Capital raised through IPO activity on African stock exchanges in 2014 has now surpassed the total raised during the whole of 2013.
IPO activity in the first half of 2014 has resulted in capital raising totaling $808.5 million. The total amount raised through the whole of 2013 was $757.5 million, according to figures from consultant EY.
The data show there were 10 African IPOs in 2012 on stock exchanges in Casablanca, Dar es Salaam, Johannesburg, Nigeria and Tunisia, 18 in 2013 and there have been nine so far in 2014. These markets are benefiting from increasing cash flow from domestic and international pension funds as well as other corporate institutional investors.
Fund managers say that the situation is improving and that confidence in African frontier-market equities is growing at pace, not only through foreign investment but also with new money from domestic pension funds. Joseph Rohm, portfolio manager at Investec Asset Management, explains: “These are nascent capital markets and they are illiquid markets. But what has been encouraging is that, for the first time in a long time, we are starting to see more capital raisings.”
Mr. Rohm says the rise in public listings is a result of prior growth in private-equity investments. “We have known for a long time that the amount of private equity in African markets—and more broadly in frontier markets—is unprecedented and we are starting to see those opportunities coming to public markets.”
In certain markets, the change has been starker. In Tunisia, for example, there were just two IPOs in 2012. In 2013, the number rose to 11 and EY predicts that 2014 will surpass last year’s record.
Slim Feriani, chief executive officer and chief investment officer of Advance Emerging Capital, says he is targeting a portfolio turnover of no more than 30% for his frontier strategy this year and believes that the trend of listings and capital-raising will continue to accelerate.
“In the next five to 10 years we are bound to see more IPOs. As it stands, some of the hidden gems are still in private hands,” he says.
Mr. Feriani, a Tunisian by birth, acknowledges that the Middle East and Africa region will be affected when the world’s central banks begin to raise interest rates. However, he still believes more capital will flow into these markets despite what he describes as “speed bumps along the way.”