2016 Africa Capital Markets Watch

Our latest look at capital market activities during 2016 and the five-year period 2012-2016.

Continuing the momentum built on the increase of equity capital market activity over the final two months of 2016, 2017 is expected to see improved conditions.


Overview

Welcome to PwC’s 2016 Africa Capital Markets Watch, our third annual publication examining African equity and debt capital market transactions.
Equity capital market (ECM) transactions included in our report comprise capital raising activities, whether initial public offerings (IPOs) or further offers (FOs), by African companies on exchanges worldwide and those made by non-African companies on African exchanges.
Debt capital market (DCM) transactions analysed this year include debt funding raised by African companies and public institutions, whether high-yield (HY) or investment grade (IG).

Decline in new African equity capital raised

2016 was a challenging year for African equity markets, primarily due to lower growth or recession in larger economies and new global political uncertainties.

New activity on Africa’s equity capital markets slowed in 2016, with a decline in the total number of ECM transactions of 28% and a decline in the value of proceeds raised of 33% in US dollar terms.

2016 saw the lowest volume in IPO activity since 2013, although there has been an overall upward trend over the five years. While FO activity was hit in 2016 by a significant decrease in terms of transaction volume and value, down 27% and 34%, respectively.

ECM activity, 2012-2016

Source:  Dealogic


IPO trends by half year, 2012 - 2016

Source:  Dealogic

Increase in African IPO activity over second half of 2016

When analysing 2016 activity by quarter, data indicates a rebound in market sentiment in the second half of the year, which comprised 80% of 2016 IPO capital raised; 53% was raised in the last quarter alone.

Financials sector continuing to dominate African equity market

During 2016, the financials sector continued to dominate the African IPO market with 45% of total value and 55% of total volume, which is consistent with sector themes noted on global IPO markets.

Similar to 2016 standalone results, over the past five years, the financials sector led the African IPO market with 45% of total volume and 45% of total value, driven in large part by the popularity of property company and REIT listings (39% of total volume and 59% of total value of the financials sector during this period); we expect activity by property funds to continue into 2017.

During 2016, the sector composition of African FO activity was broadly consistent with the five-year average in terms of value, with the financials sector contributing 47% of total FO value, followed by the heathcare sector at 12%.

Eurobond activity by African corporates declined while overall Eurobond proceeds increased due to supranational borrowing

Eurobond activity by African corporates continued to decline, with IG and HY proceeds from Eurobond issuances falling by 21% to $4.5 billion and the number of issuances by 53% to just seven. The common theme across these issuances was the use of proceeds to refinance or repay existing debt or other obligations, reflecting a focus in 2016 on strengthening balance sheets during challenging times.

Proceeds from Eurobond issuances by sovereign and supranational organisations increased by 30% in 2016 to $17.7 billion. There were comparatively fewer issuances by African governments than in recent years, with only South Africa, Mozambique, Tunisia and Ghana tapping international markets for debt finance this year.

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