Despite drop in the price of crude oil which has resulted in turmoil in several African economies, about 15 African companies have lined up to raise money from the international capital markets within the next 12 months.
According to a report by international law form Baker and Mckenzie released on 29 February capital raising deals in the pipeline could amount to $3.1 billion, which is more than the twice the total sum of $1.5 billion raised by the last 21 Initial Public Offerings (IPOs) on the continent.
“Fifteen IPOs are already in the pipeline, with one, Nigeria’s Interswitch, which processes payments for banks and operates in five African countries, could be Africa’s first billion-dollar IPO,” Baker and Mckenzie said in a statement published by Reuters.
The planned IPOs is coming as London Based Private Equity and Venture Capital also released a report on 29 February showing that Africa focused private equity firms raised $4.3 billion in funds to invest on the continent. The funds raised is the highest since 2010 and comes at a time asset prices have dropped significantly with many currencies down from 2014 highs and also stock markets in bearish territory. This means many of the private equity firms could be acquiring African assets on the cheap.
African currencies and stocks have been battered by global headwinds with the South African rand down 26 percent against the dollar, the Zambian kwacha is down 40 percent and the Mozambican metical has lost 31 percent. Nigeria has so far resisted pressure to devalue the naira but its stock market has lost $30 billion of its value since June 2014.
Dubai-based Abraaj Group Ltd, which has stakes in Nigeria firm, Mouka Foam, raised $990 million in its Africa Fund III, and London-based Helios Investment Partners LLP with $1.1 billion in its Investors III Fund.
“We’re trying to look for companies that benefit from a weaker currency, that are capable of exporting,” Bloomberg quotes Shaun Zagnoev, a partner at Ethos Private Equity Ltd. in Cape Town. The company raised $800 million for its latest Fund VI, according to Bloomberg.
“During periods of uncertainty there’s often increased deal opportunity” said Zagnoev.
“Valuations are lower and getting lower over time. This is presenting interesting opportunities over the medium-term, as we see sound businesses attracting softer valuations. Liquidity is also becoming an issue in many economies, which also opens up opportunities for private equity investors,” Marlon Chigwende, manager of the New York-based company’s $698 million African fund told Bloomberg.
Atlas Mara Ltd. co-founder, Robert Diamond also recently told Bloomberg that lower asset valuations in Africa are a buying opportunity. Diamond’s Atlas Mara has stakes in Nigeria’s Union Bank Plc.
