In line with global trends, 2015 was a challenging year for African capital markets in the wake of market volatility and the emergence of renewed global economic uncertainty in the latter part of the year, while the first half resulted in the highest levels of both equity capital markets transactions and proceeds raised in the past five years.
PwC (http://www.PwC.com) released its 2015 Africa Capital Markets Watch publication today, which 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.
Nicholas Ganz, PwC Africa Capital Markets Leader, says: “At 31 December 2015, African exchanges had a market capitalisation of about US$1 trillion, with 23% 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.”
Overall, $12.7bn was raised in 2015 in ECM activity across the continent. Over the past five years, there have been 441 African ECM transactions raising $41.3bn.
2015 showed a steady overall increase in IPOs of 12% in terms of transaction volume and 17% in terms of US dollar denominated value, as compared to 2014. However, 72% of 2015 IPO value and 54% 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 $6.1bn 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 JSE in US dollar terms decreased by 11% 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% over 2014 levels. Capital raised from IPOs by companies on other African exchanges in US dollar terms increased slightly by 3% as compared to 2014. In terms of volume, the JSE saw a 33% 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 $2.7bn. 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 $861m. In third place in terms of volume was the Casablanca Stock Exchange with 7 issuances, and third by capital raised was the Nigerian Stock Exchange with $751m, over 70% of which relates to 2014 SEPLAT IPO.
Since 2011, capital raised from IPOs by companies on the JSE represented 45% of the total African IPO capital and 33% of the total transaction volume. Coenraad Richardson, PwC South Africa Capital Markets Partner, says: “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.”
On a sector basis, the financial services sector continued to dominate the African IPO market during 2015 at 46% of total value and 50% of total volume, followed by industrial, health care and consumer goods sectors in terms of value.