African equity capital market (ECM) activity declined sharply in 2019 both in volume, by 29%, and value, by 44%, compared with 2018.

Professional services firm PwC on Thursday reported in its ‘African Capital Markets Watch’ publication that 2019 had seen the lowest ECM proceeds in the last ten years.

The report analyses equity and debt capital market transactions on an annual basis and 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 on international exchanges or non-African companies on African exchanges.

PwC says the slowdown in equity markets in 2019 was largely driven by a series of macroeconomic factors including an ECM deceleration in global markets, caution in the period leading up to key local elections in Nigeria and South Africa, as well as political gridlock and economic stagnation in South Africa.

In South Africa, ECM activity dropped by 69% in 2019 in terms of value and 46% in terms of volume, compared with 2018.

Africa’s largest bourse saw no capital raised through IPOs in 2019.

PwC Africa capital markets leader Andrew Del Boccio says the state of uncertainty seems to have become the “new normal” and he expects some degree of volatility and caution to continue affecting Africa’s capital market activity this year.

Between 2010 and 2019, there were 927 African ECM transactions, raising a total of $88-billion. The highest volume of transactions was recorded in 2015 and 2017, with 125 deals each, while 2012 recorded the lowest volume of transactions with 65 deals.

AFRICAN IPO MARKET

There had been 215 IPOs by African companies on both African and international stock exchanges in the past ten years, raising almost $17-billion in total.

Although no capital was raised through IPOs on South Africa’s JSE in 2019, South Africa still dominated in the last decade – with seven of the top ten IPOs between 2010 and 2019.

Aside from the decreased levels of activity in 2019, PwC says there were some other notable events in specific markets.

IPO activity resumed in Nigeria after four years, with Airtel Africa’s dual listing on the Nigerian Stock Exchange (NSE) and the LSE, raising $687-million.

Mozambique also recorded its first IPO in six years with the listing of Hidroeléctrica de Cahora Bassa on the Bolsa de Valores de Moçambique.

Between 2010 and 2019, total IPO proceeds of $15.9-billion were raised on exchanges in Africa in 202 IPOs. Sub-Saharan African exchanges accounted for 133 IPOs, or 66%, and $12.3-billion, or 77%, of the value raised. The remainder was raised on the North African exchanges.

Of the amount raised on the sub-Saharan African exchanges, the JSE accounted for 71%, or $8.7-billion, while the NSE accounted for 13%, or $1.5-billion.

In terms of IPO volume, the JSE and the Botswana Stock Exchange recorded 64 IPOs and 10 IPOs, respectively, while the Ghana Stock Exchange, Bourse Régionale des Valeures Mobilières and the Dar es Salaam Stock Exchange each had nine IPOs.

The Egyptian Exchange accounted for the largest proportion of the IPO proceeds raised on North African exchanges, at 60%, or $2.2-billion raised from 23 IPOs in the last decade.

FURTHER OFFERS

In 2019, FO activity declined significantly in terms of transaction volume and value, by 25% and 44%, respectively, over the prior year.

PwC says low levels of activity in South Africa fuelled the decline, with the volume of FOs on the JSE having decreased by 42% from 38 deals in 2018 to 22 deals in 2019, and the value decreasing by 58% from $3.8-billion in 2018 to $1.6-billion in 2019.

Over the past ten years, a total of 712 FO deals were recorded on African exchanges and by African companies on international exchanges with a total of $71.1-billion raised.

Last year saw the lowest FO proceeds raised on African exchanges in the past ten years, with $3.5-billion raised from 59 FOs.

Over the past decade, a significant proportion of FO activity took place in South Africa, with the JSE accounting for 58% and 79% of total FO volume and value, respectively.

Egypt accounted for the next-largest FO volume and value at 10% and 6%, respectively, followed by Nigeria with 4% of both FO volume and value.

PwC expects governments across the African continent to continue implementing strategies aimed at building robust capital markets. Some recent examples include Ethiopia’s plan to launch a local stock market this year and Angola’s roadmap to privatise its State-owned companies by 2022.

“Despite the lacklustre activity in 2019, we saw significant progress in various capital market initiatives during the year, including the drive for sustainable finance through the issuance of social, green and infrastructure bonds in South Africa, Kenya and Nigeria.

“Together with a move towards more local currency and blended financing, we expect this trend to continue, and to unlock new sources of capital for African issuers,” says PwC Africa capital markets director Alice Tomdio.