More good news for South Africa as IPO activity improves
Capital raised in domestic listings by African issuers increased for the second year in a row, according to the latest research from global law firm Baker McKenzie. While there were fewer domestic listings in Africa in 2017, domestic capital raising increased by 19.5% year-on-year to $1.4 billion.
There were seven domestic IPOs in Africa in 2017, compared to 15 in 2016. However, the value of domestic IPOs was higher in 2017 – $1.379 billion – compared to $1.154 billion in 2016.
In 2017, Steinhoff Africa Retail Limited raised $697.68 million on the Johannesburg Stock Exchange (JSE), the largest domestic IPO in Africa last year. Another large IPO was Vodacom Tanzania PLC’s listing on the Dar es Salaam Stock Exchange in Tanzania, which raised $213.25 million.
There were two cross-border IPOs in Africa in 2017 by Swiss Issuers. Aspire Global listed on the Nasdaq First North Exchange, raising $38.96 million and Rainbow Rare Earths raised $8.22 million when it listed on the London Stock Exchange in 2017.
Wildu du Plessis, Partner and Head of Africa at Baker McKenzie in Johannesburg, said: “In South Africa, the election of Cyril Ramaphosa as the new President of the ANC resulted in an increase in positive market sentiment, which was reflected in the strengthening of the rand.
“Our clients and other market players are now sounding much more positive about capital markets, specifically in South Africa. There is more interest in capital markets of late than there has been in a few years, however, we will have to see to what extent the Steinhoff developments will put investors off.”
He said time would tell if the fallout from Steinhoff’s woes will impact on Steinhoff Africa Retail and other unrelated large corporates in South Africa.
“Further, Africa’s uneven FDI picture reflects the global uncertainty, but local challenges aggravate the unevenness. IPO activity is highly dependent on political and economic instability, particularly in the key markets of South Africa, Kenya, and Nigeria.
“In 2016, more FDI flowed to the hub economies, with new East and West Africa clusters emerging. This trend also dominated in 2017, and while South Africa has the most attractive exchange for issuances, the new clusters are shaping up to drive the IPO landscape going forward,” said du Plessis.
Baker McKenzie said that African economies have also engaged in repricing. The most tangible manifestation of this repricing has been rapid fall in some currencies as export revenues slid. This has created shortages of foreign exchange.
“The currency slide, has in turn, led to an increase in consumer prices, which impacted the retail, logistics, and other consumer-oriented sectors. Currency falls, however, can also create longer-term opportunities, because assets become cheaper,” said du Plessis.
Du Plessis noted further that as more governments across the continent engaged in the privatisation of state-owned entities and listings in the coming years, regulatory frameworks would be developed that would inspire market confidence in African bourses.
“In addition, removing barriers to cross-border investments through regional integration, would harmonise regulations and increase cross-border investments. This would provide more choices of financial products for investors in future,” he said.
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