Governance issues plague JSE
A recovery in African capital markets activity is expected to continue in 2018, but the outlook for the JSE is clouded by questions about corporate governance.
A recovery in African capital markets activity— first seen in 2017 — is expected to continue in 2018, but the outlook for the JSE is clouded by ongoing questions about corporate governance.
JSE-listed companies are expected to continue tapping the equity market as a reliable source of capital, despite severe corporate governance setbacks for some companies in 2017. The local bourse maintains there is a healthy pipeline of new listings.
There was always plenty of capital available for strong offerings, but this was always difficult to forecast, said Alpha Wealth fund manager Keith Mclachlan.
“It’s hard to say, recently a large proportion of book builds have been coming out of the Resilient stable … one major player not operating in this space at the moment,” he said.
Resilient and Fortress were recently criticised for the way in which they accounted for the Siyakha education trusts‚ but they have since moved to revamp their structures.
The capital raised in 2017 from initial public offerings (IPOs) by companies on the JSE surged 178% in dollar terms in 2017 compared to 2016, driven in the main by the listings of Steinhoff Africa Retail (Star).
African Rainbow Capital Investment (Arci) and Ayo Technology were also major contributors to the surge, with Star raising $1.2bn, compared to Arci’s $332m and Ayo’s $328m, according to the 2017 PriceWaterhouseCoopers (PwC) African Capital Markets Report.
South African companies also continued to dominate follow-on-offer activities, accounting for 86% of proceeds and 51% of volume.
A significant proportion of this was due to Barclays’ continued sell-down of its African subsidiary —$2.9bn in proceeds — as well as the $1bn raised by Sibanye Gold to partially fund its May 2017 acquisition of Sibanye-Stillwater, which was five times oversubscribed.
PwC is bullish about 2018’s outlook, citing favourable global economic conditions and continued deepening of African capital markets.
Notable successes so far in 2018 include Premier Fishing, which was four times oversubscribed when it listed in February, raising R526m. The company has, however, lost some 10% so far in 2018. On the other hand, VBS Mutual Bank’s plans to list have been put on hold, with that bank recently placed under curatorship by the Reserve Bank.
Other possible listings in 2018 include global investment giant BlackRock’s European fund on the JSE, while Hosken Consolidated Investments is seeking to list its Golden Arrow Bus Services.
Grindrod has also expressed interest in unbundling its shipping business as a separate entity on the JSE.
SOUTH AFRICAN COMPANIES ALSO CONTINUED TO DOMINATE FOLLOW-ON-OFFER ACTIVITIES