Assurance, advisory and tax services multinational PwC’s yearly 'Africa Capital Markets Watch' report shows that African markets have continued with a modest recovery through 2021, reflected in higher values of non-local corporate, sovereign and supranational debt raised during the year.

Average issuances were larger than in the prior year, with 94 issuances valued at $47.5-billion in 2021, compared with 81 issuances worth $28.5-billion in 2020.

Global investors continue to assess the repayment burden on African sovereigns, which was exacerbated by the pandemic, leading to higher levels of indebtedness.

Concerns about African sovereigns’ ability to repay debt remain, with all African sovereigns who issued foreign-denominated bonds in 2021 experiencing budget deficits – sometimes of as high as 8% of gross domestic product.

However, global investors seem undeterred, with several issuances being oversubscribed by more than three times, PwC says.

"Despite economic frailty, 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%, which is a marked improvement on the country’s 9.5% Eurobonds in 2015."

Further, while there was a global surge of initial public offerings (IPOs) on the world’s exchanges, African companies seem to have systematically shied away from equity markets.

The reduction of IPOs and capital raising in Africa throughout the year indicates that the continent may be falling behind the international market’s ability to leverage the private sector to create investment and wealth, the company notes.

African issuers on debt markets raised $193.4-billion in foreign currency-denominated debt, in 566 issuances, through 2021. The number of corporates issuing debt in 2021 was more than double the number pre-pandemic of 11 in 2019, and 27 in 2021, PwC says.

The $15.2-billion total proceeds are almost double the highest yearly value of the past ten years and 25% of corporate bonds in 2021 were issued for the purposes of refinancing or repaying debt, compared with only 7% used for the same purpose in 2020.

However, sub-Saharan Africa reported a reduction of about 73% in equity capital raised from the prior year.

Additionally, African equity capital markets (ECM) activity continued its downward trend, with declines in value and volume down by 28% and 23% respectively from the prior year. This represents the lowest ECM activity in the past five years.

"Fast-growing technology companies in major African markets continue to source growth capital from outside the equity capital market owing 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, which is four more than in 2020," PwC highlights.

Meanwhile, in terms of further offers (FO) by companies already listed, 2021 recorded the lowest activity of the past five years, declining by 39% and 28% in FO value and volume, respectively, from 2020.

The largest FO transaction recorded was South African investment and holding company Pepkor Holdings recording a share sale by Steinhoff International to raise $850-million, representing 34% of the total FO value for the year. The JSE accounted for 82% of all FO activity by value in Africa during 2021.

"Analysing the sources of funding, domestic deals accounted for 57% of ECM volume and 82% of ECM value in 2021. Only one cross-border transaction was recorded during the year, raising $177-million for Mauritius-based real estate investment company Lighthouse Capital," PwC highlights.

There was an increase in outbound ECM activity in 2021 from the prior year, with 13 transactions recorded for a total value of $165-million, compared to 2020 during which 11 transactions worth $75-million were recorded.