THE London Stock Exchange (LSE) is launching an aggressive attempt to increase the number of listings of African companies in the UK, following strong interest from institutional investors in a recent wave of initial public offerings from the region.
The LSE is working on partnerships with exchanges in Morocco, Egypt, Nigeria and Kenya for dual listings, in an effort to attract African blue-chips to list in London. In effect the LSE is trying to repeat its strategy of dual London-Johannesburg listings with Casablanca, Lagos, Nairobi and Cairo.
“There is a big push for Africa, particularly creating a partnership with local exchanges,” Ibukun Adebayo, co-head of emerging markets at the LSE, said in an interview. “We are working to bring collaboration with local markets,” he added.
The stock exchange’s campaign comes just weeks after Nigeria-focused oil explorer Afren suspended its chief executive pending an investigation into “unauthorised payments”, stoking concerns about corporate governance at African companies that are raising capital in London.
The city has historically been a hub for the natural resources industry, financing mining and energy groups operating in Africa. But Mr Adebayo said the LSE was courting “indigenous companies” in the consumer and financial sectors.
The LSE’s efforts pitch it against Dubai and Singapore, which are also battling to attract African companies to their exchanges. They come as African tycoons look for new sources of capital to expand their businesses.
The Johannesburg stock exchange is also trying to convince companies from all over the region to list in South Africa.
Over the past five years, 55 African companies have listed in London, compared with 33 in the previous five years. Recent listings include Atlas Mara, the investment vehicle of Bob Diamond, former chief executive of Barclays, and Nigerian oil group Seplat, the first Lagos-London dual listing.
Seplat in April raised $500m and Atlas Mara initially secured $325m in December, but later failed to reach a $400m target for a second fundraising. Mota-Engil, Portugal’s largest construction group, said in June it would list its Africa subsidiary in London, but withdrew the offer later after tepid demand. Bidvest, one of South Africa’s largest conglomerates, in September hired bankers as it considers listing its food services business in London to help fund acquisitions and growth.
The LSE could face several obstacles in attracting more African companies.
The first is governance, as investors worry about the repetition of several contentious deals during the past decade, particularly in the commodities sector.
The flotations of ENRC of Kazakhstan and Bumi of Indonesia in the 2000s tarnished the reputation of the City of London. Controlled by foreign tycoons and lured to London by persuasive bankers, each was allowed to list despite a poor record in regard to corporate governance. Since then, the UK Listing Authority, which acts as the gatekeeper for the London Stock Exchange, has tightened rules.
Mr Adebayo admitted that some UK-based institutional investors remain concerned. “Governance issues are still out there,” he said, adding that he pipeline of potential listings was “not as big as it should be”, in part because of governance concerns.
The second obstacle is the credit market, which has opened up for African companies, allowing them to raise capital through bonds and syndicated loans, thus bypassing the equity market. “The biggest rival for us is the debt market,” said Mr Adebayo, who recognised that African companies could tap a larger pool of sources of capital today than five or ten years ago.
FT
