By Chikodi Okereocha
The overall African Equity Capital Market (ECM) last year declined sharply in volume and value from 2018. It posted the lowest proceeds over the last 10 years, PricewaterhouseCoopers (PwC) said at the weekend.
Its 2019 African Capital Markets Watch publication, which analysed equity and debt capital market transactions on an annual basis, showed that the general slowdown in equity markets was largely driven by a series of macro-economic factors including an ECM deceleration in global markets.
There was also caution in the period leading up to key local elections, which took place in both Nigeria and South Africa last year, and more specifically in South Africa, growing political gridlock and economic stagnation.
The report listed new primary market equity initial public offerings (IPOs) and further offers (FOs) by listed companies, in which capital was raised on the continent’s principal stock markets and market segments.
It also included IPO and FO activity on international exchanges or non-African companies on African exchanges.
PwC Africa Capital Markets leader, Andrew Del Boccio, said: “A state of uncertainty seems to have become the ‘new normal’, and we expect some degree of volatility and caution to continue to affect Africa’s capital markets activity in 2020.
“This sentiment is also reflected in PwC’s annual 2019 Global CEO Survey, in which African CEOs noted their expectations for a slowdown in economic growth as well as their top concerns, which included political risk, over-regulation, and worries about finding top talent to fill the skills-gap.”
According to the report, which was accessed by The Nation, 2019 ECM value was the lowest seen over the past decade, while the volume of deals was only lower in 2012.
The report overall ECM activity in 2019 declined in value and volume by 44 per cent and 29 per cent, respectively, compared to 2018.
It, however, noted that the decline was mainly related to activity in South Africa, where ECM activity dropped by 69 per cent in terms of value and 46 per cent in terms of volume compared to 2018, and where Africa’s largest bourse saw no capital raised through IPOs in 2019.
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The report said between 2010 and 2019, there were 927 African ECM transactions, raising a total of $88 billion. The highest volume of transactions was recorded in 2015 and 2017, with 125 deals each, while 2012 recorded the lowest volume of transactions with 65 deals.
On the African IPO market, the report said over the past 10 years, there have been 215 IPOs by African companies on both African and international exchanges, raising $16.9 billion.
Last year saw the lowest volume in IPO activity over the past 10 years, recording a decline of 47 per cent compared to 2018 activity.
“No capital was raised via IPOs on the Johannesburg Stock Exchange (JSE) in 2019. However, South Africa still dominated during the decade under review, with seven of the top ten IPOs between 2010-2019.
“It also accounted for the two largest IPOs by value – the $1.2 billion Steinhoff Africa IPO in 2017 and the $819 million Vivo Energy dual listing on the JSE and London Stock Exchange (LSE) in 2018,” the report said.
The report, however, pointed out that aside from the decreased levels of activity in 2019, there were some other notable events in specific markets.
For instance, IPO activity resumed in Nigeria after four years, with Airtel Africa Plc’s dual listing on the Nigerian Stock Exchange (NSE) and the LSE, raising $687 million.
Mozambique also recorded its first IPO in six years with the listing of Hidroeléctrica de Cahora Bassa on the Bolsa de Valores de Moçambique.
On capital market’s outlook, PwC said consistent with prior years, it expects governments across the African continent to continue to implement strategies towards building robust capital markets.
“Some recent examples include Ethiopia’s plan to launch a local stock market during this year, and Angola’s roadmap to privatise its state-owned companies by 2022. In addition, we can expect to see other announced privatisations in Nigeria, Malawi and Ghana,” it said.
PwC Africa Capital Markets Director. Alice Tomdio, said “Despite the lacklustre activity in 2019, we saw significant progress in various capital markets initiatives during the year, including the drive for sustainable finance through the issuance of social, green and infrastructure bonds in South Africa, Kenya, and Nigeria.
“Together with a move towards more local currency and blended financing, we expect this trend to continue, and to unlock new sources of capital for African issuers.”
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