Out of Africa
“The tale of Africa and London Stock Exchange has been intertwined for a very long time."
Ibukun Adebayo, Head of Equity Primary Markets, Africa
London Stock Exchange attracts companies from across the globe and it has a connection with Africa that stretches back for decades. Now, as economic growth in Africa continues to outstrip much of the world, more and more African firms are listing in London.
Mongolia, Singapore, Vietnam, Nigeria, Macedonia, Estonia, Bangladesh, Fiji and Belize: it reads like an extract from the United Nations, or a travel guide to exotic destinations. In fact, it is just a few of the countries that are represented on London Stock Exchange
The list goes on – in total, 700 companies from 70 different nations have chosen London to list their shares, attracted by the prestige and profile of a quote on London Stock Exchange and the unrivalled access to capital it offers.
One of the big draws of London is the expertise offered by market participants, says Jon Edwards, Deputy Head of Primary Markets, Emerging Markets at London Stock Exchange Group (LSEG).
"London is a very attractive market for international firms, particularly from emerging economies. Companies from Asia, Russia and Africa are all very well understood here. There are a large number of funds with experience of overseas companies and there is also a deep pool of analysts to draw upon for every sector of business. No other market can offer the same level of expertise," he says.
This is likely to translate into another busy year ahead for international listings in London, with an "active pipeline of companies from all sectors lining up to list", says Edwards.
African companies are particularly well represented in London and the links with the vast continent date back to the 1930s, when the first African company listed its shares in London. That was African Explosives & Industries, which made blasting explosives and detonators for the gold and diamond mining industries in South Africa. Now called AECI, it is still listed in London today.
Many more African companies have made the same journey to London since then.
"The story of Africa and London Stock Exchange has been intertwined for a very long time. We are very familiar with the way business is done in Africa so we understand the risks, and the rewards, of the continent," says Ibukun Adebayo, Head of Equity Primary Markets, Africa and India at LSEG.
"We have an ecosystem here that can adequately price the risks of doing business in different regions. London is famous as the global financial sector with the most balanced regulatory system. There is no other regime that is as comprehensive and our rules governing disclosure and market abuse provide protection for investors."
"We’re a blue riband market. If you’re an African business with aspirations, then London is your best platform," he adds.
Made up of more than 50 diverse countries, from Nigeria to Kenya, Mauritius, Zimbabwe and South Africa, Africa has achieved growth rates in recent years that would be the envy of any Western economy.
At five per cent, the average economic growth of sub-Saharan Africa outstripped that of more than 70 per cent of the world in 2013 according to the International Monetary Fund (IMF).
The rate of growth is expected to accelerate to six per cent in 2014 and, over the next five years, no less than half the world’s fastest-growing economies will be in sub-Saharan Africa, with another two in North Africa, according to IMF forecasts.
LSEG is playing its part in the African growth story. African companies looking to London have traditionally come from the natural resources sector - oil and gas, mining and precious metals. But the range of sectors is now broadening as the economies of the continent mature and millions more consumers enter its rapidly expanding middle class.
"Media companies, airlines, real estate and consumer goods companies from Africa are now all represented in London and we expect that trend to continue," says Adebayo.
At $75 billion, the collective worth of African companies on the London market is second only to the Johannesburg Stock Exchange. In total, there are 119 African companies listed in London, with 29 on the Main Market and 90 on AIM.
Among those African companies listing in London last year was Zenith Bank, Nigeria’s second largest bank and one of the few banks to emerge from the 2008-9 financial crisis intact.
Zenith was already listed on the Lagos Stock Exchange and raised no new capital through its London debut. Instead, the group used the listing to increase its profile in the international financial world and provide potential investors with the reassurance that it was able to meet London’s strict corporate governance criteria.
"London has given the bank access to a wide range of major institutional investors wanting to buy into the continent’s growth story," says Adebayo.
Since 2008, African-focused companies have raised £4.2 billion in London in new and further issues. London Stock Exchange has long attracted Africa’s resources companies, many of which are run by Western management, but Adebayo highlights the growing number of indigenous businesses that are looking to London for their financing needs.
One such success story is Lekoil, the Nigerian exploration group that raised £27 million when it floated on AIM in May 2013. Less than six months later, the group was able to go back to the market and successfully raised a further £60 million, at 55p a share, comfortably above the May float price of 40p.
The capital raised in London has enabled Lekoil to fund exploration work at its promising drilling prospects off the coast of Nigeria. Chief executive and founding director, Lekan Akinyanmi, says he has been "extremely pleased" with the positive response from investors in London.
"Our ability to attract such experienced and high quality directors along with obtaining professional advice from leading organisations in London has enabled Lekoil to develop at a rate that would not have been possible otherwise
There is undoubtedly a strong link between investment opportunities in Africa and capital from London and we see ourselves as an important part of this growing movement," he says.
LSEG works closely with the major African exchanges, providing trading software and clearing technology. "We want to help create an environment where they are able to fund local businesses," says Adebayo. "We engage with them on a collaborative basis, to help bring the liquidity pool of London to Africa."
Once a company has outgrown its local market, however, London can fulfill its financing needs. As Adebayo explains: "In terms of access to capital, the beauty of London is that it’s not just UK investors here, it's global institutions, from US pension funds to Singaporean sovereign wealth funds, German hedge funds and so on."