AFRICAN capital markets continued to recover modestly through 2021, mainly through higher debt issuance and despite a shift away from equity markets, PwC’s annual Africa Capital Markets Watch report showed yesterday.
The improved overall market was in spite of the health and economic impact of Covid-19 worldwide and was reflected in higher values of non-local corporate, sovereign and supranational debt raised during the year.
Average issuances on African markets were larger than the prior year, with 94 issuances valued at $47.5 billion (R730m) from 81 issuances worth $28.5bn in 2020.
The $15.2bn total proceeds were almost double the highest annual value in ten years.
“Global investors continue to assess the repayment burden on African sovereigns, which was exacerbated by the pandemic, leading to higher levels of indebtedness,” the report said.
There remained concerns about African sovereigns’ ability to repay debt, with all African sovereigns issuing foreign-denominated bonds in 2021 experiencing budget deficits, sometimes as high as 8 percent of gross domestic product.
However, global investors seem undeterred, with several issuances being oversubscribed by more than three times, the report said.
Several African issuances attained an improved coupon rate in comparison with their previous issuances. Cameroon’s Eurobonds issued in 2021, for example, had a coupon rate of 5.95 percent – much improved on the country’s 9.5 percent Eurobonds in 2015.
There had been a global surge of Initial Public Offerings (IPOs) on the world’s exchanges in 2021, but African companies appeared to have avoided equity markets, the report said.
The reduction of IPOs and capital raising in Africa throughout the year indicated that the continent may be falling behind the international market’s ability to leverage the private sector to create investment and wealth, the report said.
Sub-Saharan Africa reported a reduction of around 73 percent in equity capital raised from the prior year.
African equity capital markets (ECM) activity continued its downward trend, with declines in value and volume down by 28 percent and 23 percent, respectively, from the prior year. This represented the lowest ECM activity in the last five years, the report said.
Fast-growing tech companies in major African markets continued to source growth capital from outside the equity capital market due to perceived onerous regulations, among other reasons.
Not a single IPO was recorded in South Africa – the largest bourse on the continent – in 2021, while the exchange experienced a large number of delistings at 24 – four more than in 2020.
In terms of further offers (FO) by companies already listed, 2021 recorded the lowest activity of the past five years, declining by 39 percent and 28 percent in FO value and volume, respectively, from 2020.
The largest FO transaction recorded was Pepkor Holdings, the South African investment and holding company, recording a share sale by Steinhoff International to raise $850m, representing 34 percent of the total FO value for the year.
The JSE accounted for 82 percent of all FO activity by value in Africa during 2021.
Analysing the sources of funding, domestic deals accounted for 57 percent and 82 percent of ECM volume and value, respectively, in 2021. Only one cross-border transaction was recorded in the year, raising $177m for Mauritius-based real estate investment company Lighthouse Capital.
There was increased outbound ECM activity in 2021 from the prior year, with 13 transactions recorded for a total value of $165m (2020: 11 transactions worth $75m).
BUSINESS REPORT ONLINE