Unsure investment environment reduces IPO placings
South Africa had three domestic listings, which raised a total of $250m on the JSE so far.
THERE were no cross-border initial public offerings (IPO) in Africa in the first half of 2017 for the first time in five years, as political and economic instability weighed heavily on the continent, global law firm Baker McKenzie’s latest Cross Border IPO index said.
“Businesses simply do not carry out IPOs if they are unsure of the investment environment,” Wildu du Plessis, Head of Africa and Partner in the Banking & Finance Practice at Baker McKenzie in Johannesburg said.
Baker McKenzie’s Cross-Border IPO index dropped to 12.6 points, reflecting that capital raising from cross-border IPOs accounted for barely 14 percent of the value of global equity capital raised, the lowest level since the first half of 2012.
The Index released yesterday also showed that five companies in Africa, three of which were South African had raised $512 million (R6.8 billion) so far in 2017 from domestic listings, compared to eight companies that had raised $492m in the first half of 2016.
It was, however, down from the $596m raised from seven domestic deals in the first half of 2015.
Vodacom’s Tanzanian IPO was the largest of the five. It raised $213m in the first half of 2017, and was also the first company in that country to go public over the past five years.
“The IPO in Tanzania points to a future trend in the East African region, which is looking interesting in terms of the possibility of future IPOs. Kenya is currently going through elections, but we hope to see increased activity in the East African region once they have worked through this period of political uncertainty,” Du Plessis said.
South Africa had three domestic listings, which raised a total of $250m on the JSE so far this year – the highest amount of capital raisied by South African companies recorded during the first half of any year since 2012.
The listings comprised two IPOs in the fishing industry, namely Sea Harvest, a fresh and frozen fish company, which had delisted on the JSE 17 years ago, and new kid on the block, Premier Fishing, which debuted on the JSE in March.
The other South African IPO was Bidvest founder Brian Joffe’s private equity fund Long4Life, which listed on the JSE in April.
“Historically, South African companies are not actively listing outside their jurisdiction. The last time a South African company listed on a stock exchange outside of the country was in the second half of 2013, when MiX Telematics went public on the New York Stock Exchange and raised $116m,” said Du Plessis.
Du Plessis explained that the two IPOs in South Africa’s fishing sector point to a readjustment and consolidation in the sector after recent woes.
“Further, the Long4Life IPO shows that there is private equity money available for investment in Africa. If a fund can identify sufficient assets to invest in, then an IPO is a good way for them to raise capital. We haven’t seen a lot of these kinds of IPOs in Africa recently, possibly because the funds have been struggling to find assets to invest in.”
Egypt’s Raya Contact Center, which provides outsourcing services to Europe and the Middle East, raised $49m when it listed in April.
The index also said that deal making had not quite returned to the levels of 2015 – total capital raised being 24 percent lower in the first half of 2017.