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The UK wants more African companies to prioritize London when seeking to raise money from capital markets, a British government official told Semafor.
More than 100 African companies have raised over £17 billion on the London Stock Exchange (LSE) in the 10 years to 2020, with two particularly notable listings from the continent in recent months: Africa Finance Corporation, the Lagos-headquartered infrastructure investor, listed a $500 million eurobond in March, and Guaranty Trust Holding Company, the parent of one of Nigeria’s largest banks, raised $100 million in an initial public offering last month. GTCO became the first Nigerian bank owner to go public on the LSE.
Attracting more African IPOs has been high on the agenda of the UK’s Department for Business and Trade, said Tracey Austin, a senior DBT director overseeing financial and professional services. “The UK is trying to be more inventive to sell London as a financial services center from where companies can attract global capital, not just a place to do business in and leave,” Austin said.
The department’s officials have worked with private advisory firms over nearly four years to curate a pipeline of African companies to list in London. It has held forums with African private equity and venture capital firms to convince them of the benefit of having portfolio companies seek exits in London, rather than potentially wait years to attain the coveted unicorn status of private billion-dollar valuations.
A key aspect of the pitch to potential listing companies has been to explain revised listing rules that were rolled out last year. For example, the size of equity companies have to give up, in order to list on the bourse, has been lowered. The DBT has mostly spoken to pan-African and tech companies so far, Austin told Semafor, while companies in the AI, bio, and clean tech sectors are also showing promise.
Those AI and deep-tech companies are mostly in North Africa, particularly Tunisia, where a focus on science and engineering education is feeding tech entrepreneurship, she said. Ghana, Tanzania, Nigeria, and South Africa have also shown interesting ventures, Austin added.
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GTCO followed telecom operators Helios Towers, and Airtel Africa on the list of large African corporations to have gone public in London in recent years.
The London bourse is in competition with the two major stock markets in the US — Nasdaq and the New York Stock Exchange — for Africa’s public companies. The NYSE has seen a number of African IPO milestones in the last decade, especially the listing by African e-commerce company Jumia in 2019, and that of telecom towers provider IHS Towers two years later.
The US markets each amount to six to eight times the size of the LSE by capitalization, but the LSE has attracted the most IPOs by African companies on any exchange outside of the continent. Having brokers and analysts who pay attention to African equities has been part of the appeal for companies listing in London, Austin said.
Step Back
A typical listing process in London takes three years, with companies advised to aspire to one of the four sub-markets that make up the bourse, depending on their size.
The Alternative Investment Market (AIM), the smallest tier of the London exchange, has been the one easiest to get onto for African companies since it was created three decades ago. Equities listed on the AIM are among those tracked on the FTSE UK Listed Africa Index that serves as a benchmark of the performance of African companies across all tiers of the exchange. Nigeria’s GTCO was in second place on the index, as of the end of July.
The View From Nigeria
GTCO Chief Executive Officer Segun Agbaje said the company chose a London listing because of the market’s value, despite the trend this year of British companies increasingly favouring the US over London for their primary public offers.
“London still remains extremely attractive, especially for an organisation like us which is predominantly African and most of the revenues coming from anglophone West African countries,” Agbaje told the Financial Times in July, before his company’s listing.
Notable
- An IPO is a major ambition of the African fintech unicorn Flutterwave, though details around how that would happen remain vague.
- Jumia, Africa’s biggest e-commerce platform, accrued losses of $1 billion between its April 2019 IPO and 2023.