African Capital Markets Show Recovery in 2017—PwC
By Modupe Gbadeyanka
Overall, African equity capital market transaction volume and value improved in 2017 over 2016. 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% between 2016 and 2017 in US dollar terms.
PwC released its 2017 African Capital Markets Watch publication today, which 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.
This report 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.
Andrew Del Boccio, PwC Capital Markets Partner notes: “Capital markets in Africa saw a recovery in 2017 with 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.”
Since 2013, there have been 519 African ECM transactions raising a total of $52.7 billion, up 17% 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% 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.
“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,” Del Boccio comments.
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. Businesses in sectors such as telecommunications, consumer goods and services, financials, and healthcare 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.
2017 also saw a greater focus by exchanges on small and medium sized enterprises (SMEs) with the introduction of junior or alternative boards. In South Africa, the entry of four new exchanges altered the South African listing environment. Although there have been a number of listings on these new boards, with more activity in 2018, the listings to date have been technical in nature, with no new equity proceeds raised.
African IPO market
2017 saw the second-largest volume in IPO activity (28) over the past five years and is the largest in value, with $2.9bn raised in IPO proceeds, exceeding 2015 (the year with the next-largest value raised over the past five years) by 42%. Over the past five years, there have been 134 IPOs by African companies on both African and international exchanges, raising $9.1bn, a 37% increase in capital raised over the preceding five year period, 2012-2016.
Despite the policy gridlock and economic and political uncertainty South Africa has experienced over the past five years, the JSE has maintained its dominant role in the African capital markets. In 2017, capital raised from IPOs by companies on the JSE in US dollar terms increased by 178% as compared to 2016. Since 2013, capital raised from IPOs by companies on the JSE alone of $4.8bn represents 52% of the total African IPO capital raised.
Over the five-year period, the Bourse de Tunis with 23 issuances, and the EGX with 13 issuances followed the JSE in terms of volume of IPO transactions. In terms of value over the past five years, the next largest value of IPO proceeds raised was on the EGX at $1.3bn.
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% in terms of the value of IPO proceeds. There was also no IPO activity in Ghana compared to 2016, which saw $102.0 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.
The top 10 African IPOs by value took place in South Africa, Egypt, Tanzania and the Francophone West African region, represented by the BRVM. On a sector basis, for the first time in five years the consumer services sector dominated the African IPO market with 44% of total value, followed by the financial services sector with 26%. In terms of volume, financial services accounted for the greatest volume of IPOs with 50%, followed by consumer goods with 14%.
African FO market
In 2017 FO activity was on a par with 2015 levels in terms of transaction volume, at 93 FOs – this represented an increase of 27% on the prior year. In terms of proceeds raised, 2017 saw an increase of 42% on the prior year, though it fell short of the highs noted in 2015. Over the past five years, there have been 385 FOs by African companies, raising $43.6bn on both African and international exchanges.
Over the five-year period, the vast majority of FO activity took place in South Africa representing 65% and 86% of total FO volume and value, respectively. This is broadly consistent with the 2017 year, when South Africa accounted for 51% and 86% in total FO volume and value, respectively. Egypt accounted for the next largest amount of FO volume for the 2017 year at 14% and for the five-year period 2013-2017 at 6%, respectively. In terms of FO value, Mauritius accounted for the next-largest FO proceeds raised in 2017 at 5%, and Nigeria the next-largest proceeds for the five-year period at 4%.
During 2017, the sector composition of African FO activity was largely consistent with the five-year average in terms of value and volume, with the financial services sector contributing 56% of the total FO value, followed by the basic materials sector at 14%.
Inbound, outbound, domestic and cross-border activity, 2013-2017
In 2017, domestic activity represented 76% of total ECM activity in terms of volume, and 87% in terms of value. For African ECM data, this statistic is driven by significant activity on the larger exchanges such as the JSE and EGX. There was an overall drop of 17% and 44% in cross-border activity in 2017 compared to 2016 in terms of both volume and value respectively.
Outbound ECM volume in 2017 remained on a par with prior periods, ranging between a five-year low in 2016 of ten, and a high of 17 in 2014. However, there was a significant drop of 89% in the value of outbound ECM activity in 2017 compared to 2016.
African debt markets
In respect of DCM activity, non-local currency corporate issuances totalled $7.5bn, an increase of 68% in terms of value and 110% in terms of volume over the prior year, with several large first-time issuers tapping into a market with sustained appetite for emerging market yields. Most of this funding was targeted at refinancing existing debt, but there were also instances of these proceeds being put to use for acquisitions or strategic capital expenditure.
The year ahead
Del Boccio comments: “In terms of capital markets activity, we expect 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 that will lead African companies’ capital markets.”
Bitcoin, Ethereum, Others Plunge as US Sues Binance, Founder
By Adedapo Adesanya
The cryptocurrency market is under fresh headwinds as the United States Securities and Exchange Commission (SEC) accused Binance and its Chief Executive Officer, Mr Changpeng Zhao, of mishandling customer funds, misleading investors and regulators, as well as breaking securities rules.
Bitcoin (BTC), Ethereum (ETH), and a host of other digital coins are now trading at their lowest in almost three months.
The US SEC complaint filed in a federal court in Washington, D.C., listed 13 charges against Binance, Mr Zhao, and the operator of its purportedly independent US exchange.
The agency laid out a range of alleged violations against the world’s biggest crypto exchange and its leader and warned that “The public should beware of investing any of their hard-earned assets with or on these unlawful platforms.”
The SEC alleged that Binance artificially inflated its trading volumes, diverted customer funds, failed to restrict US customers from its platform and misled investors about its market surveillance controls.
The SEC also claimed that Binance and its billionaire founder and one of the crypto industry’s highest-profile moguls, secretly controlled customers’ assets, allowing them to commingle and divert investor funds “as they please.”
Binance created separate US entities “as part of an elaborate scheme to evade U.S. federal securities laws,” the SEC also alleged, citing a number of practices first reported by Reuters in a series of investigations into the exchange published this year and in 2022.
From almost three years ago until June 2022, the SEC also alleged that a trading firm owned and controlled by Mr Zhao, Sigma Chain, engaged in so-called wash trading that artificially inflated the trading volume of crypto asset securities on the Binance.US platform. The SEC said Sigma Chain spent $11 million from an account on a yacht.
SEC Chair Gary Gensler said, “We allege that Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law.”
In a blog post, Binance, in its defence, said: “We intend to defend our platform vigorously,” adding that “because Binance is not a US exchange, the SEC’s actions are limited in reach.”
“All user assets on Binance and Binance affiliate platforms, including Binance.US, are safe and secure,” the blog post said.
In the statement, Binance said it had “actively cooperated” with the SEC from the start and respectfully disagreed with the SEC’s allegations.
Binance said it had been trying to find a “reasonable resolution” with the SEC, but the agency “at the eleventh hour” issued new requests and went to court, adding the SEC’s actions appeared to be an effort to “claim jurisdictional ground from other regulators.”
As the events continue to unfold, the market is reacting negatively as BTC has lost over 4.1 per cent in the last 24 hours to trade at $25,721.67 while ETH has lost 3.00 per cent to $1,817.01 while Binance Coin (BNB), Binance’s token, has lost nearly 8 per cent of its value as it trades at $277.33.
Other tokens like Cardano (ADA), Solana (SOL), Litecon (LTC), Polygon (MATIC), and Dogecoin (DOGE) have also lost more than 6-7 per cent of their respective values.
BUA Cement Gets $500m for Two New Production Lines
By Adedapo Adesanya
Nigeria’s second-largest cement producer, BUA Cement, has gotten a $500 million financing package from the International Finance Corporation (IFC) to develop two new production lines in Sokoto State.
In what is IFC’s largest-ever investment in northern Nigeria, the financing package, which saw input from African and European partners to BUA Cement Plc, will help the company part-finance and develop two new, energy-efficient cement production lines that will create up to 12,000 direct and indirect jobs.
The funding includes a $160.5 million loan from IFC’s account, a $94.5 million loan through the Managed Co-Lending Portfolio Program (MCPP), and $245 million in parallel loans from syndication partners; the African Development Bank (AfDB) – $100 million, the Africa Finance Corporation (AFC) – $100 million, and the German Investment Corporation, Deutsche Investitions- und Entwicklungsgesellschaft (DEG) – $45 million.
The financing was announced during the Africa CEO Forum in Abidjan, Cote d’Ivoire.
It was disclosed that the plants would run partly on alternative fuels derived from waste and solar power. Each will produce about three million tons of cement annually when complete, serving markets in Nigeria, Niger, and Burkina Faso.
Speaking on this, Mr Abdul Samad Rabiu, Chairman and Founder of BUA Group, said that “BUA is delighted to partner with IFC and other esteemed institutions in securing this $500 million facility to develop energy-efficient cement production capacity and strengthen our equipment and logistics capabilities in northern Nigeria.
“In line with our commitment to sustainability and ESG principles, this investment will create jobs and contribute to economic and infrastructural development within Nigeria and the greater Sahel region.
“We are particularly pleased to have successfully gone through the rigorous process with IFC, AfDB, AFC, and DEG, which validates our responsible business practices. By focusing on greener fuels and enhancing our equipment and logistics platform, BUA Cement is building a foundation for sustainable infrastructure growth and a more inclusive society,” he said.
“We are pleased to join with our partners to support BUA with an investment that will boost industrialization, create jobs and deliver economic growth in northern Nigeria, a region with significant economic potential,” said Mr Makhtar Diop, IFC’s Managing Director.
Investing in northern Nigeria is integral to IFC’s strategy to promote sustainable development in underserved regions. This includes areas with limited opportunities and a need for increased private-sector engagement.
The new plants will provide local developers with a reliable and affordable source of cement, and bolster the construction of essential infrastructure, fostering economic growth and prosperity for the region.
The project is expected to create about 1,000 direct jobs and 10,800 indirect jobs. Direct jobs include those in manufacturing, engineering, and advanced automation systems. Indirect jobs include those in the cleaning, maintenance, mining, and transportation sectors.
The financing package will also allow BUA to replace some of its diesel trucks with vehicles that are run partly on natural gas, over time producing fewer emissions. As part of the project, IFC will also advise BUA on developing a gender-inclusive workplace strategy that creates more opportunities for women across its operations.
“Following an initial $200 million investment in BUA Group in 2021, we are proud to play another key role in this landmark manufacturing project to transform northern Nigeria’s construction sector and the entire country. Investing in this project will sustainably build Nigeria’s local manufacturing capacity, empower local communities, and create employment opportunities. AFC is committed to working with our partners to accelerate development impact through infrastructure solutions that support value addition, industrialization, and job creation throughout Africa,” added Mr Samaila Zubairu, CEO & President of Africa Finance Corporation (AFC).
“The African Development Bank is pleased to be partnering with IFC and BUA on this expansion project as it is aligned with our priority strategies of industrializing Africa and improving the quality of lives of Africans through the increase in cement production, which will lead to the development of additional affordable housing and critical infrastructure in Nigeria and neighbouring West African countries while supporting the use of cleaner energy at BUA’s Sokoto facility,” said Mr Solomon Quaynor, Vice President of AfDB’s Private Sector, Infrastructure and Industrialization arm.
“DEG’s mission is to be a reliable partner to private sector enterprises as drivers of development and creators of qualified jobs. We are pleased to contribute to this transaction together with our development finance partner institutions. Together we support BUA in its transformation towards a more sustainable production by implementing innovative technology. The significant reduction of CO2 emissions and the creation of decent jobs in a region with many vulnerable households are key factors for DEG’s financing,” said Mr Gunnar Stork, Senior Director at DEG.
The investment in BUA is part of IFC’s strategy to promote diversified, inclusive growth and job creation in Nigeria, where IFC supports the manufacturing agribusiness, healthcare, infrastructure, technology, and financial services sectors. IFC has an active investment portfolio of $2.3 billion in Nigeria.
Nigeria’s OTC Stock Market Depreciates by 1.40%
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange opened the week in the negative territory as the bourse witnessed a 1.40 per cent loss on Monday, June 5.
This was influenced by the sole price loser, FrieslandCampina Wamco Nigeria Plc, which fell by N4.00 to sell at N71.00 per unit compared with the preceding session’s N75.00 per unit.
The milk-producing firm pushed down the efforts of Niger Delta Exploration and Production (NDEP) Plc and Industrial and General Insurance (IGI) Plc to lift the OTC stock market.
NDEP gained N1.16 during the session to finish at N246.21 per share versus N245.05 per share, and IGI Plc appreciated by 1 Kobo to 8 Kobo from 7 Kobo.
At the close of business, the market capitalisation of the bourse decreased by N14.30 billion to N1.008 trillion from N1.022 trillion, and the NASD Unlisted Securities Index (NSI) recorded a 10.35 points decline to wrap the session at 728.86 points compared with 739.21 points of the previous session.
Amid the weak sentiment, there was a 1,768.8 per cent rise in the volume of securities traded at the bourse yesterday to 22.7 million units from the previous trading session’s N1.2 million, the value of shares transacted by investors rose by 151.0 per cent to N142.9 million from the N56.9 million reported last Friday, as the number of deals surged by 500.0 per cent to 48 deals from eight deals.
Geo-Fluids Plc remained the most traded stock by volume (year-to-date) with 832.1 million units worth N1.3 billion, followed by IGI Plc with 628.3 units valued at N49.5 million, and UBN Property Plc with 395.9 million units valued at N336.6 million.
Similarly, VFD Group Plc was the most traded stock by value (year-to-date) with 11.0 million units valued at N2.5 billion, trailed by Geo-Fluids Plc with 832.1 million units worth N1.3 billion, and FrieslandCampina Wamco Nigeria Plc with the sale of 17.1 million units worth N1.2 billion.
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