand their investor base by way of a secondary listing, as well as those raising further funds from existing international listings. The sector profile of these outbound FOs differs to that of African 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.
Building on the strong performance of last year, 2015 is expected to be a positive year for ECM activity in Africa. This is driven largely by a combination of expectations for continued exits by private equity investors, reforms to certain capital markets legislation, and growing investor confidence in and familiarity with African markets.
