Dar es Salaam emerges Africa’s top stock exchange

• IPOs soar as continent’s capital markets raise $11b

• Nigeria, Ghana, worst performers

TANZANIA’S Dar es Salaam Stock Exchange topped the performance list for the 12 months to 31 January for USD investors, according to the data collected  excellent Investing in Africa website. 

  It managed a 27 per cent rise, including 3.8 per cent in January,  beating  S&P 500 index which managed a strong 11.9 per cent, despite increasing worries of pending bear markets and falling back to 30 Jan, although it has since gained.

  Other African bourses which beat the S&P included Uganda Securities Exchange (up 18.3 per cent), South Africa’s JSE (up 17.1 per cent), Nairobi Securities Exchange (16.1 per cent) and Namibian Stock Exchange (up 15 per cent).

 But two of the worst performers were hit by the crashing oil price, including heavy falls in the currency compared to the soaraway USD. Nigeria was down 36.9 per cent including 16.6 per cent in January and Ghana crashed 32.1 per cent,  including 8.3 per cent in January. 

  PwC Nigeria Capital Markets Partner, Darrell McGraw,  warned that commodities prices and currency depreciation could lead to some “headwinds that may affect the momentum of the capital markets in Nigeria and other territories heavily involved in resources.” However, he said, Nigeria already had an IPO in Jan 2015 and “has a strong pipeline of listings likely to be brought to market later this year.”

   Meanwhile,  US$11billion IPO and Further Offers  proceeds was  raised in 2014 in African equity markets

   African markets excelled in terms of capital raising for business in 2014 with a total of $11 billion raised through a total of 24 initial public offers (IPOs) and also through further offers (FOs). 

  According to the inaugural publication IPO Watch Africa 2014, released by PwC  a significant portion of the 2014 capital raising came from outside South Africa, compared to previous years.

  The PwC study covers the five years 2010-2014 and shows that the total money raised in 2014 was equivalent to the combined total for 2012 and 2013. The sum from IPOs alone was $1.7billion in 2014, up from $0.8billion in 2013.

 Listings on the Johannesburg Stock Exchange accounted for 32 per cent of total IPO capital in 2013 and 44 per cent in 2014.

  PwC Africa Capital Markets Leader, Nicholas Ganz,  observed that the performance of African markets was strong in 2014, with an increase in equity capital market activity of 40 per cent in terms of volume of offers and 100 per cent in terms of capital raised when compared with prior year activity.

However South Africa accounted for 87 per cent of the capital raised through FOs offers with a 50 per cent increase in the number of transactions and doubled in terms of capital raised to $9.3billion, from $4.6billion in 2013.

  PwC South Africa Capital Markets Partner, Coenraad Richardson, said of South Africa’s share of the market for further offers: “This is a reflection of the depth and stability of the South African listed company and investor base, underpinned by a securities exchange regulatory framework ranked number one in the world by the World Economic Forum’s 2014-2015 Global Competitiveness Report.”

 The financial services sector (including real estate) was 57 per cent of the combined IPO and FO volume, followed by industrial products and services, and consumer products. Growth in these sectors reflects Africa’s shifting economic and social demographics, including increasing urbanization and an emergent middle class. The resources sectors were a smaller proportion of 2014 activity.

  The trend also shows “increasing global integration of businesses in Africa and the interest of international investors in opportunities in Africa” according to the report. Several top 10 IPOs in 2013 and 2014 had an international component, either foreign companies raising capital directly on African exchanges, or African companies marketing shares to international investors through dual listings or sales to qualified institutional buyers abroad.

  During 2010-2014, African companies raised a total of $31.1billion through FOs on African exchanges plus another $1.2billion of FO capital raised by African companies on international exchanges. This included companies expanding their investor base via a secondary listing, as with the 2011 listing of Elemental Minerals on the Toronto Stock Exchange and the 2013 listing of MiX Telematics on the New York Stock Exchange under the Jumpstart Our Business Startups (JOBS) Act, as well as those raising further funds from existing international listings. Resources transactions are more prominent in “outbound” FOs compared to the African IPOs and FOs over the period 2010 to 2014.