April 8th, 2015 by Tom Minney
Commodity exchange trading floors have failed in in Zambia, Uganda, Nigeria, Zimbabwe, and Kenya. However, this has not deterred donors, according to a recent article on Bloomberg, and at least 8 commodity exchanges started in sub-Saharan Africa over the past 20 years with the aim of improving food security for local populations.
Exchanges are a distraction from other initiatives that would better serve poor farmers, Nicholas Sitko, a Michigan State University agricultural economist who’s based in Zambia, where a commodity exchange closed in 2012, is reported as saying: “We’ve learned that no amount of money pumped into them and no amount of government effort to get them off the ground can force them to work,” he says.
Why were donors attracted to commodity exchanges, which analysts said suffered from the same flaw: a top-down approach that’s better at attracting foreign aid than at improving farming practices and developing transportation and communications networks. Donors like exchanges because they look like institutions in their own countries, says Peter Robbins, a former commodities trader in London who’s studied African exchanges. And “African leaders like to show off trading floors to show how modern their countries have become,” he says.
Even the famous Ethiopia Commodity Exchange, started in 2008 with the help of foreign donors including US and United Nations to improve food distribution in a country where millions often went hungry, has not proved as effective as desired. This is despite strong Government backing, including decrees that almost all buying and selling of coffee, sesame seeds, and navy beans for export must take place on the exchange.
According to Bloomberg: “With its buyers and sellers in coloured jackets and open-outcry trading floor displaying real-time market data from around the world, the ECX has been a prime example of what an exchange can and can’t do. The government ordered export coffee trading onto the exchange shortly after it opened, hoping it would jump-start activity and help attract other business. That didn’t work: Small amounts of corn and wheat are traded, but coffee and sesame seeds account for about 90% of exchange volume.
“Eleni Gabre-Madhin, who founded the ECX and served as its first director, says one obstacle for the exchange was that the state didn’t build enough warehouses to store bulky items such as cereals.” ECX Chief Executive Officer Ermias Eshetu said ECX will re-strategize from the bottom up in the Government’s next 5-year Growth and Transformation Plan II starting in July so that it can handle staple foods and is now allowed to license private warehouse operators to expand storage capacity.
Fekade Mamo, general manager of Mochaland Import and Export and a former ECX board member, was reported saying that Ethiopia’s fragmented, barter-based agricultural economy would have to modernize before it can benefit from a Western-style commodity exchange, according to: “The objective was to bring about an equitable food supply system.. That has completely failed.”
On the positive side, founder Eleni says farmers who use the exchange have seen benefits: Posting prices publicly has boosted their income, and centralized trading means buyers don’t default on contracts. Gary Robbins (no relation to Peter), chief of the economic growth and transformation office at the U.S. Agency for International Development in Addis Ababa, says commodity exchanges can encourage a consistently higher crop quality, a key condition for global trade, says. ECX
Eleni left the ECX in 2012 and has been working with investors, including International Finance Corp.—an arm of the World Bank—and Bob Geldof’s 8 Miles private equity fund, to establish an exchange in Ghana. Next she hopes to help set up one in Cameroon.
Shahidur Rashid, a food-security analyst with the International Food Policy Research Institute in Washington, says the problem is that conditions for success, such as large trading volumes, a strong financial sector, and a commitment to transparency, don’t yet exist in most countries: “A new institution should add value, and I struggle to find that value,” Rashid says. “Every country does not need an exchange. Nor is it any good to establish them in places where they will fail.” But he also says that under the right circumstances, exchanges can make sense.
March 25th, 2015 by Tom Minney
Schulze Global Investments is the longest-established private equity firm in Ethiopia. It is run by a family office and is extremely well networked. It has made several deals, but apparently no exits yet although prospects are improving.
SGI Ethiopia has also not been much in the media. In this interview, Dinfin Mulupi of HowWeMadeItinAfrica.com interviews Blen Abebe, vice president at SGI Ethiopia, who highlights the importance of a local team for successful private equity. For the full story, have a look at the original interview here.
Blen Abebe (photo reprinted from HowWeMadeItinAfrica)
So how has SGI been able to navigate this unique environment?
At Schulze Global, most staff are Ethiopian-Americans and the fact that you look Ethiopian and speak the native language ensures the locals can relate to us. For example, we have closed deals partly because we were on the ground and could relate better to locals than other private equity firms. And it makes sense, because most family businesses have been passed down through generations so they wouldn’t necessarily trust, or be willing to work with, you before they get to know you. That is why Schulze Global ensures it has people who know both the foreign and local culture.
What are some of the challenges SGI faces in Ethiopia?
Well, being the first one on the ground can have both positive and negative effects. For example, when Schulze Global opened its office back in 2008 most people had never heard of private equity. So we literally had to go through a teaching process of what it was we are doing. And to add to that, most companies confuse us with a bank so we must almost always explain the difference between a private equity firm and a bank.
After they understand the private equity structure, then the next challenge is agreeing to the terms that are in the term sheet.
Do you see in the future any likelihood of an exit?
We haven’t done any exits yet, but the future looks positive as we are seeing many entrants into the market. Therefore an exit via a strategic buyer should be attainable.
With more private equity funds coming in, how will things play out?
Competition is definitely increasing. We see it already. In fact, in one deal we are currently looking at, the sponsor is telling us they are also being courted by another fund. But our strength has always been that we have been in Ethiopia the longest, so we know what works and what doesn’t. And that long presence, even a small thing like knowing where our office is and the fact that they can visit us anytime, gives the local sponsors comfort – and at the same time gives us some leverage compared with other funds using the “fly-in and fly-out” model.
March 24th, 2015 by Tom Minney
“How do we become relevant to society again?” This is the challenge posed to world’s securities exchanges this morning by Ashish Chauhan, CEO of BSE India securities exchange. He told the World Exchanges Congress in London this morning (Tue) that stock exchanges that concentrate only on trading for the sake of trading are in a zero-sum game.
They should look to add value in areas where there will be gains. He sees the gains will be huge for proactive securities exchanges: “In next 20 years we will create more wealth than in last 10,000 years – will the exchange industry participate in that”.
Chauhan points out that India has 1 in 6 of world’s population but only 2% of its land mass, there are more people than Europe and USA combined and 50% of population are under 25 years old. The challenge is to create jobs and to provide the skills for employment. Exchanges should ask if that will be done by private equity and other channels, or will the exchanges be able to play a major part?
BSE India’s response is to set up BSE SME Platform. Its website “offers an entrepreneur and investor friendly environment, which enables the listing of SMEs from the unorganized sector scattered throughout India, into a regulated and organized sector.”
Chauhan says that going forward technology will change the world and India with its young population skilled in technology will be driving that change. How does each exchange solve the problems of the society it is operating in?
Europe’s integrated capital solutions to big issues
Earlier Cees Vermaas, in his first engagement as CEO of CME Europe, spoke of his vision of Europe in 2030. A centralized market and Europe-wide clearing and settlement will allow relentless pursuit of efficiency and falling costs. London will remain the financial centre, but smart networks will allow other specialist centres to grow all over Europe. This will include more exchange centres to provide funding for SMEs and for infrastructure. Exchange-linked investment into all forms of energy and will support transitions into new and efficient forms of green energy. European bond markets are only 30% of USA volumes at present but in coming years that will change fast with less fragmented bankruptcy regulatory frameworks
March 13th, 2015 by Tom Minney
Do you agree or disagree with this view? Comments are welcome below
Pension funds in 10 African countries already have $379 billion in assets under management – 85% or $322bn of it based in South Africa – and they continue to grow very fast. That means careful thinking about how to nurture Africa’s savings pool while the need to deploy these resources most productively puts the spotlight on the search for quality investment assets.
For example, Ghana’s pension fund industry reached $2.6bn by Dec 2013 after growing 400% from 2008 to 2014. Nigeria’s industry has tripled in the last 5 years to some $25bn in assets by De 2013, and assets under management are growing at 30% a year. There are 6 million contributors, but many more Nigerians still to sign up pensions.
Pensions have a special place in the capital market as they take a longer-term view and can be patient in the hope of greater returns. Some pension funds, in Africa and elsewhere, argue that pensioners are not just looking at the value of their retirement income but also the quality of their lives, opening the way to carefully chosen investments in infrastructure, healthcare and other benefits which pensioners and their families might enjoy.
What are the African factors driving the growth of pension funds?
• Many countries have set up new regulators and even more are introducing regulations, including forcing more employers to provide pensions. With the new regulatory frameworks come structural changes such as the need for professional third party asset managers
• Changing demographics: The age group over 60 years is the most rapidly increasing, according to some research
• It’s a virtuous circle, many Africans want savings opportunities. If pension funds produce results, and are well run and good at communicating, people will respond.
The growth is only beginning. So far only 5%-10% of the population in sub-Saharan Africa are thought to be covered by pension funds and 80% in North Africa. Pension funds are still tiny in comparison to gross domestic product (GDP), which in turn is growing fast in many African countries – for example pension funds are about 5% of GDP in Nigeria, compared to 170% of GDP in Netherlands, 131% in UK and 113% in America.
Southern Africa is generally better served: Namibia has some $10bn in pension assets representing 80% of GDP and Botswana $6bn or 42% of GDP. The biggest pension schemes are usually government and social-security funds as well as local government and parastatal funds (such as Eskom in South Africa), as well as those of big corporations and multinationals.
Economist Charles Robertson of Renaissance Capital says conservatively that pension funds in the 6 largest sub-Saharan African markets will grow to $622bn in assets by 2020 and to $7.3 trillion by 2050.
What to invest in?
The challenge is how to invest the capital productively. Are Africa’s entrepreneurs, corporate finance and investment banking houses and capital markets rising to the challenge of bringing a a strong pipeline of investment-ready projects to keep up demand for capital?
Capital markets need to offer liquidity and transparency both to channel the foreign capital looking for African growth opportunities for their portfolios and now for domestic funds too. Liquidity can be a key problem, even in Africa’s world-beating Johannesburg Stock Exchange, where the Government Employees Pension Fund (GEPF) is thought to account for 13% of market capitalization and to be the country’s biggest investor in commercial property.
Big funds in small other Southern African capital market swamps can be like hungry hippos, snapping up promising new investments as they surface. Even if they feel satisfied from a good run of success on some of these investments, they can hardly disgorge them back into the liquidity pool for other traders because of the gnawing fear they would not find other local investments to fill their bulging portfolios.
Others share the worry. Eyamba Nzekwu of Nigeria’s Pencom was reported as saying: “Savings are growing much faster than products are being brought to the market to absorb these funds”. Pension fund growth is thought to have contributed to a 79% surge in Ghana stock market in 2013 as funds chased too few investments.
Regulators should encourage the fund-managers to upgrade skills fast to be more proactive in picking and trading stocks and African fixed income. They should also widen the space in the interests of helping the markets and the funds to grow through liquidity. This means, for instance instance, urgently relooking restrictions on cross-border investments, including into other African markets.
Private equity and infrastructure
The pension funds provide a huge opportunity for alternative assets, especially private equity. According to research by the African Development Bank’s Making Finance Work for Africa and the Commonwealth Secretariat, African pension funds are estimated to have invested some $3.8bn-$5.7bn in private equity and to have scope to invest another $29bn (see table below). Many countries are passing new regulations to allow investment into private equity and other unlisted investments. Funds have been experimenting – sometimes disastrously – with small and medium enterprise and other developmental investments.
International private equity fund managers such as Helios and LeapFrog have also seen the future, making investment in pension fund providers – Helios took equity in Nigeria’s ARM Pension Fund Managers and LeapFrog into Ghana’s Petra Trust.
Africa has huge need for infrastructure finance and pension funds could be the ideal pool of patient capital but more work needs to be done to increase the supply of investable projects and to increase capacity of pension funds to invest in projects directly or through infrastructure fund managers.
Savings are good for growth, provided there are productive assets for them to go into. Africa’s savings are rising, often driven by regulation, and international interest has been strong for years. Can Africa’s entrepreneurs, their advisors, private equity funds and the capital markets institutions rise to the challenge of building a big enough pipeline of great investment opportunities suited to the needs of these investors?
For more reading:
This article is heavily based on work by: Ashiagbor, David, Nadiya Satyamurthy, Mike Casey and Joevas Asare (2014). “Pension Funds and Private Equity: Unlocking Africa’s Potential”. Making Finance Work for Africa, Emerging Markets Private Equity Association. London. Commonwealth Secretariat. Available through MFW4A.
Another book is by Robertson, Charles (2012). “The Fastest Billion: The Story Behind Africa’s Economic Revolution”. Renaissance Capital. Read more here or buy it on Amazon (link brings revenue to this site).
Other articles are at The Economist on Nigeria’s pensions, African Business and Wall Street Journal.
March 12th, 2015 by Tom Minney
Paul Bwiso, the former general general manager of stockbroker Dyer and Blair Investment Bank of Uganda, has big plans as new CEO of the Uganda Securities Exchange. His challenges include a challenger exchange, plans to win more listings, more automation, hopes to demutualize the exchange.
Low liquidity in the Ugandan capital market has not deterred a rival exchange, ALTX Uganda, which is currently testing and plans start trading from 1 May. ALTX was founded by Joseph Kitamirike, a previous CEO of the USE. Last month ALTX announced backing from GMEX Group which is offering an “exchange in a box” hosted trading solution and has backing from Deutsche Börse AG and Forum Trading Solutions Limited through its investment vehicle.
Paul Bwiso, the new USE chief executive officer. Photo by Mark Keith Muhumuza
According to a recent interview in Uganda’s Daily Monitor newspaper, Bwiso, who has been on the exchange’s governing council, says: “My plan is to correct the way we have been doing things… We know the problem with the way things have been done. We shall review some of regulations in order to open up the market.”
He is confident on ALTX: “They were only putting us on the edge but I believe we are in a stronger position.”
He admits the market has struggled to attract listings while Ugandan companies are also seeking to raise money: “We’ll have to sell the potential of the main market segment, growth enterprise market segment and corporate bonds. In about 18 months, if we can fix the system here, then I see about 7 listings,” he said.
Market capitalization on the USE was UGX 28.6 trillion ($9.8 billion) including dual-listed stocks, according to today’s (12 March) market report. A recent news report put the value of 8 local stocks at $1.27bn, dominated by Stanbic Bank Uganda with $600m of market capitalization (measured by number of shares multiplied by closing share price). Power distributor Umeme attracted a lot of interest when it came to the market in November 2012 and since then the share price is up from UGX340 to UGX500 today.
So far only 40,000 Ugandans have registered as shareholders, according to the 2014/15 national budget speech, out of a population of 37.6 million. Liquidity both to invest and to exit have been some of the major worries.
It took the USE governing council more than a year to find the right successor to Kitamirike, according to the report.
March 5th, 2015 by Tom Minney
CEO Oscar Onyema shows top managers of NASDAQ OMX the NSE trading floor. (Credit: businessdayonline)
Nigeria’s Securities and Exchange Commission has published rules on demutualization of securities exchanges on 20 February and this week is the end of the 2-week deadline for comments from stakeholders in the capital markets.
The Nigerian Stock Exchange (NSE) has decided to demutualize, by agreement of the Council and members. However, it had not been able to go ahead because there were no SEC rules on demutualization. According to this press report in This Day newspaper, the announcement comes 3 years after an SEC committee had submitted its report.
Demutualization is a process in which a member-owned exchange, sometimes a company limited by guarantee, is turned into a normal company with shareholders and investors. Usually it is a for-profit company and it can even list on its own exchange, with good examples set by the Johannesburg and Nairobi securities exchanges.
The proposed draft rules and regulations suggest “no single entity/person or related entities/persons should be permitted to own, directly or indirectly, more than 5% of the equity and/or voting rights in the demutualized securities exchange. The aggregate equity interests of members of any specific stakeholder group (for example, brokers and broker/dealers) in the demutualized securities exchange should not exceed 40%.”
Trading participants who are shareholders need to reduce their cumulative holding in the exchange to not more than 10% within 5 years of demutualization.
“Strategic investors” can get equity if they provide evidence of technical expertise through managing other exchanges. “The aggregate number of shares to be offered to the Strategic Investors shall not be more than 30% of issued and fully paid up capital of the securities exchange. However, if the exchange is in dire need of funds, it could issue a higher number of shares subject to approval of the Commission.”
The Board of Directors of the demutualized exchange should be up to 13 members with at least a third are independent, non-executive directors and all board and executive management appointments must be approved by the SEC. The exchange must comply in all other respects with the SEC Code of Corporate Governance for public companies.
March 5th, 2015 by Tom Minney
The Nairobi Securities Exchange is calling for applicants for a “certified capital markets specialist” course, to be held on 16-20 March at the Ole Sereni Hotel, Nairobi. Registration has been extended to 10 March. Places cost $1,995 + VAT.
The course for 30 participants is organized by Intellisys Business Solutions Ltd in partnership with the International Association of Finance Management, headquartered in Luxembourg. According to its website it is a global organization that provides financial training courses to professionals, institutions and corporations around various locations and programmes in banking, insurance, capital markets, wealth management, risk management and project finance.
The course is facilitated by Michael Preiss, a member of the Interfima management committee. According to his bio he is a senior investment advisor based in London, advising ultra high net worth and key clients in Russia, Middle East and Africa. He has also worked at HSBC Private Bank in Dubai and the Middle East and Standard Chartered Bank in Hong Kong and Singapore.
There is not an obvious connection with the regional-focused training courses organized by the Securities Industry Training Institute (SITI) and funded by International Finance Corporation as part of its Efficient Securities Markets Institutional Development (ESMID) programme (www.ifc.org) with the Swedish International Development Authority and the World Bank. According to this story, this was launched in 2009 and is based in Kampala, aiming to offer certified courses that would be recognized across the region to thousands over a 10 year period.
February 27th, 2015 by Tom Minney
Leading website and magazine Private Equity Africa lists the top 10 Africa private equity deals from 2014. They use data from Preqin.
1. Helios Investment Partners – Helios Towers Africa – $630m
This is the second year that Helios Investment Partners took the top slot when it led a consortium to inject $630m of growth capital into telecommunications service provider Helios Towers Africa (HTA) in July. It was US-based private equity investor Providence Equity Partners’ first deal in Africa. The IFC’s African, Latin American and Caribbean Fund also invested for the first time in HTA. Existing investors Quantum Strategic Partners, Albright Capital Management and RIT Capital Partners also backed the tranche. (Helios’ big deal in 2013 was to partner with BTG Pactual and Indorama to bring $1.5bn investment into Nigeria-based oil and gas exploration company, Petrobras Africa.)
2. Emerging Capital Partners leads consortium – IHS – $490m
Emerging Capital Partners (ECP) led the consortium that invested $490m in Nigeria-based telecommunications towers company IHS. The latest 2014 funding round brought in Goldman Sachs was a new investor and the IFC Global Infrastructure Fund and African Infrastructure Investment Managers (AIIM) were also in. IHS is part-owned by Investec Asset Management, the first private equity investor to fund its expansion. Other existing investors are ECP, Wendel, sovereign wealth fund Korea Investment Corporation (KIC) and the Netherlands Development Finance Company (FMO). KIC first backed IHS when it joined Investec and ECP in a $1bn financing round in 2013. Standard Chartered Bank contributed $70m in senior debt specifically set apart to finance expansion into Zambia as part of the capital package
3. Abraaj – Liberty Star – confidential
South Africa’s Liberty Star Consumer Holdings (Libstar) manufacture and distributes food. It sells private-label products to retailers, own-brand products and third-party packaging and ingredients to the food industry. Abraaj acquired a majority stake in the company through a secondary buyout from Metier, Old Mutual Private Equity, Development Partners International and Lereko – which have all exited the company. Libstar management took a minority stake in the buyout. The deal value is confidential.
4. Atlas Merchant Capital – Union Bank of Nigeria – $270m
The investment was channelled through Atlas Mara Co-Nvest, its $325m investment vehicle listed on the London Stock Exchange. Atlas Merchant previously held 9.05% in Union Bank, inherited when it took over ADC African Development Corporation in early 2014. It committed the capital by exercising an option to acquire 20.89% of the financial services company.
5. IFC-Asset Management Compan & Temasek – Seven Energy – $255m
More sovereign wealth fund action in April, when Singapore’s Temasek partners with IFC Asset Management Company (IFC-AMC) to invest $255m in Nigeria’s Seven Energy, an oil and gas exploration and production company. Temasek contributed $150m for a 25% stake. Previous investors in Seven Energy include Actis, Investec Asset Management, Africa Finance Corporation, Capital International Private Equity and Standard Chartered Private Equity. Seven Energy’s $600m capital-raising round included $335m in debt of which the IFC African, Latin American, and Caribbean Fund contributed $30m.
6. Kohlberg Kravis Roberts – Afriflora – $200m
KKR’s first deal for Africa, in July, was approximately $200m in Afriflora, an Ethiopia-focused agriculture production company that cultivates, produces and sells roses based on Fairtrade standards. The company operates as Sher Ethiopia. The investment is part of KKR’s $6.2bn European Fund III.
7. Carlyle – Tiger Automotive – confidential
It was fast-moving Carlyle’s third deal of the year from its maiden $698m Africa-focused fund, closed earlier in 2014. It bought South Africa’s vehicle accessories distributor Tiger Automotive (TiAuto) in November. It partnered with Old Mutual Private Equity (OMPE) to buy the company from Ethos Private Equity. TiAuto operates through 7 divisions, including Tiger Wheel & Tyre, Tyres & More, YSA and Treads Unlimited and primarily distributes branded tyres such as Continental, Yokohama, Michelin, Pirelli, Goodyear, Achilles, GT Radial and Hankook.
8. Stanchart – Sphinx Glass – $180m
Standard Chartered Private Equity backed a deal and partnered with Saudi Arabia’s Construction Products Holding to buy Egypt-based industrial production company Sphinx Glass from Qalaa Holdings (formerly Citadel Capital) in May for $180m. Sphinx Glass operates under license from US-based PPG Industries, a specialist float glass technology provider. Qalaa sold it as part of a strategy to shed non-core assets.
9. Rocket & Kinnevik – Jumia – $148m
Hotshot tech investors Rocket Internet and Kinnevik put another $148m into their consumer shopping platform Jumia in December. US-based private equity investor Summit Partners owns part of Jumia and JP Morgan Asset Management has also previously invested. Jumia owns consumer shopping websites offering branded consumer products as Internet shopping starts to take Africa by storm. Rocket Internet has previously backed Groupon, eBay, Facebook, LinkedIn and Zynga. Watch this space.
10. Carlyle Diamond Bank – $147m
Carlyle’s fourth deal was into Nigeria-based financial services company Diamond Bank, which is a Tier II bank, covering corporate, retail and public sector banking with subsidiaries offering custodian, mortgage, securities and insurance products and services. Kunoch Holdings, the Africa-focused investment platform of entrepreneur and investor Pascal Dozie, raised its holding in the bank from 5.86% to 20.65% in August, buying the additional stake from Actis and CDC Group.
*Rankings based on Preqin data and Private Equity Africa research.
February 9th, 2015 by Tom Minney
• US$11bn IPO and FO proceeds raised in 2014 in African equity markets
• US$37.4bn proceeds raised from 2010 to 2014
• 24 African IPO companies listed in 2014
African markets excelled in terms of capital raising for business in 2014 with a total of $11 billion raised through a total of 24 initial public offers (IPOs) and also through further offers (FOs). According to the inaugural publication IPO Watch Africa 2014, released by PwC on 1 Feb, a significant portion of the 2014 capital raising came from outside South Africa, compared to previous years.
The PwC study covers the 5 years 2010-2014 and shows that the total money raised in 2014 was equivalent to the combined total for 2012 and 2013. The sum from IPOs alone was $1.7bn in 2014, up from $0.8bn in 2013. Listings on the Johannesburg Stock Exchange accounted for 32% of total IPO capital in 2013 and 44% in 2014.
Source: IPO Watch Africa 2014 by PwC
Nicholas Ganz, PwC Africa Capital Markets Leader, said in a press release: “The performance of African markets was strong in 2014, with an increase in equity capital market activity of 40% in terms of volume of offers and 100% in terms of capital raised when compared with prior year activity.”
However South Africa accounted for 87% of the capital raised through FOs offers with a 50% increase in the number of transactions and doubled in terms of capital raised to $9.3bn, from $4.6bn in 2013.
Coenraad Richardson, PwC South Africa Capital Markets Partner, said of South Africa’s share of the market for further offers: “This is a reflection of the depth and stability of the South African listed company and investor base, underpinned by a securities exchange regulatory framework ranked number one in the world by the World Economic Forum’s 2014-2015 Global Competitiveness Report.”
The excellent report can be downloaded here and includes lists of the top 10 IPOs in 2014 and 2015, performance by exchange, share performance from the IPO to 31 Dec (the Egyptian Exchange’s Arabian Cement Co raised $109m and then soared 88%) and much other useful information.
Source IPO Watch Africa 2014 by PwC
The financial services sector (including real estate) was 57% of the combined IPO and FO volume, followed by industrial products & services, and consumer products. Growth in these sectors reflects Africa’s shifting economic and social demographics, including increasing urbanization and an emergent middle class. The resources sectors were a smaller proportion of 2014 activity.
The trend also shows “increasing global integration of businesses in Africa and the interest of international investors in opportunities in Africa” according to the report. Several top 10 IPOs in 2013 and 2014 had an international component, either foreign companies raising capital directly on African exchanges, or African companies marketing shares to international investors through dual listings or sales to qualified institutional buyers abroad.
During 2010-2014, African companies raised a total of $31.1bn through FOs on African exchanges plus another $1.2bn of FO capital raised by African companies on international exchanges. This included companies expanding their investor base via a secondary listing, as with the 2011 listing of Elemental Minerals on the Toronto Stock Exchange and the 2013 listing of MiX Telematics on the New York Stock Exchange under the Jumpstart Our Business Startups (JOBS) Act, as well as those raising further funds from existing international listings. Resources transactions are more prominent in “outbound” FOs compared to the African IPOs and FOs over the period 2010-2014.
Good prospects for 2015
The report notes: Further liberalization of exchange regulations in some key territories, such as Tanzania, as well as harmonisation of regional exchanges bodes well for continued growth of ECM activity in 2015. Other positive factors include expectations for continued exits by private equity investors, reforms to certain capital markets legislation, and growing investor confidence in and familiarity with African markets.
Darrell McGraw, PwC Nigeria Capital Markets Partner, warns that commodities prices and currency depreciation could lead to some “headwinds that may affect the momentum of the capital markets in Nigeria and other territories heavily involved in resources.” However, Nigeria already had an IPO in Jan 2015 and “has a strong pipeline of listings likely to be brought to market later this year.”
Source IPO Watch Africa 2014 by PwC
February 7th, 2015 by Tom Minney
Tanzania’s Dar es Salaam Stock Exchange topped the performance list for the 12 months to 31 January for USD investors, according to the data collected by Ryan Hoover’s excellent Investing in Africa website. It managed a 27% climb, including 3.8% in January. That beat the S&P 500 index which managed a strong 11.9%, despite increasing worries of pending bear markets and falling back to 30 Jan, although it has since gained.
Other African bourses which beat the S&P included Uganda Securities Exchange (up 18.3%), South Africa’s JSE (up 17.1%), Nairobi Securities Exchange (16.1%) and Namibian Stock Exchange (up 15%).
Hardly surprisingly, two of the worst performers were hit by the crashing oil price, including heavy falls in the currency compared to the soaraway USD. Nigeria was down 36.9% including 16.6% in January and Ghana down 32.1% including 8.3% in January. Weakness in the euro no doubt contributed to the poor performance of the BRVM, as the CFA currency is linked to the euro.
Graphic by www.africanbusinesscentral.com
This picture, created by website AfricanBusinessCentral
gives “volume”, which is normally defined as the number of shares traded, although I could not find the source data for this infographic so we welcome any clarifications. Better indications of exchange liquidity are often the value of shares traded and the number of transactions.