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THE year 2014 saw the highest level of activity on African equity markets over the previous five years, and a significant increase in both transaction volume and capital raised last year compared to the prior year, according to a report issued by PwC.

PwC’s inaugural report entitled, IPO Watch Africa 2014, has found that $11 billion was raised last year on the African equity markets, almost equal to $11,1 billion raised in 2012 and 2013.

Last year, IPO activity also increased to 24 IPO’s from 20, and doubled in terms of capital raised to $1,7 billion from $800 million in 2013.

The report analyses equity market transactions that took place between 2010 and 2014 on stock exchanges in Africa, as well as transactions by African companies on international exchanges.

Mr Nicholas Ganz, PwC Africa Capital Markets Leader, says: “The performance of African markets was g in 2014, with an increase in equity capital market activity of 40 percent in terms of volume of offers and 100 percent in terms of capital raised when compared with prior year activity.

“We noted a few instances of management following a dual-track approach aimed at maximising value for existing shareholders, and consistent with the growth in other forms of capital raising activity across Africa.”

The report shows a significant share of capital was raised in markets outside of South Africa, with Johannesburg listings accounting for only 32 percent and 44 percent of total IPO capital raised in 2013 and 2014, respectively, a notable departure from its more prominent position in prior years.

PwC South Africa Capital Markets Partner Coenraad Richardson notes a counterpoint in respect of further offers (FOs).

“While IPO activity across the continent increased its share vis-agrave-vis the JSE, FOs remained dominated by capital raising in South Africa, which accounted for 87 percent of proceeds in 2014,” said Richardson.

“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.”

Overall, FO activity during 2014 increased by 50 percent in terms of the volume of transactions and doubled in terms of capital raised to $9,3 billion from $4,6 billion in 2013.

On a sector basis, the financial services sector (which includes real estate), industrial products and services, and consumer products dominated the market, with the financial services sector representing 57 percent of combined IPO and FO volume during 2014.

Growth in these sectors reflects shifting economic and social demographics, namely an increase in urbanisation and an emergent middle class across the African continent.

By contrast, the resources sectors collectively represented a comparatively smaller proportion of 2014 activity.

In addition, a total of $1,2 billion of FO capital was raised by African companies on international exchanges since 2010.

FOs in this context include those companies seeking to expand their investor base by way of a secondary listing, as well as those raising further funds from existing international listings.

The sector profile of these outbound FOs differs to that of African IPOs and FOs, in that the resources sector plays a more prominent role, when analysing both the number and size of the offer.

The JSE retained its position in 2014 as the most active African market in terms of both total ECM transaction volume and proceeds. The Tunis and Nigerian Stock Exchanges held the second position on the continent in terms of volume and proceeds raised, respectively.

Building on the g performance of last year, 2015 is expected to be a positive year for ECM activity in Africa.

This is driven largely by a combination of expectations for continued exits by private equity investors, reforms to certain capital markets legislation, and growing investor confidence in and familiarity with African markets.

Mr Darrell McGraw, PwC Nigeria Capital Markets Partner, does note a degree of caution.

“Due to recent movements in commodity prices and relative depreciation of local currencies against the US dollar, there are some headwinds that may affect the momentum of the capital markets in Nigeria and other territories heavily involved in resources.

“That said, Nigeria has already recorded an IPO in January 2015, and has a g pipeline of listings likely to be brought to market later this year.”

Source : The Herald

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