PricewaterhouseCoopers (PwC), a multinational professional services network of companies, has projected that Africa’s equity capital market (ECM) will sustain its volatile trend in the 2020 financial year amid promising prospects for growth if the authorities do the needful.
The projection derives from the poor performance of the ECM last year as the activity declined sharply both in volume and value when compared to the level in the preceding year, with 2019 posting the lowest proceeds raised in ten years. Specifically, during the year in review of African equity markets, the overall ECM activity in 2019 declined in value and volume by 44% and 29% respectively, compared to 2018. According to the professional services firm, the decline was mainly related to activity in South Africa, where ECM activity dropped by 69% in terms of value and 46% in terms of volume compared to 2018, and where Africa’s largest bourse saw no capital raised through IPOs in 2019.
Despite the lackluster performances of most African bourses and the volatility that characterised their operations last year, the global consultancy outfit, in its 2019 African Capital Markets Watch, which captured the value of transactions of the bourses across equity, Initial Public Offerings (IPOs) and Further Offers (FOs) market segments publication issued today, was optimistic that 2020 held good promises for investment.
Commenting on the ECM value slump, PwC Africa Capital Markets leader, Andrew Del Boccio, noted that “a state of uncertainty seems to have become the ‘new normal’, and we expect some degree of volatility and caution to continue to affect Africa’s capital markets activity in 2020.
“This sentiment is also reflected in PwC’s annual 2019 Global CEO Survey, in which African CEOs noted their expectations for a slowdown in economic growth as well as their top concerns, which included political risk, over-regulation, and worries about finding top talent to fill the skills-gap”, the investment analyst added.
Even then, the firm’s Africa Capital Markets Director, Alice Tomdio, predicted: “Consistent with prior years, we expect governments across the African continent to continue to implement strategies towards building robust capital markets. Some recent examples include Ethiopia’s plan to launch a local stock market during this year, and Angola’s roadmap to privatise its state-owned companies by 2022.
In addition, we can expect to see other announced privatisations in Nigeria, Malawi and Ghana. “Despite the lackluster activity in 2019, we saw significant progress in various capital markets initiatives during the year, including the drive for sustainable finance through the issuance of social, green and infrastructure bonds in South Africa, Kenya, and Nigeria. Together with a move towards more local currency and blended financing, we expect this trend to continue, and to unlock new sources of capital for African issuers”, she added. In the report, PwC linked the general slowdown in equity markets to a series of macroeconomic factors. These include an ECM deceleration in global markets, caution in the period leading up to key local elections, which took place in both Nigeria and South Africa in 2019, and more specifically in South Africa, growing political gridlock and economic stagnation.
