IN LINE with global trends, 2015 was a challenging year for African capital markets in the wake of market volatility and the emergence of renewed global economic uncertainty in the latter part of the year. However, the first half saw the highest levels of both equity capital markets transactions and proceeds raised in the past five years, says global accounting firm, PwC, in its 2015 Africa Capital Markets Watch.
Released late January, the report analyses equity and debt capital markets transactions that took place between 2011 and 2015 on exchanges throughout Africa, as well as transactions by African companies on international exchanges. Equity capital markets (ECM) transactions included in the analysis comprise capital raising activities, whether initial public offerings (IPOs) or further offers (FOs), by African companies on exchanges worldwide, as well as those made by non-African companies on African exchanges. Debt capital markets (DCM) transactions analysed include debt funding raised by African companies and public institutions.
Nicholas Ganz, PwC Africa capital markets leader, says, ‘At 31 December 2015, African exchanges had a market capitalisation of about $1 trillion, with 23 percent of this value residing on exchanges outside of South Africa. Though statistics cannot be interpreted in isolation, certain metrics commonly used to analyse global market performance, such as the market capitalisation-to-GDP ratio, suggest that untapped value remains in Africa’s capital markets.’
Overall, $12.7bn was raised in 2015 in ECM activity across the continent. Over the past five years, there have been 441 African ECM transactions raising $41.3bn.
2015 showed a steady overall increase in IPOs of 12 percent in terms of transaction volume and 17 percent in terms of US dollar denominated value, as compared to 2014. However, 72 percent of 2015 IPO value and 54 percent of IPO volume was carried out during the first half of the year, reflective of the relatively higher levels of consumer confidence as compared to the second half of 2015.
Since 2011, capital raised from IPOs by companies on the JSE represented 45 percent of the total African IPO capital and 33 percent of the total transaction volume. Coenraad Richardson, PwC South Africa capital markets partner, says, ‘The JSE remains a significant anchor of African capital markets activity, with a ranking of second in the world for exchange regulation and a leading global ranking for ease of raising debt and equity capital, according to the World Economic Forum’s Global Competitiveness Report 2015-2016.’
On a sector basis, the financial services sector continued to dominate the African IPO market during 2015 at 46 percent of total value and 50 percent of total volume, followed by industrial, health care and consumer goods sectors in terms of value.
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