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Capital raised by African issuers decline by 28% year on year

Anna Lyudvig
June 20, 2019, 10:08 p.m.
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Capital raised by African issuers declined by 28% year on year to $341m in the first half of 2019 (H1 2019), compared with $472m in H1 2018, according to Baker McKenzie.

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Capital raised by African issuers declined by 28% year on year to $341m in the first half of 2019 (H1 2019), compared with $472m in H1 2018, according to Baker McKenzie.

The decline is attributed to the 80% drop in domestic capital raising in Africa - standing at only $85m from four Initial Public Offerings (IPOs), compared with $419m from the same number of IPOs in H1 2018.

This is according to Baker McKenzie’s latest Cross-Border IPO Index for H1 2019, using data sourced from Refinitiv.

Wildu du Plessis, Head of Capital Markets at Baker McKenzie in Johannesburg, said: “The drop in African IPO values in H12019 was mostly because of political and economic uncertainty on the continent. Investors wanting to raise capital in Africa are thinking twice and waiting for political and economic stability to return before going ahead.”

“Also eroding investor confidence in Africa are the escalating global trade tensions, which have culminated in, for example,  the so-called United States (US) China trade wars and the possibility of a  “no deal Brexit” – both have the potential to impact African economies significantly.”

According to the Index, the largest IPO to come out of the region so far in 2019 is Carbon Holdings, which is expected to raise as much as $250m in London and Egypt sometime in June.

Egypt is generating buzz around its pipeline of IPOs with some speculating this could be the busiest year for listings in Cairo since the uprising in 2011.

Growing confidence in economic policies introduced since the currency float has boosted the EGX and is prompting companies to consider share sales.

One large pipeline IPO is expected from Banque du Caire SAE in Q3 2019.

According to Du Plessis, in South Africa, capital raising has decreased substantially in recent years, also due to economic and political uncertainty.

“Political stability will hopefully begin to return now that country’s elections are over, but there is still a lot of work to do to stabilise the economy. The World Bank recently downgraded South Africa’s growth rates and I think there is at least another year of hard work before the economy starts to recuperate and capital markets in South Africa recover,” Du Plessis said.

“However, there is good news in other jurisdictions in Africa. In addition to the healthy pipeline of IPOs in Egypt, there are also signs of life returning to Nigeria’s capital markets. Political instability was also to blame for a big collapse in capital raising in Nigeria in recent years, but the country looks to be recovering and, according to Baker McKenzie’s recent Global Transactions Forecast, there is a predicted return of IPOs in Nigeria in the next three years.”

 “A case in point, Airtel Africa announced recently that it is seeking to raise as much as $750m in London and Nigeria, but the company has yet to release more information about when it plans to go public this year.

“Hopefully this is the start of a long upswing in capital raising activity in the country,” said Du Plessis.

The top cross-border IPOs by African issuers were South African company Renergen Limited’s listing in Australia, which raised $7m; and Egyptian company Carbon Holding’s pipeline dual listing in London and Egypt, which is expected to raise $250m. Both of these cross-border IPOs are in the energy and power sector.

In terms of domestic IPOs, technology company BMIT Technologies PLC raised $55m when it listed in Malta, real estate company ICON Properties PLC’s listing in Malawi raised $20m, industrial company Skyway Aviation Handling Co raised $6m when it listed in Nigeria and healthcare company Speed Medical SAE raised $3m in a domestic IPO in Egypt.

A major deal that is excluded from African figures is Jumia Technologies' debut on the NYSE, which raised $225m in April.

Jumia is a pan-African e-commerce start-up but its parent company, Jumia Group, is incorporated in Germany, so it is not included in the Africa report.

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