A global surge in private offerings has so far eluded Sub-Saharan Africa.
Companies have raised a record $467 billion on the world s stock exchange during the first eight months of this year, according to Bloomberg data compiled by Bloomberg. However 21 companies have de-listed in Johannesburg, home of Africa's largest bourse, with 31 stocks relisted to come in 2021. Smaller exchanges at Accra, Nairobi and Lagos have been similarly quiet.
The world s highest unemployment rate and a lack of confidence in South Africa s economy are pushing companies toward more affordable financing sources. Firms in the continent's most industrialized nation, especially small businesses, have been finding it easier and cheaper to raise debt to fund growth than issue shares, Mate Munalula said in an interview.
An official can be perceived as more administrative, procedural and more on-the-job when running a small entity, he said.
Another reason is that technology and digital startups are in short supply in the country, yet this sector has accounted for a major part of the global startup rush. South Korean ride-hailing giant Didi Global Inc. raised $4.4 billion in the U.S. in June, while KakaoBank Corp. raised on the internet only to go public, sold $2.2 billion of stock and soared more than 70% in its trading debut.
South Africa has two fast-growing tech firms in branchless lender TymeBank, backed by billionaire Patrice Motsepe and the payment company Yoco, but both have sourced cash outside of equity capital markets. TymeBank raised $109 million in January, at a valuation of 8 billion notes $530 million Yoco raised $83 million in July.
In Nigeria, FinTech companies are emerging on the radar of high-profile investors. The U.S. firm Stripe Inc. agreed to pay $200 million to buy out Paris-based Paystack, and Flutterwave Inc. said it would look to New York as a potential IPO destination.
Wireless carriers MTN Group Ltd. and Airtel Africa Plc has indicated a willingness to spin off fast-growing fintech or mobile-money arms, valuing them at billions of dollars. Although in both cases an IPO could be years away.
When you look at disruptors that are listing to attract capital, in South Africa, Kyle Wales is a laggard, explained Flagship Asset Management Portfolio Manager. E-commerce penetration is 3% in South Africa. In China, the same ratio of 25 % is reached. Three firms Opted Out: CPA, Global Development Bank, Vinci, Texas; and Total Investment Inc.
Comair Ltd., the South African partner of British Airways, was put under bankruptcy protection amid Covid - 19 travel restrictions. The carrier was later rescued by private investors and de-listed. Cartrack Holdings Ltd., a transportation-data company, was taken private by its founder and listed on Nasdaq under the name Karooooo in limited capacity. The firm needed more exposure to foreign investment funds focused on technology, Chief Executive Officer Zak Calisto said. Revego Africa Energy Ltd. a investor in private renewable projects, had planned to raise as much as 1.5 billion rand but instead opted to pursue capital raising in South African markets, CEO Reyburn Hendricks said
The lack of IPOs and exodus from JSE Ltd. could also be linked to the South Africa s near-stagnant economy and spiraling unemployment figures. The corruption-tainted tenure of former President Jacob Zuma and the subsequent coronavirus pandemic have weakened investor risk appetite, said Citi s Munalula, while a rally and looting spree that followed Zuma's arrest in July only exacerbated the situation.
The short and long of it is South Africa s economy is the over-riding factor, Munalula said.
Still, there are reason to believe in recovery. Economists surveyed by Bloomberg predict gross domestic product will expand 4.2% in 2021 after contracting the most in one century last year. Future investment in renewable power worldwide should also bode well for South African companies, which could benefit from a new policy of government that would allow more private generation.
A number of companies are contemplating listings from 2022, according to Richard Stout, head of equity markets at Standard Bank Group Ltd.
Those to have made their intentions public include medical cannabis firm Cilo Cybin Pharmaceutical Ltd. while Bushveld Minerals Ltd. a Canadian-listed vanadium miner, said it remains interested in a potential listing on the JSE.
South Africa s large state-owned companies may also have scope to raise funds via a securities sale, though this may require some mind-set changes, according to John Slettevold, head of UBS Group AG in South Africa. State enterprises in South Africa have flooded the market with debt and there should be room to add equity, he said.