Africa Stockmarkets Now Run Dry On New Rights Offerings

A shift in economic activities has altered the outlook for capital markets across Africa, leaving stock exchanges struggling to attract new issuers as investors scrape the boards for returns in the face of government policies tilted in favour of fixed securities.

Since the crash in commodity prices a decade ago, the face of African stock exchanges has morphed from the heavy mechanics of industry to the agility of technology players and the soft touch of service providers ranging from financial to retail.

That swift change has seen previous bell weathers being upstaged by greenhorns or delisting altogether.

New initial public offerings are proving hard to come by in contrast to the constant flow of debt instruments such as government securities and Treasury bonds.

The fortunes across markets, however, is mixed with larger markets in western Africa appearing to attract new listings such as that of Airtel in Nigeria with issuers using it as a ladder to float in the more liquid London Securities Exchange, the latest being Airtel Africa.

However, issuers are also looking to list in other European financial capitals amid uncertainties around London’s financial hub’s leadership in the face of Brexit, whose controversies forced a change in the UK leadership last week in which Boris Johnson replaced Theresa May as prime minister.

South Africa’s Naspers, for example, plans to list Prosus, its international Internet arm on Euronext Amsterdam with a secondary listing on the Johannesburg Stock Exchange on September 11.

MTN also listed on the Nigeria Stock Exchange earlier this year but not through an initial public offering.

According to Baker McKenzie, Global Cross Border Index African issuers raised $1.4 billion through listings in 2017 compared with $1.2 billion in 2016.

The number of companies listing on the continent, however, fell from 17 to 15, while those seeking cross-border listings were only two.

"African companies are seeking to raise capital internationally because as they mature and grow in size, they cannot raise sufficient capital in domestic markets. Going to look for capital say in London helps them reach out to a larger pool of investors," said Eric Musau, the head of research at Standard Investment Bank in Nairobi.A further slowdown is expected with the London law firm’s tracking data showing that only $69.8 billion was raised from 514 Ipos globally in the first half of this year.Most of the activity was in the Asia Pacific region and was led by financials and telecoms. But while cheaper valuations […]

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