The London Stock Exchange expects an increase in new listings from African companies this year as businesses in the continent’s fast-growing economies seek to attract foreign investors.
London, which has seen a general drop off in listing activity over the past few years due to the global financial crisis, expects companies from countries including Chad, Mozambique, Nigeria and Kenya could go public on its markets.
“Africa is a very big focus for us in terms of future opportunity,” Ibukun Adebayo, the LSE’s Head of Equity Primary Markets for Africa, Middle East and South Asia, said.
“You will see Africa have its fair share among this year’s listings.”
Improving equity markets – the UK’s FTSE100 blue-chip index is up about 7.6 per cent this year – and lower volatility are helping to entice companies, while Africa’s attractive growth prospects are drawing in investors seeking an alternative to the moribund returns on offer in the developed world.
Mr. Adebayo expects the new African listings to be a mixture of firms joining its junior Alternative Investment Market (AIM), favoured by small but fast-growing companies, as well as its main market.
London is known as a hub for natural resources companies and has previously attracted African firms from this sector. While it expects this to continue, Mr. Adebayo said interest was widening, including companies in sectors such as financial and consumer.
The LSE is already home to 96 companies whose main operations are in Sub Saharan-Africa, including 23 that have shares listed on its main market.
Companies domiciled in Africa have raised more than $15.3-billion (U.S.) globally from initial public offerings (IPOs) over the last 10 years, according to Thomson Reuters data, almost $3-billion of which was raised in London.
Many more companies which are incorporated outside of Africa, but have their main operations on the continent, have also raised money in London.
“Where it makes sense is if the business is an international business which simply has a base in Africa, or for companies operating in an area or sector which is better understood in London where the company could realize a better valuation, such as natural resources or infrastructure,” he said.
“We still believe that purely domestic businesses should be financed by domestic stock exchanges.”
Nigerian billionaire Aliko Dangote said in May last year he was aiming to list his $11-billion cement company Dangote Cement in London by the third quarter of 2013, while Kenya’s Equity Bank is also among those who has said it could consider an overseas listing.
The LSE has been on a push to secure links with exchanges in emerging economies and has been involved in helping to develop the stock exchange and capital markets infrastructure in resource-rich Mongolia. It is now hoping to do a similar thing in Angola.
“There are a lot of private sector companies that need access to capital beyond just using the banks,” said Mr. Adebayo, highlighting areas such as real estate and oil services, and consumer sectors such as telecommunications.
Investment bankers have also flagged Africa as a likely source of listings activity this year.
According to the International Monetary Fund, Sub-Saharan Africa is the world’s second-fastest growing region after developing Asia. African investment funds have grown nearly five times in value over the past six years.
Beyond natural resources, favoured investment plays now include banking stocks, particularly in Nigeria, as a growing middle class leads to more demand for financial services. Telecoms and pharmaceuticals are also popular.
Global private equity companies have also been showing an increasing interest in investing in Africa, with large buyout houses like Carlyle setting up offices there.
“Everything that one would want to see in place is certainly in place,” Mr. Adebayo said.