African issuers raise $1.4bn in IPO share offers in 2017

African share issuers have raised $1,379 million ($1.4bn) in 2017 through initial public offers (IPOs) of shares, compared to $1,154m ($1.2bn) in 2016, the second year of increase. However, the number of domestic African IPOs was down to 7, compared to 15 in 2016. The number of cross-border IPOs in Africa was 2 in each year.

The research was released today (15 December) in the latest Global Cross-Border Index from law firm Baker McKenzie. African issuers raised a total of 19.5% more capital in 2017 through IPOs was up 19.5% on 2016. Worldwide, issuers have increased IPO activity by 44% to $206.6bn and there were 1,694 new listings, up 31%.

Swiss issuers accounted for both cross-border IPOS in Africa in 2017. Aspire Global Plc listed on the Nasdaq First North Exchange, raising $38.96m, and Rainbow Rare Earths Ltd raised $8.22m when it listed on the London Stock Exchange. The total they raised was $47m, compared to $246m raised through cross-border IPOs in 2016.

Wildu du Plessis, Partner and Head of Africa at Baker McKenzie in Johannesburg, commented in a press release: “Africa’s uneven FDI (foreign direct investment) 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.”

“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,” he said.

Du Plessis added that he expected in coming years that more governments across Africa will privatize state-owned entities through listings, this would boost development of regulatory frameworks. In turn this will inspire market confidence in African bourses. Privatizations can be partial or full.

“In addition, removing barriers to cross-border investments through regional integration, would harmonize regulations and increase cross-border investments. This would provide more choices of financial products for investors in future,” he noted.

Global IPOs

According to Baker McKenzie, worldwide IPO volumes in 2017 reached the highest level since 2007. Momentum built through the year with an acceleration in both volume and value of capital raised in the second half. In total, 1,694 companies raised $206.6bn from IPOs, a jump of around a third in both value and volume on 2016. Both cross-border and domestic activity grew.

Cross-border deals jumped by 60% in volume, growing in all regions, including Latin America, which saw its first cross-border listing in 10 years. However, growth in cross-border capital was once again outpaced by growth in domestic capital raising, which rose 55% in value. This led to a slight decline in Baker McKenzie’s Global Cross-Border Index.

Koen Vanhaerents, Global Head of Capital Markets at Baker McKenzie, commented: “The IPO market in 2017 has put in its best performance in 10 years. A more stable political environment in some of the key markets, combined with strong economic growth, has boosted both the number of listings and the volume of capital raised.”

“With key risks to the global economic outlook easing, we expect IPOs to hit a new post-financial crisis high in 2018,” he added. “We recently forecast that domestic IPO activity will continue to rise, to a peak of over $220bn in 2018.”

About: “Baker McKenzie helps clients overcome the challenges of competing in the global economy. We solve complex legal problems across borders and practice areas. Our unique culture, developed over 65 years, enables our 13,000 people to understand local markets and navigate multiple jurisdictions, working together as trusted colleagues and friends to instil confidence in our clients (www.bakermckenzie.com).

London Stock Exchange – blue blood in the City after shoot out

“Quentin Tarantino couldn’t have written it better. After weeks of everyone at the London Stock Exchange pointing guns at each other, Reservoir Dogs-style, on Wednesday they all pulled the trigger.

“The final scene: Xavier Rolet takes one to the head, Donald Brydon reels from a gutshot, hedge funder Sir Chris Hohn makes a break for it, only to meet a hail of bullets offstage.

“A gory, unedifying, end to a film that, though being great box office, leaves all the cast bloodied.

“Rolet looks truculent in the extreme. Despite his “what, me?” statement today condemning the “unwelcome publicity” around his departure, it’s hard to believe he couldn’t have stopped all this weeks ago by having a quiet word with Hohn — through intermediaries if the gagging order on him prevented direct contact.

“Clearly, and understandably, he was miffed about getting the boot. But by letting the row run for so long, he has self-immolated a successful next career in City chairmanships. Who would hire him now? The manner of his ending will overshadow his extraordinary achievements turning the LSE around.”

This is columnist Jim Armitage in yesterday’s Evening Standard in London.

“This whole film would be fun were it not for the fact that the LSE is weakened just as it needs to be at its strongest.

“The Stock Exchange is about as essential to the City’s future financial dominance as you can get, and with Brexit coming, it has rarely been so challenged by EU rivals.

“The only character to emerge with reputation enhanced, is Mark Carney. Back in the day, the Governor of the Bank of England could order companies into line with a raise of the eyebrow. Carney lifted his beetle brow yesterday, declaring himself “mystified” by the whole affair. Within 24 hours, the squabble was over.”

The announcement from the London Stock Exchange Group came yesterday. Xavier Rolet said in the statement: “Since the announcement of my future departure on 19 October, ‎there has been a great deal of unwelcome publicity, which has not been helpful to the Company. At the request of the Board, I have agreed to step down as CEO with immediate effect. I will not be returning to the office of CEO or director under any circumstances. I am proud of what we have achieved during the past eight and a half years.”

CFO David Warren took over on £700,000 salary as interim, after 5 years at LSE and previously 9 years as CFO at NASDAQ. The Chairman of the Board, Donald Brydon, announced he would not seek a new term at the London Stock Exchange Group AGM in 2019.

Brydon paid tribute to “Xavier’s immense – indeed transformative – contribution to the business.” According to one newspaper report in City AM, over 9 years: “Rolet is widely acknowledged to have driven the LSE from a declining, if venerable, City stalwart to a major player on the international scene through acquisitions”,

The Financial Times has a great article on the drama including charts of LSE mergers and acquisitions in the top rank of world stock exchanges since 2005, and changes in the LSE share price compared to that of other exchanges.

The row started on 19 October when it was announced that the Board was looking for a successor for Rolet to leave by the end of December 2018 . That follows Rolet saying he would leave if a $13.8bn merger with Deutche Börse did not succeed – it was blocked by regulators – but then saying he would stay indefinitely. Activist shareholder Sir Chris Hohn of the Children’s Investment Fund (TCI) called for a shareholder meeting to discuss the dismissal in view of Rolet’s excellent track record.

Commentators did not dispute the track record, where Rolet transformed the institution which is at the heart of the City of London’s standing. On 4 Nov, columnist Anthony Hilton wrote this insightful defence of corporate governance and the foolhardiness of overruling the authority of the Board. “The chief executive is accountable to the board, and the board has a duty to tell him or her when it is time to go. What makes it so tough is that the problem invariably lies not with poor-quality bosses, who are relatively easy to show the door; the challenge is reining in those who have done well, those who have shown the vision and skill to move the business to a new and altogether higher level and who have in the process built a significant fan club. But it needs to be done. A major reason why good companies fail is that boards fail to exercise proper control over a successful leader who evolves into an over-mighty chief executive, and are then powerless when he overreaches himself. The danger is hubris.”

According to the FT the row is not yet over. It says the share price of LSE is down 2% since the October announcement, while that of Deutsche Börse is up more than 12%. Hong Kong Exchanges and Clearing is the other big winner, up nearly 8&, followed by CME (over 6%). The LSE share price has had a great run under Rolet.

Rolet is on “gardening leave” for the next 12 months on his £800,000 salary, although he tweeted yesterday morning “I doubt if my wife would tolerate me meddling with her vineyard although I do sample the product every now and then”. According to the news his total payout including annual bonus, deferred bonuses and long-term incentives could be up to £13m.

Former London Stock Exchange Group CEO Xavier Rolet is on gardening leave. (Photo: Anne-Christine Poujoulat/AFP/Getty Images)

On 28 Nov, Bank of England Governor Mark Carney, said he was “mystified by the debate” but called for “clarity… as soon as possible”. According to City AM newspaper he said: “I can’t envision a circumstance where the CEO [chief executive] stays on beyond the agreed period.”

The Bank, which regulates the London Stock Exchange as owner of LCH (clearing house) had been informed of the LSE’s plans to appoint a new head before Rolet publicly announced his retirement in October, and has been kept updated on progress, Carney said.

Carney hailed Rolet’s “extraordinary contribution” to the LSE.


Xavier Rolet and Donald Brydon in 2013 (photo Royal Mail Group/Getty Images).

How big are African pension funds?

Here are selected findings from a recent hunt through the Internet:

According to a recent report by PricewaterhouseCoopers, “Africa Asset Management 2020” (get your copy here) total assets under management in 12 selected Africa countries were $293 billion in 2008, more than doubling to $634bn by 2014. They are forecast at $1.1 trillion in 2020. (The 12 countries are: South Africa, Morocco, Mauritius, Namibia; Egypt, Kenya, Botswana, Ghana, Nigeria; Angola, Algeria, Tunisia).

Pensions are increasingly important as many countries set up and grow pension schemes. Mauritius and Ghana are examples of countries with 3-pillar pension systems and some countries are starting to revise their regulations to allow pension funds to invest more widely than just into domestic bonds, money market and equities

How big are the funds and are do they invest in infrastructure?

The giant African pension fund is South Africa’s Government Employees Pension Fund (GEPF), which had an investment portfolio of ZAR1.67trn ($124bn) at 31 March 2017 while accumulated funds and reserves grew at 10.2% a year for the last decade, according to the latest annual report.

The fund has 14 direct investments in 904MW of renewable energy including Bokpoort (50MW concentrating solar power CSP), wind and the 175MW photovoltaic (PV) Solar Capital Plant. GEPF has also backed 646 housing projects and unlisted investments include ZAR3.9bn ($290m) into the Pan African Infrastructure Development Fund run by Harith General Partners, ZAR2.4bn into South Africa’s airports and ZAR996m in telco MTN Nigeria, with a total of 1.2% of assets in infrastructure including roads and power in South Africa and across Africa.

Next-door Namibia has 2.5m people and David Nuyoma, CEO of the Government Institutions Pension Fund (GIPF) told a workshop in October 2017 its total assets were N$105bn ($7.9bn), 64% of the nation’s gross domestic product. Its unlisted portfolio includes residential, tourism and commercial developments, solar power and an infrastructure fund run by Old Mutual.

Botswana Public Officers Pension Fund has assets under management of BWP54.6bn ($2.6bn), including BWP11m invested with Harith.

Other markets are growing fast. In September 2017, Nigeria’s Pencom put pension fund assets at NGN7.16trn (down to $20.1bn after currency falls) of which NGN5.2bn was in infrastructure funds and NGN221.5bn in real estate including real-estate investment trusts (REITS). Earlier the industry had been growing by 30% a year from 2008-2015. There are 2015 regulations governing investment into infrastructure, and fund managers Asset and Resource Management Company and Harith General Partners, based in South Africa, have teamed up to create a $250m infrastructure fund for West Africa that meets the requirements.

 

Source: PricewaterhouseCoopers

In December 2016, Kenya’s Retirement Benefits Authority then CEO Edward Odundo said the industry would be KES1trn ($9.8bn) by the end of that month. The regulator is investigating structures for pensions and other funds to invest in road Government-led infrastructure such as Nairobi-Nakuru-Mau Summit superhighway (report in Nation newspaper)

Investments of social security schemes in Tanzania were TZS7.8trn ($3.6bn) in June 2015 and had grown 17% in the year, according to the Social Security Regulatory Authority (SSRA). The National Social Security Fund invested for 60% of the $140m Kigamboni toll bridge (Government has 40%).

Social Security and National Investment Trust (SSNIT) in Ghana, has assets GHS8.8bn ($2.0bn) and is invested in power projects, housing, health and other infrastructure in support of Government initiatives.

 

(Figures from author’s Internet research of annual reports of regulators and funds or recent news updates)

African pensions and infrastructure investment – recent research

Learning from Latin America
The challenge to create structures so that pension funds can invest in local infrastructure projects and help develop the capital markets has led to some innovative ideas across Latin America. There are lessons for African regulators of pensions and social security as well as for those promoting public-private partnerships for a full range of African infrastructure, including roads, bridges, telecoms, hospitals and house. Here are a couple of examples (from a 2017 World Bank paper by Fiona Stewart, Romain Despalins and Inna Remizova).

Mexico’s CKDs (Certificados de Capital de Desarrollo) securities are traded on the Mexican Stock Exchange (Mexican Bolsa/BMV) and were created in July 2009 with the mandatory pension funds (Siefores) as their key source of capital. CKDs are designed to boost infrastructure projects from ports to electricity and water, and real estate amounted to 30% of the total since 2009. Regulator CONSAR has deregulated investment restrictions for Siefores in stages to allow them to invest into private equity, real estate and infrastructure projects through CKDs.

Peruvian funds have created trust structures to allow pension funds to invest in infrastructure projects. The World Bank has helped Columbia develop infrastructure debt funds which pension funds can invest into.

 

Excellent recent research

Several excellent papers have been published this year. Here are some of them, with links to their sources.

  • Maurer, Klaus (April 2017). “Mobilization of of Long-term Savings for Infrastructure Financing in Africa”. Study prepared for Germany’s Study prepared for Federal Ministry for Economic Cooperation and Development (BMZ). Bonn. Deutsche Gesellschaft fur Internationale Zusammenarbeit (GIZ) GmbH, available here. Sources include 2 articles on this blog in Feb 2017 and in Mar 2015!
  • PricewaterhouseCoopers (2017). “Africa Asset Management 2020”. PwC. Download here.
  • RisCura (current). Bright Africa. Cape Town. RisCura. The report was published in 2015 but the website is interactive and updated, check out the excellent information and stats here.
  • Stewart, Fiona, Romain Despalins and Inna Remizova (July 2017). “Pension Funds, Capital Markets, and the Power of Diversification”. Policy Research Working Paper. Washington, DC. World Bank Group. Download via here.
  • Sy Amadou (Mar 2017). “Leveraging African Pension Funds for Financing Infrastructure Development”. Washington, DC. African Growth Initiative of The Brookings Institution with NEPAD and the United Nations Office of the Special Advisor on Africa (OSAA). Available from Brookings.

Another good resource is African Development Bank’s Making Finance Work For Africa (MFW4A).

Tanzania’s Kigamboni Bridge, an investment by NSSF (Credit Nairobi Wire)

Innovative African IPO and listing successes show strong demand

Here is a round-up of recent initial public offers (IPOs) and other listings of shares on African Stock Exchanges, many of them over-subscribed. Namibia has scored its first listing of a special purpose acquisition company (SPAC), while Mauritius is the home for an innovative listing of Afreximbank GDRs and of 2 primary listings on the Johannesburg Stock Exchange.

Namibia: Nimbus Infrastructure Limited is first SPAC vehicle
Nimbus Infrastructure Limited listed on the Namibian Stock Exchange (NSX) via private placement and started trading on 6 October. It raised more than N$100 million ($7m) from local investment institutions and retail investors. It aims to invest into information, computer and telecommunications (ICT) projects and institutions in sub-Saharan Africa.

It is Namibia’s first listed capital pool company (CPC). This is a type of company, also known as a special purpose acquisition company (SPAC), is most popular in the USA or Canada and South Africa’s Johannesburg Stock Exchange (JSE) has listed several SPACs.

The company has no commercial operations or assets, except cash. It uses its cash to evaluate promising investments and once it has invested in a viable business, usually within a set timeframe, it continues to operate as a conventional listed company. The funds are kept in an escrow account and are released on approval by shareholders or in line with a pre-approved spending budget, according to the company website. It must also comply with the Corporate Governance Code for Namibia (NamCode).

The private placement was open from 15-29 September. The listing of Nimbus was a joint initiative between Cirrus Capital, Paratus Namibia and Cronje and Company.

According to the company, it “is currently looking at a number of potential transactions and as per the stock exchange rules, aims to take these transactions forward for shareholder approval before the end of the year.” Nimbuas has signed a management agreement with Paratus.

According to an NSX statement, reported in Namibian Economist: “The Nimbus listing boasts exciting opportunities for Namibia, as not only does it focus on the fast-growing ICT sector across the continent, but in so doing, it offers a strong diversification opportunity for the funds of institutions and individuals alike, allowing diversified jurisdiction, currency and sector returns for investors. Further to this, as Namibia’s first CPC, Nimbus represents an opportunity to prove a new concept that will likely form a critical part of the future development of the Namibian real and financial sectors”.

Côte d’Ivoire: Ecobank Cote d’Ivoire
Ecobank Cote d’Ivoire launched a share offer on 27 September and closed it the same day as it was already twice oversubscribed. The IPO was to sell 20.44% of the bank’s shareholding in the form of 2,250,000 shares at XOF20,000 per share, raising XOF45bn (USD79.5m).

The bank is set to list on the Bourse Régionale des Valeurs Mobilières (BRVM) in December, where it will join parent company Ecobank Transnational Incorporated (ETI), a leading share on the BRVM, the Nigerian Stock Exchang and the Ghana Stock Exchanghe.

The offer, organized by stockbrokers EDC Investment Corporation and Hudson & Cie had been scheduled to run from 22 September to 11 October. It was 2.2x oversubscribed on the first day.

According to Enko Capital “Ecobank Cote d’Ivoire was created in 1989 following the acquisition of Chase Manhattan Bank. The bank has since expanded to become the third largest lender in Ivory Coast with a market share of 10.5% in terms of loans and 11.7% in terms of deposits and employs 648 people across 53 branches holding 274,018 accounts.

“Prior to the IPO, ETI held a 94.26% stake in Ecobank Cote d’Ivoire and this will reduce to 75% post listing. ETI was founded in Togo in 1985 and currently has a presence in 36 African countries. The banking group is listed on three exchanges in Africa.. Its stock is owned by more than 600,000 shareholders and the group employs over 17,000 people across 1,200 branches and offices. Ecobank Cote d’Ivoire is the third largest contributor to ETI’s group revenue after Ecobank Nigeria and Ecobank Ghana.”

Namibia: Letshego Holdings
Letshego Holdings Namibia had to extend its IPO by 4 days to 26 September and drop its offer price from NAD4.70 to NAD3.80 per share, according to Enko Capital: “The main purpose of the IPO was to satisfy the Bank of Namibia’s conditions for granting a banking license to Letshego Bank Namibia in 2016 which require a minimum 45% local ownership within a four year period.”

Letshego listed on 28 September on the Namibian Stock Exchange (NSX)with a market capitlaization of NAD1.9 billion, according to a report in New Era and a press release.

Finance Minister Calle Schlettwein did not have a warm view of capital markets as he celebrated the listing: “’With this listing Letshego has taken a dive into the shark pool, but this is a well-prepared dive that you were truly prepared for”.

Over 3,600 qualifying applications were received during the 4-week offer, with individuals and non-institutional investors making up NAD40m of the total NAD180m raised.

NSX CEO Tiaan Bazuin said: “I am extremely pleased with the successful listing of Letshego. There has been a lot of talk about localization in the Namibian market and this listing shows the best way, in my mind, to achieve this goal.”

Letshego Namibia is an offshoot of Letshego Holdings Limited, listed on the Botswana Stock Exchange, which has reduced its holding from 85% to 79%. Letshego Bank Namibia has had a full licence since July 2016, and is a 100% subsidiary of Letshego Holdings Namibia. Its origin in 2002 was as Edu Loan Namibia, making salary loans, and in 2008 Letshego bought majority shareholding.

Mauritius – Afeximbank global depositary receipts
African Export-Import Bank (Afreximbank), headquartered in Egypt, raised more than its $100m minimum target after selling global depositary receipts (GDRs) backed by its Class D shares. The GDRs listed on the Stock Exchange of Mauritius was on 4 October. The minimum investment for the offer was $30,000 and it closed on 22 September.

Afreximbank is a supranational trade finance bank established in October 1993. Class A shareholders consist of African States, African central banks and African public institutions; Class B shareholders are African financial institutions and African private investors; Class C shareholders are non-African investors, such as international banks and export credit agencies; while Class D shareholders can be any investors.

South Africa: African Rainbow Capital Investments
This newly formed company listed on the main board of the Johannesburg Stock Exchange on 7 September, the 12th listing to date in 2017. It raised ZAR4.0bn ($282m) and brought the total capital raised on the JSE in the year to date to ZAR76bn ($54bn), according to this JSE press release.

ARC Investments is a capital raising and investment entity incorporated in Mauritius which will offer shareholders the opportunity to invest in a permanently broad-based black controlled investment entity holding a diversified portfolio of investments. The initial investment portfolio held by ARC Investments will be seeded by African Rainbow Capital Proprietary Limited (ARC), which will remain the majority shareholder in ARC Investments.

Shareholders invest alongside ARC in the initial portfolio of 16 investments in financial services including: Alexander Forbes Limited, Alexander Forbes Group Limited, Indwe Broker Holdings, Senayo Securities and Santam and and 17 non-financial services including investments in agriculture and food production, building and construction, energy, information technology and telecommunications, investment holding companies and real estate businesses. Its most significant investment is a 20% interest in Multisource Telecoms Proprietary Limited, currently trading as Rain. According to Reuters, ARC Investments is valued at ZAR8.5bn, and has 3 cornerstone investors including Singapore’s GIC Pte Ltd, the Public Investment Corporation and Sanlam Private Wealth.

ARC is a majority black-owned investment holding company which seeks to utilize its empowerment credentials, strong balance sheet and the track record of its leadership and brand to invest in financial services distribution businesses. ARC is wholly owned by Ubuntu-Botho Investments (UBI), which was created in 2003.

Patrice Motsepe, Chairman of both Ubuntu Botho Investments and ARC, said: “the listing of ARC Investments on the JSE is a major step towards realising one of the key objectives of ARC, namely to build a world class broad- based black – controlled investment entity for all South Africans.”

Nemer says the JSE is equally proud to help ARC Investments facilitate its goal of providing investment exposure for the public to B-BBEE assets, which are often only held privately.

South Africa – Steinhoff Africa Retail (STAR)

Holding company Steinhoff Africa Retail (STAR) successfully raised ZAR15.38bn (USD1.08bn) after placing 750,000,000 shares at ZAR20.50 each between 4 and 14 September. It listed on the JSE on 20 September.

It brings public shareholding to 21.7% of STAR, which was formed as part of the restructuring of the Steinhoff Group, and Steinhoff International holds 78.3%. The group has 4,808 stores in Angola, Botswana, Lesotho, Mozambique, Malawi, Namibia, Nigeria, South Africa, Swaziland, Uganda, Zambia and Zimbabwe. Brands operating under the STAR group include Pep, Ackermans, Poco, Russells, Flash, Bradlows, Rochester, Buco, Timbercity, The Tile House, Incredible Connection, HiFi Corp, Dunns, John Craig, Refinery, Shoe City, Tekkie Town and Sleepmasters.

According to Enko capital, the offer was 4.8x over-subscribed.

South Africa: Brainworks
Mauritius-registered investment holding company Brainworks, with an investment base focused on hospitality, real estate, financial serice and logistics in Zimbabwe, listed on the JSE on 13 October, after an IPO from 28 September to 11 October. It is the first Zimbabwean company with a proimary listing on the JSE and the 16th listing for the year to date, according to a JSE press release, where it sought to raise ZAR316.5m (USD22.3m) through the sale of 27,523,951 shares at ZAR11.50 per share.

Brainworks was established in 2011 and holds investments including controlling stakes in 2 listed hospitality companies, African Sun and Dawn Properties, which are listed on the Zimbabwe Stock Exchange. It also has investments in GetBucks, GetCash, GetSure, MyBucks, Skyclear and FML Logistics and says approximately 38% of revenue is generated in hard currency.

Donna Nemer, Director: Capital Markets at the JSE, says the exchange is proud to welcome Brainworks to the South African market. “As Africa’s largest stock exchange, the JSE believes we can make an important contribution to the growth and the development of our continent. We do this through offering foreign investors a secure and transparent entry point into Africa and providing the companies who do business here with a liquid platform to raise further capital to fund their expansion.”

Nemer says the JSE also favours dual- or cross-listings, wherein debt or equity is listed simultaneously on the JSE and on a local market. “This assists companies from other African countries to gain access to a much larger capital pool and trade in a more liquid environment, while still allowing local market participation.”

Thanks to research contribution by Enko Capital, which invests in African opportunities.

African IPO pipeline includes $3bn Vivo Energy

Investors have been snapping up Africa-focused IPOs (initial public offers) of shares and more capital-raisings and stock-exchange listings are in the pipeline. Biggest of the upcoming African IPOs is a reported share offer by Vivo Energy, while miner AfriTin, investment and real estate company Cytonn and property company Hystead also said to be heading for the markets.

Earlier this month, Wall Street Journal reported that Netherlands-based Vivo Energy, which is licensed to distribute Shell fuel and lubricants in 16 African countries, is working with investment banks to act as underwriters. Its offer, planned for the London Stock Exchange, could value the company at $3 billion.

Vivo Energy (photo credit Vitol Africa)


Vivo was created in 2011 after Shell sold 80% of its downstream operations in 14 African countries to Dutch firm Vitol Africa BV and private equity fund Helios Investment Partners in a deal worth $1bn and then sold the balance to them for $250 million earlier this year. Vivo operates 1,800 Shell fuel stations and sells Shell-branded products such as liquefied petroleum gas and lubricants to aviation, marine and mining in 16 markets.

AfriTin is a newly formed tin company which is acquiring the tin assets of Bushveld Minerals in Namibia and South Africa and announced plans for a £2m ($2.6m) capital raise on the AIM market operated by the London Stock Exchange. The assets will include 85% of Uis Tin Project, the former workings of Uis mine in Namibia, and assets in South Africa including Mokopane and Zaaiplaats Tin Tailings project.

Pieter Prinsloo, CEO of South African real estate investment trust (REIT) Hyprop, focused on shopping centres, said it was looking to list UK subsidiary Hystead separately on the Johannesburg and Luxembourg stock exchanges in the first half of 2018, according to this news report. Hyprop owns 60% of Hystead, which has interests in 4 malls in Montenegro, Serbia, Macedonia and Bulgaria valued at EUR460m ($535m). Hyprop listed on the JSE in 1988 and has property assets in malls in South Africa, Ghana, Zambia and Nigeria.

Kenya’s Cytonn Investment plc changed into a public company in August using a 2015 provision in the Companies Act. It said it plans to list 10m shares by introduction on the Growth Enterprise Market Segment (GEMS) of the Nairobi Securities Exchange in mid-2018. CEO Edwin Dande said on CNBC . It is not raising new capital but seeking to diversify sources of funding and increase corporate governance, transparency and accountability.

CampusKey houses 4,000 students in 6 locations in South Africa. It says it will list on th JSE when it gets to 10,000 beds and says this is on track for 2019.

Thanks to research contribution by Enko Capital, which invests in IPOs and other African opportunities.

More hires at leading Africa and frontier investment bank Exotix Capital

A leading emerging and frontier markets investment bank, Exotix Capital, continues to add senior hires in key African markets. Exotix has offices in London, New York, Dubai, Lagos and Nairobi and is a licensed stockbroker on both the Nigerian and Nairobi stock exchanges – and in July rated #1 with 24% market share in Nairobi. The hires, which take immediate effect, add to the strengthening of the team in recent months and new appointments across business lines and geographies to harness growing investor interest in the world’s highest-growth economies.

The past year has seen significant growth for Exotix across Africa’s equity capital markets both in clients and market share. In Kenya, Exotix has been steadily increasing month-on-month this year. In June the firm launched a Research, Analytics and Data division, by Paul Domjan, the former Chief Executive of Roubini Global Economics and Founder of Country Insights.

It has also been expanding its investment-banking reach in Africa, with particular focus on the energy, financial and consumer sectors. On 3 October, Exotix was one of the three deal managers, alongside JPMorgan and Morgan Stanley, for the tender offer by Guaranty Trust Bank on its $400 million 2018 Eurobond.

The new appointments are
Serge Marston, currently Head of EMEA sales at NEX Markets, Serge Marston from NEX Markets as Non-Executive Director on Exotix’s Executive Management Board
Chiamaka Ezenwa, formerly at Morgan Stanley in London and FBN Capital in Lagos, as the new Head of Investment Banking West Africa
Mbithe Muema, previously with African Alliance Kenya, is appointed as Head of Equity Sales in Nairobi

CEO Duncan Wales says in a press release: “We are excited to have Serge, Chiamaka and Mbithe on board to help us take full advantage of the opportunity presented by our unique place in the world’s most exciting economies. Serge brings unparalleled expertise from his experience at the cutting edge of financial innovation.”

Marston is Head of EMEA sales at NEX Markets, a division within NEX Group that provides electronic trading technology services in the fixed income and foreign exchange markets. As Non-Executive Director he will work closely with CEO Duncan Wales and Chairman Mark Richards. Prior to joining NEX, he spent 19 years at Deutsche Bank in a variety of roles, most recently as Co-Head of Fixed Income, Currencies & Commodities, and e-Commerce Sales in the Global Markets division. NEX Group is a key shareholder of Exotix.

Ezenwa will be working with Andrew Moorfield (Natural Resources) and Fabrizio Ferrero (Financial Institutions), co-heads of Investment Banking at Exotix, and Esili Eigbe, Head of Equities, Africa, based in Lagos, to expand business in West Africa. She had previously spent 6 years at Morgan Stanley in London with primary focus on equity capital markets for Sub-Saharan Africa, the UK and Northern Europe, and the past 4 years in Lagos at FBN Capital, the investment-banking subsidiary of FBNH, Nigeria’s largest bank by total assets, most recently as Head of Equity Sales. She has originated and executed a variety of transactions across jurisdictions for international and Nigerian corporations.

According to Ferrero: “Chiamaka’s appointment enhances our investment bank offering in West Africa and overall in Sub-Saharan Africa through her extensive experience and relationships in the local markets. I am confident she will be a valuable addition to our team and further expand Exotix Capital’s investment banking footprint in the region.”

Muema was previously Head of Institutional Sales at African Alliance Kenya, where she was largely responsible for building the company’s local client base in the Nairobi office. She will lead Equity Sales further boosting Exotix’s position. She had previously worked at Renaissance Capital and Equity Bank as a research analyst and is currently on the board of the Konza Technopolis Development Authority in Kenya in a non-executive role, where she steers the business development committee. She will work closely with Eigbe and Debbie Rees, Global Head of Equity Sales.

Eigbe commented: “Mbithe has the necessary experience of markets in the region to support our commitment to expand Exotix’s business in Kenya and the wider region.”

Earlier in October Exotix appointed Matthew Pearson, former Head of Equities at ICBC Standard Bank, as Global Head of Equities, joining the firm’s Executive Committee, and Christopher Dielmann, formerly Research Analyst in the International Monetary Fund’s Strategy, Policy & Review Department, as Senior Economist with responsibility for markets including Egypt, Kenya, Nigeria, Bangladesh, Pakistan and Vietnam.

Other new additions to the team include Rafael Elias, formerly Head of Emerging Markets Research and Strategy for Fixed Income at Cantor Fitzgerald, returning to Exotix to continue his core focus on Latin America as Corporate Credit Analyst, and Rex Nowell, who has successfully directed independent research sales and account management teams in the Americas, Europe and Asia for the past 20 years, most recently for Roubini Global Economics, joining Exotix in New York as Managing Director for New Client Development.

Exotix has also been expanding financials research with the hire of three new analysts last month inlcuding Temitope Ode, previously an analyst at Sankore Global Investments and before that at Goldman Sachs, joining Exotix’s Lagos office to cover financial companies. Faith Mwangi, formerly Senior Research Analyst at Genghis Capital, covering banking and media, and prior to that Investment Analyst at Standard Investment Bank, covers financials in East Africa after joining in August.

Exotix Capital says it “provides the most comprehensive and integrated cross-asset platform to penetrate the full capital structure in frontier and emerging markets.” Its analysts cover over 160 companies, more than any other frontier-markets firm, in emerging Europe, the Middle East, Africa, Asia and the Americas. It is specialist in equity and fixed-income markets and the Exotix advisory team provides the full range of investment-banking services to companies, financial institutions, investment funds and governments. These include strategic advisory assignments from debt capital to private equity fund raising.

Serge Marston, Chiamaka Ezenwa and Mbithe Muema

UK regulator accused of dropping standards to woo $2 trillion listing

Investment institutions are protesting moves by the UK capital markets regulator, the Financial Conduct Authority, to alter listing standards to accommodate a potential $2 trillion listing on the London Stock Exchange. Meanwhile rumours are growing that Saudi Aramco may be dropping its plans for a £1.5bn initial public offer on the New York, London or Tokyo Stock Exchange in addition to the Tadawul (Saudi Stock Exchange).

According to this article in the Financial Times, a trend towards “uber compliance” for listed securities means Aramco is thinking of selling shares to sovereign wealth funds, possibly led by China, as an alternative to a public listing which would have been the world’s largest float.

On 15 October, Aramco said the giant listing is still on: ““All listing venues under review for optimal decision, IPO process is on track for 2018”.

Plans for a giant £1.5bn ($2bn) initial public offering of only 5% of Aramco’s capital are a key part of Saudi Arabia’s Vision 2030, which plans to wean the economy off reliance on oil, where it made up 90% of public revenues until 2014. However, in the short term it may signal Saudi intentions to use price-fixing cartel the Organization of Petroleum Exporting Countries (OPEC) to push up oil prices and boost the valuation.

Outgoing LSE CEO Xavier Rolet accompanied British Prime Minister Theresa May for a visit to Aramco in April, while Andrew Bailey, chief executive of the FCA, agreed the regulator had met the potential listing candidate before a consultation on revising the listing standards. Many observers think there is political pressure on FCA and LSE to win the listing from New York and prove that London is still competitive as Brexit uncertainty and economic damage impacts UK.

Consultation on the FCA’s new listing rules closed on Friday 13 October. It would be the world’s largest float.

According to writer Nils Pratley in The Guardian: “Furious fund managers sense a bad case of a regulator planning to lower standards to suit ministers’ short-term desire to persuade Aramco to float in London rather than New York.

“The investors’ objection is straightforward: why on earth would we want to create a ‘premium’ listing category for state-owned companies while not enforcing normal investor protections?

“Under the FCA’s proposal, the likes of Aramco would be allowed to ignore some basic principles. They would not have to get approval from outside shareholders for transactions with the state. They would not have to give independent shareholders a vote on who should serve as independent directors.

“There clearly could be a place for such companies in London, but you would hardly award ‘premium’ status, a label that is meant to indicate the highest governance protections. The regulatory regime would look like a pushover, which may succeed in drumming up some short-term business but could seriously damage London’s status as a good place to invest.”

On 18 October, the world’s biggest wealth fund warned the FCA that the listing changes would be a “step back”, according to an article in City AM. Norges Bank Investmnet Management, part of the Norwegian Central bank which manages assets on behalf of Norway’s $1trn fund, which has $44bn invested in LSE companies, wrote on 13 October to FCA:

“Ultimately, investors expect today’s high standards of shareholder protection to apply to the premium listing category, whether controlled by a sovereign state or private investors. We fear that relaxing these rules would reduce the voice of minority investors and undermine the independence of the board.”

NBIM said the changes would be a “step back” in terms of investor protection, especially for minority shareholders, and would threaten the London Stock Exchange’s standing as a best in class corporate governance framework: “We believe the FCA should consider a more balanced approach that takes into consideration the interests of all stakeholders in the listing environment.” Other protests about relaxing the listing rules have come from a wide range of institutions, including the Institute of Directors and investor group the International Corporate Governance Network which said the plans were “fundamentally flawed” and increased risk. The Investment Association boss Chris Cummings said the change: “could impact on London’s reputation and future as one of the world’s leading financial centres”.

FCA’s Bailey had told Parliament that people would not need to invest in the new listing if they did not like the governance. According to this article , he wrote: “We do not think protections for investors will be weakened. Plainly, absent the new category, sovereign-controlled companies would be unable to choose a premium listing; they would therefore not be bound by any of the premium listing requirements that might otherwise offer additional protection for investors.”

Bailey said some criticism of the proposal left the “incorrect impression that the premium listing is monolithic in form, and therefore, that any issuer included in that category must also be included in the main FTSE UK index”. Financial services advocacy group The CityUK supported the FCA’s “open-minded approach to regulatory change”.

Ashley Hamilton Claxton, corporate governance manager at Royal London Asset Management, said it will be “bad news” for London if the proposals are put in place: “It looks like the FCA is consulting on amending the existing listing rules to accommodate the peculiarities of one company, which is not a very effective strategy for regulating the market as a whole. If the proposals in this consultation document are implemented, it will be bad news for London and will reverse the progress we have made in recent years to uphold strong governance and protect minority shareholders.”

According to the Financial Times: “A market regulator that makes transparent and fair rules, respecting both property rights and investor choice, will attract business in the long run. If, on the other hand, attracting business becomes a short-term goal, and rules are tailored to land big deals, regulation becomes marketing, and the long-term outlook becomes much less attractive.”

Saudi Aramco says its 2018 listing is on track (photo Reuters/Ali Jarekji)

Egypt is Africa’s new #1 investment destination

The challenge for African economies is to adapt to commodity slowdown and sluggish production growth. Many countries have suffered stress in the past three years, and the latest report from a leading investment bank suggests the new winners – and who is lagging. Rand Merchant Bank’s (RMB) Where to Invest in Africa 2018 report shows changes in the top investment destinations in Africa.

South Africa is off the top spot, edged aside by Egypt, and Nigeria and Algeria have crashed out of the top 10. The theme is “money talks” and focuses on major sources of dollar revenues, important income-generators and investment opportunities.

But the report compares 191 global jurisdictions and measures African against country groupings. African countries are still at the lower end of the global-performance spectrum, which is still dominated by the US, UK, Australia and Germany.

In Africa, according to the RMB press release, there is a new pharaoh in town: “Egypt (#1) displaced South Africa (#2) largely because of its superior economic activity score and sluggish growth rates in South Africa, which have deteriorated markedly over the past seven years. South Africa also faces mounting concerns over issues of institutional strength and governance though in South Africa’s favour are its currency, equity and capital markets which are still a cut above the rest, with many other African nations facing liquidity constraints.

“Morocco (#3) retained its third position for a third consecutive year having benefitted from a greatly enhanced operating environment since the Arab Spring which began in 2010. Surprisingly, Ethiopia (#4), a country dogged by socio-political instability, displaced Ghana (#5) to take fourth spot mostly because of its rapid economic growth, having brushed past Kenya as the largest economy in East Africa. Ghana’s slide to fifth position was mostly due to perceptions of worsening corruption and weaker economic freedom.

“Kenya (#6) holds firm in the top 10 at number six. Despite being surpassed by Ethiopia, investors are still attracted by Kenya’s diverse economic structure, pro-market policies and brisk consumer spending growth. A host of business-friendly reforms aimed at rooting out corruption and steady economic growth helped Tanzania (#7) climb by two places to number seven. Rwanda (#8) re-entered the top 10 having spent two years on the periphery, helped by being one of the fastest reforming economies in the world, high real growth rates and its continuing attempt to diversify its economy.

“At number nine, Tunisia (#9) has made great strides in advancing political transition while an improved business climate has been achieved by structural reforms, greater security and social stability. Cote d’Ivoire (#10) slipped two places to take up the tenth position. Although its business environment scoring is still relatively low, its government has made significant strides in inviting investment into the country leading to a strong increase in foreign direct investment over the years resulting in one of the fastest growing economies in Africa.

“For the first time, Nigeria (#13) does not feature in the top 10, with its short-term investment appeal having been eroded by recessionary conditions. Uganda is steadily closing in on the top 10 though market activity is likely to remain subdued after a tumultuous 2016 marred by election-related uncertainty, a debilitating drought and high commercial lending rates.

“Though Botswana, Mauritius and Namibia are widely rated as investment grade economies, they do not feature in the top 10 mostly because of the relatively small sizes of their markets – market size has been a key consideration in the report’s methodology.”

RMB Africa analysts spoke on economic trends:

Neville Mandimika: “The last three years have sounded an alarm, amplifying what is now a dire need for the economies of Africa to shift their focus from traditional sources of income to other viable alternatives.”

Celeste Fauconnier: “Over the past three years, some African governments have had to implement deep and painful budget cuts, announce multiple currency devaluations and adopt hawkish monetary policy stances – all as a result of a significant drop in traditional revenues.”

Nema Ramkhelawan-Bhana: “Some countries have been more nimble and effective than others in managing shortfalls,” says and an author of the report. “But major policy dilemmas have ensued, forcing governments to balance economically prudent solutions with what is politically palatable.”

Where to Invest in Africa 2018 also includes 191 jurisdictions around the world, and measures Africa’s performance relative to other country groupings. The report is available via: www.rmb.co.za/globalmarkets/where-to-invest-in-africa-2018-edition.

Runaway gains continue as Zimbabwe Stock Exchange soars

Zimbabwe Stock exchange continues to soar, with gains of 9.3% yesterday (14 September) in its industrial index which closed at 379.95, after climbing 10.3% on 13 September, its biggest one-day gain according to the Herald newspaper. Market capitalization by close of 14 September was US$10.7bn.

The industrial index opened the year at 144.53, so it has more than doubled with 163% gain. The mining index has climbed from 58.51 to close 14 September at 84.65, up 45%. Most of the gain in the industrial index comes in the last 3 months, as shown on African Markets website.

Turnover was $5.2m on 14 September, with foreigners buying $1.5m and selling $4.3m in 162 trades, according to the excellent ZSE website . Meanwhile the Herald newspaper reported turnover on 13 September at $9.0m was one of the highest for the year with foreigners selling $3.5m worth of shares and buying just above $104,000.

Biggest volume on 14 September was in Delta Corporation, which traded $2.0m worth of shares as the price climbed 44 cents (19.9%) to $2.6656 after hitting a year high of $2.6675. On 13 September it had climbed 13% in $2.37m worth of trading, according to the Herald. Barclays Bank traded $1.1m with a price gain of 0.52 cents to close at $0.0852, up 6.5%. Other strong gains were brickmaker Willdale, up 27% in the day to 1 cent ($0.0100) after climbing 58% on 13 September. CBZ Holdings, First Mutual Properties and Nampak Zimbabwe which each scored 20% gain, while Old Mutual was up 19.9%.

Starafricacorproation climbed 14% to close at 2.5 cents ($0.0250) after a reported 67% gain on 13 September, Other top risers on 13 September, according to the Herald, were agribusiness Ariston up 52%, Zimre Property Investment up 37% and hotelier African Sun up 20%.

Seed Co is reportedly seeking to raise $30m and list on a regional exchange. Fast foods retailer Simbisa brands continues to trade under cautionary that it plans to list on the London Stock Exchange AIM board.

A week ago the rally was already in full swing as the ZSE market capitalization reached $8bn and the industrial index hit 286.63. The Herald reported on 11 September “Local investors have been buying into the equity market as a hedge against currency uncertainties and shortages. Most cash-rich Zimbabwean companies and individuals have been failing to access their cash locked in banks due to foreign currency shortages. Business, especially manufacturers and mines, have also been struggling to make foreign payments since the foreign currency shortages intensified at the beginning of 2016. This is the cash that is now being deployed into the stock market, considered a safe haven by many.”

The newspaper reported one investor worried that cash holdings at the banks, even in foreign currency, would not represent fair value “Investors are thus looking at hedging against this loss of value by buying into stocks.”

This web report on Charles Rukuni’s Insider Zim also worries that it is a rerun of 2007: “A stock market running on fumes and not any real fundamentals, a currency crisis and signs of inflation? We have seen this all before. In 2007, just like today, the ZSE became the world’s best performing market. Shares were up close to 600% by mid-year in 2007. Year-on-year, by April 2007, the stock market had risen a massive 12,000%. We now know it was all a deception; it was only going up because investors had nowhere else to put their Zimbabwe dollars, whose worth was evaporating fast. Then, as now, it did not matter that a company was performing badly.”