Economy
African Capital Markets Shows Significant Decline in 2016—PwC
By Dipo Olowookere
Twenty-sixteen marked a challenging year for African equity markets in the wake of lower economic growth and political upheaval around the globe, largely as a result of the US elections cycle and the Brexit vote.
African equity capital markets (ECM) broke a streak of three successive years of growth, recording a decline in overall ECM activity of 28% from 2015 in the number of transactions and 33% from 2015 in terms of capital raised.
PwC issued its 2016 Africa Capital Markets Watch publication today, which analyses equity and debt capital markets transactions that took place between 2012 and 2016 on exchanges throughout Africa, as well as transactions by African companies on international exchanges.
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.
Darrell McGraw, PwC Capital Markets Partner based in Lagos, says: “Many African economies, in particular those dependent on resources suffered in a low growth environment, significantly reducing ECM activity, and a continued lack of clarity around foreign exchange risk in Nigeria further discouraged foreign investment.
“Although overall ECM activity decreased in 2016 in terms of both transaction volume and value as compared to 2015, there was a significant increase in ECM activity, particularly IPOs, in the second half of the year, indicating the cautious optimism of issuers and investors as the year progressed.”
Since 2012, there have been 450 African ECM transactions raising a total of $44.9bn, up 8% in terms of capital raised over the previous five year period 2011-2015.
African IPO Market
Overall, $1.5bn was raised in IPO proceeds in 2016, and while 2016 saw a decrease from the prior year, there has been an overall upward trend in IPO activity over the five year period.
Over the past five years there have been 110 IPOs raising $6.5 billion by African companies on exchanges worldwide and non-African companies on African exchanges.
In 2016, capital raised from IPOs by companies listed on the Johannesburg Stock Exchange (JSE) increased by 25% in US dollar terms as compared to 2015, mainly driven by a comparatively stronger rand and three large listings by Dis-Chem, the Liberty Two Degrees real estate investment trust (REIT) and one of South Africa’s largest private equity firms, Ethos. It was also a record year for the JSE’s AltX, which saw the secondary listing of the fledgling Mauritian private equity investor, Universal Partners, generate proceeds of more than five times greater than in 2015.
Capital raised from IPOs by companies on exchanges other than the JSE decreased by 22% as compared to 2015, largely driven by relatively smaller Egyptian IPOs in 2016. IPO activity on the Egyptian Stock Exchange (EGX) decreased significantly – by 72% in terms of value of IPO proceeds – as companies delayed listing plans in anticipation of an improved economic outlook following the August 2016 announcement of a potential stabilisation programme by the IMF and the free float of the Egyptian pound in November 2016.
Elsewhere on the continent, there were some significant increases in IPO capital raised on exchanges in Ghana, Morocco and Botswana compared to 2015, due to partial privatisations of state-owned entities.
Coenraad Richardson, PwC Capital Markets Partner based in Johannesburg, adds: “The JSE retains the leading position in the African capital markets, with capital raised from IPOs by companies on the JSE representing 42% of the total African IPO capital and 34% of the total number of transactions since 2012.” In terms of value over the past five years, the next-largest value of IPO proceeds raised was on the EGX at $1.1 billion, followed by the Nigerian Stock Exchange at $751 million.
On a sector basis, the financial services sector continued to dominate the African IPO market during 2016 with 45% of total value and 55% of total volume, followed by consumer goods and industrials with a total value of 31% and 13% respectively.
African FO market
Over the past five years, there have been 340 FOs raising $38.4 billion on both African and international exchanges. As was the case with the IPO market, FO activity was hit by a significant decrease in terms of transaction volume and value, down 27% and 34% respectively. Andrew Del Boccio, PwC Capital Markets Partner based in Johannesburg, notes: “The decline in FO activity after a period of sustained growth reflects many of the challenges and uncertainties in Africa and around the globe.”
In terms of geography, 85% of FO proceeds in 2016 were raised either by South African companies or by foreign companies listed on the JSE. However, the nature of these FOs shows a mixed landscape–a significant portion of funds were raised for business restructuring or divesture by foreign investors looking to monetise or exit their African investments, or by South African companies seeking to diversify their portfolios via acquisition of assets outside of Africa.
Both during 2016 and over the five-year period, the vast majority of FO activity was from sub-Saharan countries representing 78% and 81% in total FOs volume, respectively, and 96% and 95%, respectively of total FO value.
Between 2012 and 2016, FO capital raised on the JSE represented 87% of total African FO capital raised and 71% of total transaction volume. In terms of movements from 2015, Nigerian FO activity dried up, with no further offers in 2016, mainly as a result of the ongoing recession and exchange rate environment. Tunisia also saw a significant decline in activity based on value of proceeds raised.
On a sector basis, the financial services sector contributed 47% of total FO value, followed by the healthcare sector at 12%.
During the five-year period from 2012, average FO capital raised per transaction of $113 million remained well above the average proceeds raised from IPOs of $59 million, as a number of large, seasoned issuers, such as Naspers, Aspen, Mediclinic and Steinhoff, among others, tapped markets 17 times for proceeds in excess of $500 million; only one IPO, that of Seplat in 2014 exceeded the $500 million threshold.
African debt markets
Debt capital market (DCM) activity, in particular Eurobond activity, represents only a portion of the total debt raised in Africa, with a large component of debt funding sourced from traditional bank finance, other lending arrangements with investors or debt raised in local currency on local exchanges.
Eurobond activity by African corporates continued to decline in 2016, with investment grade and high-yield proceeds from Eurobond issuances falling by 21% to $4.5 billion, and the number of issuances by 53% to just seven, including some large issuances by South African telecommunications provider, MTN, and Nigerian telecommunications infrastructure company, IHS, which raised $800 million in sub-Saharan Africa’s largest-ever high-yield bond. Proceeds from all seven of these 2016 issuances were raised in US dollars.
Domestic debt markets also played a more significant role in the overall DCM story in 2016 than in previous years, particularly in Nigeria, as companies and governments across the continent retreated from risks related to foreign currency funding in 2016 and as global appetite for African debt securities declined.
Del Boccio concludes: “Despite challenging times, we expect to see improved conditions around capital markets activity in 2017, continuing the momentum built in the final two months of 2016, including an increase in ECM activity by companies on the JSE as well as by companies pursuing privatisation plans through the capital markets in Nigeria, Rwanda, Tanzania and the BRVM region.”
By Adedapo Adesanya
Seplat Energy Plc will revive hundreds of Nigerian oil wells laying fallow after completing the acquisition of Mobil Producing Nigeria Unlimited (MPNU) from ExxonMobil.
The company said it aims to lift oil output to about 200,000 barrels a day, a move that will help boost Nigeria’s oil production levels, as it aims to reach 2 million barrels per day next year.
The transaction, according to Seplat, “is transformative for Seplat Energy, more than doubling production and positioning the company to drive growth and profitability, whilst contributing significantly to Nigeria’s future prosperity.”
The completion of the Seplat-ExxonMobil deal has created Nigeria’s leading independent energy company, with the enlarged company having equity in 11 blocks (onshore and shallow water Nigeria); 48 producing oil and gas fields; 5 gas processing facilities; and 3 export terminals.
Recall that the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) in October approved the deal as part of a series of approvals, while it blocked Shell’s asset sale of up to $2.4 billion to the Renaissance consortium.
The acquisition of the entire issued share capital of MPNU adds the following assets to the Seplat Group: 40 per cent operated interest in OML 67, 68, 70 and 104; 40 per cent operated interest in the Qua Iboe export terminal and the Yoho FSO; 51 per cent operated interest in the Bonny River Terminal (‘BRT’) NGL recovery plant; 9.6 per cent participating interest in the Aneman-Kpono field; and approximately 1,000 staff and 500 contractors will transition to the Seplat Group.
MPNU adds substantial reserves and production to Seplat Energy; 409 million barrels of oil equivalent (MMboe) 2P reserves and 670 MMboe 2P + 2C reserves and resources as at 30 June 2024 and 6M 2024 average daily production of 71.4 kboepd (thousand barrels of oil equivalent).
Business Post reports that Seplat will be part of the payment this year, and will defer some to next year,
Speaking on the transaction, the Chairman of Seplat Energy, Mr Udoma Udo Udoma commended President Bola Tinubu for supporting this transaction and appreciated the support and diligence of the various ministries and regulators for all the work to reach a successful conclusion.
“We are delighted to welcome the MPNU employees to Seplat Energy. We are excited to begin our journey in a new region of the country, and we look forward to replicating the positive impacts we have achieved within our communities in our current areas of operations.
“Seplat’s mission is to deliver value to all our stakeholders, and we treasure the good relationships we have developed with the government, regulators, communities and our staff.”
On his part, the chief executive of Seplat Energy, Mr Roger Brown, described the acquisition as a major milestone, adding, “I extend my thanks to the entire Seplat team for their hard work and perseverance to complete this transaction.
“MPNU’s employees and contractors have a strong reputation for safety and operational excellence, and I welcome them to the Seplat Energy Group.
“We have acquired a company with one of the best portfolios of assets and related infrastructure in a world-class basin, providing enormous potential for the Seplat Group. Our commitment is to invest to increase oil and gas production while reducing costs and emissions, maximising value for all our stakeholders.
“MPNU is a perfect fit with our strategy to build a sustainable business that can deliver affordable, accessible and reliable energy for Nigeria alongside attractive returns to our shareholders”.
By Adedapo Adesanya
The National Pension Commission (PenCom) is projected to close the year with over N22 trillion in pension assets impacted by challenges like inflation and monetary policies.
This is according to PenCom Director-General, Mrs Omolola Oloworaran, at a press conference in Abuja on Thursday.
She said as of October 2024, the Contributory Pension Scheme (CPS) had 10.53 million registered contributors and pension fund assets worth N21.92 trillion.
Speaking at the conference-themed Tech-driven Transformation Shaping the Pension Landscape, which showcased PenCom’s strategic commitment to innovation, she said that the numbers reflected the agency’s unwavering commitment to fund safety, prudent management, and sustainable growth.
She explained that the pension environment was impacted by the wider economic challenges facing the country, noting that the sector battled multi-year high inflation, Naira devaluation, and the lingering effects of unorthodox monetary policies by the Central Bank of Nigeria (CBN).
Business Post reports that the apex bank hiked interest rates by 875 basis points this year alone to tackle persistent inflation which peaked at 33.8 per cent as of October.
She said that these challenges eroded the real value of pension funds and impacted contributors’ purchasing power.
“To address these issues, the commission has initiated a comprehensive review of its investment regulations.
“It is focusing on diversifying pension fund investments into inflation-protected instruments, alternative assets, and foreign currency-denominated investments.
“The goal is to safeguard contributor savings and ensure resilience against future economic volatility,” she said.
She restated the commission’s commitment to expanding pension coverage, particularly through the advanced micro-pension plan designed to encourage participation from the informal sector using technology.
“This initiative will make it easier for everyday Nigerians to save for retirement, aligning with our vision of inclusive growth and financial stability for all.
“The backlog in retirement benefits for retirees of the Federal Government’s Ministries, Departments, and Agencies (MDAs) will soon be settled.
“The federal government recently disbursed N44 billion under the 2024 budget to settle approved pension rights.
“We are collaborating with the Federal Government to institutionalise a sustainable solution to ensure retirees receive their benefits promptly, eliminating delays,” Mrs Oloworaran said.
She said that PenCom’s technology-driven transformation aimed to make the CPS more accessible, reliable, and sustainable.
“From data management to seamless contributions and regulatory supervision, we are paving the way for a future where the pension industry serves all Nigerians effectively,” she said,
Mrs Oloworaran also said that the e-application portal for pension clearance certificates has replaced the manual processes and enhanced the ease of doing business in the sector.
“Since its deployment, 38,528 pension clearance certificates have been issued. This initiative ensures compliance and secures the future of Nigerians working in organisations that interact with the government,” she said.
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange closed flat on Thursday, December 12 after it ended the trading session with no single price gainer or loser.
As a result, the market capitalisation remained unchanged at N1.055 trillion as the NASD Unlisted Security Index (NSI) followed the same route, remaining at 3,012.50 points like the previous trading session.
However, the activity chart witnessed changes as the volume of securities traded at the bourse went down by 92.5 per cent to 447,905 units from the 5.9 million units transacted a day earlier.
In the same vein, the value of securities bought and sold by investors declined by 86.6 per cent to N3.02 million from the N22.5 million recorded in the preceding trading day.
But the number of deals carried out during the session remained unchanged at 21 deals, according to data obtained by Business Post.
When trading activities ended for the day, Geo-Fluids Plc remained the most active stock by volume (year-to-date) with 1.7 billion units sold for N3.9 billion, Okitipupa Plc came next with 752.2 million units valued at N7.8 billion, and Afriland Properties Plc was in third place with 297.5 million units worth N5.3 million.
Also, Aradel Holdings Plc remained the most active stock by value (year-to-date) with 108.7 million units worth N89.2 billion, followed by Okitipupa Plc with 752.2 million units valued at N7.8 billion, and Afriland Properties Plc with 297.5 million units sold for N5.3 billion.
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