African capital markets continue to reflect strong figures for 2015

while the first half resulted in the highest levels of both equity capital markets transactions and proceeds raised in the past five years, PwC has said in a new report.

The 2015 Africa Capital Markets Watchreleased early this month, analyses equity and debt capital markets transactions that took place between 2011 and 2015 on exchanges throughout Africa, as well as transactions by African companies on international exchanges.

Equity capital markets (ECM) transactions included in the analysis comprise capital raising activities, whether initial public offerings (IPOs) or further offers (FOs), by African companies on exchanges worldwide, as well as those made by non-African companies on African exchanges. Debt capital markets (DCM) transactions analysed include debt funding raised by African companies and public institutions.

“At 31 December 2015, African exchanges had a market capitalisation of about US$1 trillion, with 23 per cent of this value residing on exchanges outside of South Africa. Though statistics cannot be interpreted in isolation, certain metrics commonly used to analyse global market performance, such as the market capitalisation-to-GDP ratio, suggest that untapped value remains in Africa’s capital markets,” Nicholas Ganz, PwC Africa Capital Markets Leader, notes in the report.

African IPO Market
Overall, US$12.7 billion was raised in 2015 in ECM activity across the continent. Over the past five years, there have been 441 African ECM transactions raising US$41.3 billion.

2015 showed a steady overall increase in IPOs of 12 per cent in terms of transaction volume and 17 per cent in terms of US dollar denominated value, as compared to 2014. However, 72 per cent of 2015 IPO value and 54 per cent of IPO volume was carried out during the first half of the year, reflective of the relatively higher levels of consumer confidence as compared to the second half of 2015.

Over the past five years, there have been 105 IPOs raising US$6.1 billion by African companies on exchanges worldwide and non-African companies on African exchanges. The top 10 African IPOs by value in 2015 took place in South Africa and North Africa, namely Egypt and Morocco.

In 2015, capital raised from IPOs by companies on the Johannesburg Stock Exchange (JSE) in US dollar terms decreased by 11 per cent as compared to 2014, largely due to the weakening of the South African rand during the year; noteworthy is that the rand value of IPO capital raised on the JSE in 2015 increased by 11 per cent over 2014 levels.

Capital raised from IPOs by companies on other African exchanges in US dollar terms increased slightly by three per cent% as compared to 2014. In terms of volume, the JSE saw a 33 per cent increase in the number of IPOs as compared to 2014, and listings on the JSE’s AltX more than doubled.

Over the past five years, the JSE has led African exchanges in terms of IPO transactions and capital raised, at US$2.7 billion. In second place in terms of IPO transaction volume after the JSE was the Bourse de Tunis with 23 issuances, while in second place by capital raised was the Egyptian Exchange with US$861 million.

In third place in terms of volume was the Casablanca Stock Exchange with seven issuances, and third by capital raised was the Nigerian Stock Exchange with US$751 million, over 70 per cent of which relates to 2014 SEPLAT IPO.

Since 2011, capital raised from IPOs by companies on the JSE represented 45 per cent of the total African IPO capital and 33 per cent of the total transaction volume.

“The JSE remains a significant anchor of African capital markets activity, with a ranking of second in the world for exchange regulation and a leading global ranking for ease of raising debt and equity capital, according to the World Economic Forum’s Global Competitiveness Report 2015-2016,” says Coenraad Richardson, PwC South Africa Capital Markets Partner.

On a sector basis, the financial services sector continued to dominate the African IPO market during 2015 at 46 per cent of total value and 50 per cent of total volume, followed by industrial, health care and consumer goods sectors in terms of value.