African equity capital market (ECM) activity had been the lowest in the last decade, in 2020, recording a significant decline in both volume and value, PwC notes in its latest edition of the 'Africa Capital Markets Watch' publication.
African ECM recorded a value decline of 2% and a volume decline of 23% in 2020.
The consultancy says the drop in equity markets was largely driven by the impact of repercussions of the Covid-19 pandemic, as well as global and economic uncertainty.
The slowdown effect of the pandemic was also evident in the volumes and values of non-local corporate, sovereign and supranational debt raised during the year, PwC reports.
“While many global markets experienced a brief delay in activity at the onset of the pandemic, followed by recoveries before the end of the year, the pause experienced in African capital markets was more prolonged. Some recovery was noted in the second half of the year with the completion of several deals,” affirms PwC Africa capital markets division director Ashley Schoombee.
Initial public offering (IPO) activity continued a downward trend in 2020, as has been the case over the last four years. Five IPOs were recorded in 2020 – the lowest number in ten years.
PwC points out that the largest IPO in 2020 by value was the dual listing of Bytes Technology Group on the LSE and JSE, raising $467-million. Bytes is a UK business that demerged from South African technology company Altron.
Further offer (FO) value in 2020 increased by 16% in 2020, compared with 2019, but fewer companies accessed the market in 2020, which continues the trend of lower FO volumes over the past few years, PwC states.
Domestic deals accounted for 71% of ECM volume and value recorded in 2020.
Over the past decade, domestic activity accounted for 72% and 78% of ECM volume and value, respectively. There was a significant decline in outbound ECM activity between 2019 and 2020.
Moreover, PwC reports that African issuers have raised $167-billion in non-local currency debt from 536 issuances over the past five years.
The consultancy says patterns of corporate non-local currency bond issuances have been somewhat inconsistent over the past five years, owing to the small number of active issuers and the variable size of issuances over the period. Total proceeds in 2020 represented a five-year high of $7.2-billion.
Egypt has consistently been the largest issuer of sovereign bonds over the past five years, accounting for 38% of all sovereign bonds issued in 2020.
Many countries cancelled or postponed their plans to issue bonds in light of Covid-19-related economic and financial uncertainties.
“A state of uncertainty seems to have become the ‘new normal’ globally, and we can expect some degree of volatility and caution to continue to affect Africa’s capital markets activity in 2021,” Schoombee concludes.