Africa will need to fasttrack market integration in order to enhance the potential for initial public offerings, even as the value of flotations on the continent is projected to exceed last year’s. Some 15 IPOs are expected across the continent in 2016.
Chicago-based legal advisory services provider Baker & McKenzie said integration would increase liquidity, adding that Rwanda is expected to float three IPOs this year and London should remain the key global financial centre for Africa.
“If the 15 in the pipeline proceed, they are likely to raise $1.5 billion more than last year’s 21 African IPOs — almost twice as much as the total raised in 2015, and more than what was raised in 2011-2013 combined,” said the firm.
Egypt, Nigeria and South Africa are seen likely to be the most active stockmarkets, with technology, consumer essentials and industrials set to be the busiest sectors due to the expected surge in private placements and rights issues.
Nigeria’s Interswitch, which processes payments for banks and operates in five countries on the continent, could be Africa’s first billion- dollar IPO, if it proceeds with plans to dual-list in London and Lagos.
Africa’s equity capital markets are set for a strong 2016 following a reasonable 2015, despite commodity price falls and capital flight from emerging markets hitting the continent’s major economies.
Baker & McKenzie said these are challenging times for African economies dependent on commodities for much of their income, while “hot money” flows out of emerging market funds investing in Africa.
“So it is positive to see steady progress in Africa’s equity capital markets, and potentially larger deals than we have seen for some time,” said the firm’s global head of capital markets, Koen Vanhaerents.
Energy, power, real estate, financial services and health care have been active over the past five years, but consumer staples and technology are joining the league of the most active sectors, as Africa’s capital markets broaden in tandem with a growing middle class demanding more sophisticated services.
Egypt looks set to be a bright spot as delayed deals come back on stream in the retail, financial services and food sectors. Nigeria’s pipeline looks reasonable later in the year in the tech, telco and transport sectors.
South Africa will see more than two deals in the pipeline come to fruition after nine IPOs last year. Mauritius continues to act as an offshore financial centre for Africa for rights issues and private placements.
Baker & McKenzie’s head of capital markets practice Edward Bibko, said there is enormous pent-up demand in Egypt, which is showing strong growth and the emergence of a larger middle class.
“Large companies have to dual-list in a global financial centre like London, as well as their home market, to avoid volatility,” he said.
Equity volumes may be higher given the Dar es Salaam Stock Exchange’s plan to self-list this year, and Botswana Telecommunications Corporations Ltd IPO, which closed on March 4.
Others are real estate fund Tadvest’s dual-listing in Mauritius and Namibia, Mauritian retailer Compagnie des Magasins Populaires’ recent announcement of a $4 million rights issue, and Mauritian-listed Atlantic Leaf Properties’ $70 million equity raising through a private placement.