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Domestic IPO by African issuers increases for a second year

Africa Global Funds
Jan. 7, 2018, 1:52 p.m.
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Capital raised in domestic listings by African issuers increased for the second year in a row, according to research in the latest Global Cross-Border Index from Baker McKenzie.

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Capital raised in domestic listings by African issuers increased for the second year in a row, according to research in the latest Global Cross-Border Index from Baker McKenzie.

While there were fewer domestic listings in Africa in 2017, domestic capital raising increased by 19.5% year-on-year to $1.4bn.

There were seven domestic IPOs in Africa in 2017, compared to 15 in 2016, however, the value of domestic IPOs was higher in 2017 – $1,379m - compared to $1,154m in 2016.

There were two cross-border IPOS in Africa in 2017, both by Swiss Issuers.

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 in 2017.

There were also two cross-border IPOS in Africa in 2016.

In 2016, $246m was raised through cross-border IPOs, compared to $47m in 2017.

“Africa’s uneven FDI 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,” said Wildu du Plessis, Partner and Head of Africa at Baker McKenzie in Johannesburg.

“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 noted further that as more governments across the continent engaged in the privatisation of state-owned entities and listings in the coming years, regulatory frameworks would be developed that would inspire market confidence in African bourses.

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

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