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.”

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