Africa has raised us$53 billion from its growing capital markets since 2013, with 2017 recording significant recovery backed by the positive impact of commodity stabilisation in key regional economies, PwC has reported.

In its African Capital Markets Watch issued this week, PwC – a multinational professional service network - observed that the continent’s capital markets have been on a steady recovery with an overall increase in volume and value of equity capital market (ECM) transactions.

The report analyses equity and debt capital market transactions that took place between 2013 and 2017 on exchanges throughout Africa, as well as transactions by African companies on international exchanges. It lists all new primary market equity initial public offerings (IPOs) and further offers (FOs) by listed companies, in which capital was raised on Africa’s principal stock markets and market segments. The report also includes IPO and FO activity of African companies on international exchanges or non-African companies on African exchanges, on an annual basis.

The report notes that overall, African equity capital market transaction volume and value improved in 2017 over 2016 and that in terms of value, 2017 saw the largest initial public offerings (IPOs) over the trailing five-year period, and an increase in the total value of equity capital market (ECM) transactions of 49 percent between 2016 and 2017 in US dollar terms.

“Since 2013, there have been 519 African ECM transactions raising a total of US$52,7 billion, up 17 percent in terms of capital raised over the previous five-year period. Overall, ECM activity in 2017 was the second highest since 2013 in terms of volume with 121 issuances, up 25 percent over the prior year, and the highest since 2013 in terms of value, driven mainly by a few significant IPOs and FOs during the year,” said PwC.

Andrew Del Boccio, PwC Capital Markets Partner attributed the significant growth in 2017 to the positive impact of commodity stabilisation on economies such as Cote d’Ivoire and Nigeria, which emerged from five successive quarters of GDP declines, and resilience in the face of economic and political uncertainty in South Africa.

“We are optimistic about the pipeline of companies seeking to access the capital markets in 2018, including cross-border IPOs of African companies, given encouraging indicators in large markets such as South Africa, Egypt, and Nigeria, and the continued economic growth in East Africa and the Francophone West African countries,” he commented.

According to PwC African ECM activity in 2017 was largely driven by the financial services sector for FOs, and the consumer services sector for IPOs, though both of these statistics were impacted by a few very sizable transactions during the year.

It said businesses in sectors such as telecommunications, consumer goods and services, financials, and health care continued to form a significant component of African ECM activity.

“Although levels of market capitalisation for many of Africa’s exchanges remain low in a global context, a number of initiatives have taken place to deepen liquidity and provide investment opportunities for foreign and domestic investors alike.

“Regulators in some African countries have made efforts in recent years to encourage companies in specific sectors to list shares on their domestic stock exchanges. Additionally, enhanced regulatory capital requirements have driven financial services companies to access both the debt and equity capital markets over the past year,” said PwC.

Last year also saw a greater focus by exchanges on small and medium-sized enterprises with the introduction of junior or alternative boards. In South Africa, for instance, the entry of four new exchanges altered the South African listing environment. Despite policy gridlocks, economic and the recent political uncertainty South Africa has experienced over the past five years, the report indicates the JSE has maintained its dominant role in the African capital markets.

For example in 2017, capital raised from IPOs by companies on the JSE in US dollar terms increased by 178 percent as compared to 2016. Since 2013, capital raised from IPOs by companies on the JSE alone of US$4.8bn represents 52 percent of the total African IPO capital raised. While a stronger year for some exchanges in sub-Saharan Africa, IPO activity on the North African stock exchanges – Egypt, Morocco, Tunisia and Algeria – decreased by 61 percent in terms of the value of IPO proceeds.

There was also no IPO activity in Ghana compared to 2016, which saw US$102 million raised on the Ghana Stock Exchange. In contrast, elsewhere on the continent, 2017 saw some significant increases in IPO value on exchanges in Namibia, Rwanda and Tanzania compared to the prior year. According to the report, the top 10 African IPOs by value took place in South Africa, Egypt, Tanzania and the Francophone West African region. On a sector basis, for the first time in five years, the consumer services sector dominated the African IPO market with 44 percent of total value, followed by the financial services sector with 26 percent.

In terms of volume, financial services accounted for the greatest volume of IPOs with 50 percent, followed by consumer goods with 14 percent. Going forward, in terms of capital markets activity, Del Boccio projects that the recovery seen in 2017 will gain momentum in 2018 against a more stable political and economic backdrop.

“This will likely include an increase in cross-border ECM activity for regional players looking to compete in global markets, the continued impact of partial privatisation efforts through the capital markets, and the effect of other regulatory drivers,” he said.