Coca-Cola Co, based in Atlanta, US, could quaff €7bn ($8.1bn) when it lists its African bottling operations with an initial public offering. It owns 66.5% of Coca-Cola Beverages Africa (CCBA), after it bought out Anheuser-Busch InBev’s share for $3.15bn in 2016. The other shareholder in CCBA is South Africa’s Gutsche Family Investments, led by Philipp Gutsche.

In April 2021, Coca- Cola announced plans to list CCBA shares within 18 months, with a primary listing on Euronext Amsterdam and a secondary listing in Johannesburg.

CCBA has 20,000 employees and operates in 14 countries, making up 40% of the volume of Coca-Cola products sold in Africa. Its headquarters will stay in South Africa. It said Rothschild & Co would advise.

Bruno Pietracci, president of the Africa operating unit, said: “The Coca-Cola Company sees Africa as a key growth market and views a separate listing of CCBA as an opportunity to deliver a broad, supportive, long-term investor base for the ongoing development of the business.”

In January 2022 Coca- Cola held a virtual capital markets day to highlight progress and the growth opportunity to potential investors. It has a strong record of profitable growth in hard currency and feels there are good reasons for optimism about future growth.

The company said:

“Over recent years, CCBA outperformed all the listed Coca-Cola bottlers by volume growth, outside of the Covid-19-impacted 2020, and believes it can continue this outperformance.”

Coca-Cola’s sparkling soft-drink brands include Coca-Cola, Sprite and Fanta; hydration, sports, coffee and tea brands include Powerade and Costa; and nutrition, juice, dairy and plant-based beverage brands including Minute Maid, Simply, Innocent and Del Valle.

Reports said the IPO advisers would include Bank of America Corp., Morgan Stanley and Standard Bank Group.

A big year for Nigeria’s bourse

Expect more innovation and a faster rollout of technology to enhance trading and market experience in 2022, says Temi Popoola, CEO of Nigerian Exchange Ltd (NGX).

At a presentation in February, he foresaw strategic business reorganisation for the bourse, which is part of

the NGX Group, including expansion to reach individual shareholders and digital transformation to bring more people into the capital market.

2021 saw transformation and achievement, including the Nigerian Stock Exchange’s successful demutualisation in March 2021. Nigerian Exchange Group Plc (NGX Group) is the holding company and has three operating subsidiaries: Nigerian Exchange Ltd (NGX), the operating exchange; NGX Regulation Ltd (NGX RegCo), the independent regulatory company; and NGX Real Estate Ltd (NGX RelCo), the real estate company. The NGX Group was listed by introduction on the NGX in October 2021.

Another key change in Nigeria’s capital market came on 9 December when NG Clearing launched Africa’s second central counterparty (CCP) clearing system for securities trades. This establishes a secure central operator to act as counterparty with all buyers and sellers and for risk management and it paves the way to introduce exchange-traded derivatives. Seven of these derivative contracts have been registered with the Securities and Exchange Commission for permission to trade them.

Zainab Ahmed, Nigeria’s Minister for Finance, Budget and National Planning, spoke at the official launch of the central counterparty last December and said that the capital market has a critical role of meeting the nation’s infrastructure needs, including mobilising medium- to long-term funds crucial to economic growth.

Aisha Ahmad, Deputy Governor, Financial System Stability,

Central Bank of Nigeria, said the new central counterparty would help strengthen the country’s investment environment through solutions that systematically reduce risks, enhance operating efficiency, and minimise costs for all market participants, thereby contributing to national development. NG Clearing will also boost clearing and settlement of payment on trades among African countries.

It is sometimes seen as a gold standard for market stability when there is trading of standardised derivatives on regulated exchanges through the electronic trading platform supported by a successful, well-capitalised and well-regulated central counterparty.

Otunba Abimbola Ogunbanjo, Chairman, NGX Group Plc, added: “The availability of derivatives as an asset class contributes towards the development of a country by providing links between cash markets, hedgers and speculators. The primary purpose of a derivatives exchange is to provide liquidity and price discovery mechanisms to transfer the underlying risks among players with varying roles in an economy.

“The experience of emerging markets such as Thailand, Turkey, South Africa, as well as markets like Korea, Malaysia, Brazil and India, reveals that innovation and growth in derivatives activity over the past 20 years has yielded substantial benefits in terms of market expansion and overall economic growth.”

NG Clearing joined CCP12, the Global Association of Central Counterparties, as an observer member on 15 September. Kevin McClear, Chairman of CCP12, and Teo Floor, CEO of CCP12, said: “We are delighted to welcome the second CCP from Africa as an Observer Member of CCP12. NG Clearing will bring much value to CCP12, and we look forward to collaborating.”

According to Popoola’s February presentation, the NGX All Share Index climbed 6.1% in 2021, with the NGX Oil/Gas Index up 52.5% and the NGX Growth Board Index up 28.0%.

In May, Nigeria’s second- largest cement producer, BUA Cement, issued the country’s largest corporate bond, using the NGX and FMDQ exchanges to raise $276m in seven-year debt capital at fixed interest of 7.5%. The issue was oversubscribed by 38%. BUA aims to increase cement production to 20m tonnes per year in 2022.

Infrastructure investment was boosted by the October listing of the LFZC Funding SPV $25.2m corporate bond which has 20 years’ duration – the longest in the market - and a 13.25% coupon.

The issuer is a special purpose vehicle company sponsored by Lagos Free Zone Company. Its parent is Tolaram, headquartered in Singapore, which develops and manages the zone and leases land to enterprises. The bond is guaranteed by the Infrastructure Credit Guarantee Company.

Day trading dawns in Kenya

Day trading is one of several innovations introduced by the Nairobi Securities Exchange, but it is taking time to appeal to investors and traders. By 20 January, day trading made up 3.4% of the value of shares traded in the two months since 22 November when it became available. The aim is to boost liquidity and trading activity.

Geoffrey Odundo (right), Chief Executive of the NSE, commented: “Day trading is a welcome move for local investors who have previously lobbied for the activation of the intraday trading, as they seek to take advantage of intraday price movements and increase their profit margins. We are confident of a bullish market performance going forward. Since we launched day trading (in December) we have seen activity totalling Ksh378m ($3.3m), which is 2.1% of the total turnover. This is an indicator that our market participants understand and fully embrace day trading.”

The programme started with unleveraged intra-day trading and will expand to cover leveraged day trading once rules are in place. Unleveraged trading means buy orders can only be taken if the client has enough cash in their broker back-office account and sell orders if they have the securities in their account.

David Wainaina, Head of Operations at the Nairobi exchange, said that it expects to double trading volumes from the current average of 22,600 transactions a month.

He said the bourse had upgraded its systems for the change. Previously, an investor had to wait until the next day before she or he could sell.

Trades are handled by the Central Depository and Settlement Corporation (CDSC), which provides clearing, settlement and depository services for listed securities.

Brokerage and transaction costs are major blocks to liquidity on African capital markets. Kenya is the most competitive bourse in East Africa, but investors pay up to 2.1% on the buy order and another 2.1% on the sell.

To encourage day trading, the NSE offers a 5% discount on the subsequent trades. The first leg of the NSE fees will be levied at the normal fee of 0.12% and the second leg will be at 0.114% but the fees to the regulator and the central depository are not rebated for day trading. Traders and brokers complain that combined charges remain expensive and movements in a share price within a day would need to be high to cover the trading cost.

Muathi Kilonzo, head of equities at EFG Hermes, Kenya, said: “The cost structure of day trading makes it difficult to make a profitable trade. That is, a stock would need to move a few percentage points during the day for day trading to make sense to an individual or firm. This has hampered the uptake. The authorities are aware and this should be solved in the near future.”

The NSE, with 65 listed securities, is one of the most dynamic and active exchanges in Africa.

On 1 February, the central depository CDSC said it was completing tests on a platform to allow pension funds and others to lend and borrow securities.

An institution or individual that holds shares can lend them to another for an agreed fee. The securities are either to be returned on an agreed date or on demand. Institutions and individuals with long-term holdings of shares can earn fees from lending them and use these to offset costs such as bank charges for custody.

CDSC takes the role of central counterparty as it will guarantee the settlement of all securities borrowing and lending transactions. In 2019 the NSE was the second exchange in sub-Saharan Africa to offer derivative trading when it launched the Next Derivatives Market. This offers futures contracts on the NSE-25 share index and single stock futures on selected active shares.

 First Abu Dhabi’s $1bn bid for Egypt’s EFG Hermes 

First Abu Dhabi Bank (FAB) has launched a bid for Egypt’s biggest investment bank, EFG Hermes, valuing it at E£18.5bn ($1.18bn).

EFG Hermes has a strong presence in Africa and the Middle East and operates leading stockbrokers in Egypt, Nigeria and Kenya. It also handles IPOs, mergers and capital raisings, as well as private equity and asset management.

Egypt’s Financial Regulatory Authority confirmed on 9 February that it had received FAB’s letter with a non-binding offer to buy at least 51% of the shares of EFG Hermes, which is listed on the Egyptian Exchange (EGX) and the London Stock Exchange. Rothschild & Co is advising FAB.

The offer is E£19 ($1.21) per share, a premium of about 21% compared to the share price before trading was briefly suspended on 9 February. When trading resumed the shares rose by 19%, before losing some of the gains.

EFG Hermes had net profit (after tax and minority interests) of E£356m ($22.6m) in the nine months to September 2021, down 16% on the same period in 2020. Investment banking revenue was down 38% year on year to $43.1m and made up 57% of the revenue contribution, while non- banking financial income was growing fast and was up 52% to $32.3m, or 43% of the total.

Allen Sandeep of Egypt’s Naeem Brokerage told Reuters the offer was too low compared to what he believed was fair value.

He said the offer valuation suggests a price of 1.3 times the book value of the assets but that non-banking income, which is a fast- growing share of the income and profits, should attract a valuation of over three times the book value.

EFG Hermes shareholders include the public (52%), French investment bank Natixis SA (12.9%), US private equity firm Ripplewood, Rimco EGT Investment and BNY Mellon, according to the September results.

The Financial Regulatory Authority said that whether or not the offer proceeds depends on due diligence inquiries, which EFG Hermes would conduct: “It is decided that the purchase offer should be submitted or not in light of the results of the due diligence examination, as well as fulfilling the necessary procedures and obtaining the relevant internal and administrative approvals from the concerned authorities within the Arab Republic of Egypt and the United Arab Emirates.”

Under Egyptian market rules, an offer for more than a third of the target will trigger a mandatory offer for 100% of the shares.

FAB stated: “The potential transaction is in line with FAB’s long- term strategic ambitions, and beneficial for both parties, providing enhanced scale, specialization and significant revenue synergies in investment banking.”

FAB first expanded into Egypt by buying Lebanese Bank Audi’s Egyptian operation in 2021. It has close ties to the Abu Dhabi government and is half- owned by sovereign wealth fund Mubadala Investment Co. and by members of the ruling family. Hana Al Rostamani took over as CEO in February 2021.

EFG Hermes operates in 13 countries in Africa, Asia, Europe and the US. It is reported that the aim is to keep it separate and listed.

Its stockbroker firms are ranked second on the Abu Dhabi Securities Exchange, first in Dubai, third on the EGX, and fourth in Nigeria. It has been a leading advisor on major deals and IPOs across its markets and it publishes top research.

Banks in the United Arab Emirates are looking outside the borders for expansion. Egypt, Africa’s third most populous nation, is a major investment destination. In 2019 the UAE and Egypt set up a $20bn joint strategic platform to invest in different sectors and the UAE government has been a key supporter for Egypt’s President Abdel Fattah el- Sisi.

Airtel Uganda to list 20% shares

Airtel Uganda is making plans to list 20% of its shares for trading on the Uganda Securities Exchange (USE) after selling shares to institutions and the public through an initial public offer. It follows the biggest phone company, MTN, which listed on the USE on 6 December after launching Uganda’s biggest IPO.

MTN in South Africa had intended to raise Ush895.6bn ($248.9m) through offering 20% of the shares in subsidiary company MTN Uganda, valuing the company at about $1.25bn. However, when the offer closed on 22 November it had fallen short of the target and only sold $151m-worth of shares, just under 60% of the target.

 MTN Uganda CEO Wim Vanhelleputte  said the offer increased local Ugandan ownership to about 15% from 4% as South African-based MTN Group Ltd. cut its 96% stake to 83%. He blamed “negativity” during the sale period.

SBG Securities Uganda Limited was the Transaction Advisor and Lead Sponsoring Broker for MTN Uganda’s IPO.

The IPO doubled the size of the Ugandan stock exchange, as it attracted 21,394 individuals and corporate investors, including 20,894 Ugandans, and boosted the number of accounts at the USE Securities Central Depository from 38,000 to 113,421 accounts.

The market capitalisation of domestic shares has more than doubled from $1.1bn to $2.4bn. All East Africans who applied were awarded 5 bonus shares for every 100 shares they were allocated, while Ugandan investors had a bonus of 10 shares for every 100 shares allocated.

The stock exchange and MTN Uganda operated digital platforms to allow the public to open new central depository accounts and apply for MTN shares seamlessly. The exchange says this innovation is the first of its kind in East Africa and over 74,000 trading accounts were opened at the Securities Central Depository.

It was a big boost for the bourse, which opened 25 years ago and had attracted 16 listings, including dual listings from Kenya. The previous listing was Cipla Quality Chemical Industries in 2016. The largest listing before MTN Uganda was electricity distributor UMEME in 2012.

The National Social Security Fund was the key anchor of both the MTN and UMEME share offers and bought 8.8% of MTN shares worth $100m, a large share of the offer. Other investors include Charles Magezi Mbire, Kenya’s National Social Security Fund, Duet Africa Opportunities Master Fund IC, EFG Hermes Oman LLC and pension funds for the Ugandan central bank and tax authority.

The listings come after regulation from the Capital Markets Authority of Uganda, which requires all foreign-owned telecommunications companies to list 20% of their shares, and in terms of Uganda’s National Broadband Policy. MTN Uganda will need to come back to the market to sell more shares to reach its target.

In 2021 the government required all mobile phone operators to list by June 2022. However, Airtel may also focus on the two-year time limit from when it renewed its 20-year licence in 2020. Market sources expect the listing in the third quarter.

MTN Uganda has a 51% market share, compared to 33% for Airtel.

Egypt’s $1.5bn transport start-up heads for Nasdaq 

Mostafa Kandil, the CEO of Egyptian ride-hailing start- up, Swvl Holdings Corp, said the company would list 35% of its shares for trading on the Nasdaq stock exchange after its merged with US special purpose company (SPAC) Queen’s Gambit Growth Capital. The target date for the listing is before March.

A press release said Swvl would have an imputed equity value of $1.5bn and would be the only listed tech-enabled mass transit solutions company. Swvl aims to raise $445m to expand from the current 10 cities in Egypt, Kenya, Pakistan, the UAE, Saudi Arabia and Jordan, to 20 countries by 2025.

The company was founded in 2017 and is based in Dubai. It supports travel within and between cities and offers services such as transporting students and employees to governments and businesses. According to the company, 1.4m riders had booked 46m rides. It says it pays drivers better rates than competitors and offers fleet optimisation, network planning, dynamic routing and demand estimation to organisations.

Investors in Swvl include supply-chain company Agility and mobile and data services operator Zain (with 50m customers), which both operate in many of the same markets, and Luxor Capital Group.

Mostafa Kandil, CEO and co-founder, said: “We have succeeded in executing our business plan in some of the most challenging emerging markets, where inefficiencies in infrastructure and related mass transit systems represent a universal problem, and have now reached a critical inflection point where we are ready to share our expertise and technology with the rest of the world.

“Queen’s Gambit is an ideal partner, who shares our core values and is committed to helping accelerate Swvl’s long-term growth plans.” By 2025 he aims to operate in Africa, South and North America, Europe and Asia.

Kandil previously worked as Head of Operations at Rocket Internet and then joined Careem, a ride- sharing platform that is now a subsidiary of Uber and operates in 100 cities across 15 countries.

Queen’s Gambit’s mission is “removing barriers to social and economic opportunity and solving complex challenges”. Victoria Grace, Queen’s Gambit founder and CEO, said: “When forming Queen’s Gambit, I was squarely focused on assembling a team of highly successful and strategically-minded women with unparalleled global relationships, to identify and then grow a disruptive platform that solves complex challenges and empowers underserved populations.

“In Swvl, we have found each of those things and more. Having established a leadership position in key emerging markets, we believe Swvl is ready to capitalise on a truly global market opportunity. We believe this combination will serve as a catalyst for massive growth at scale.” Swvl emphasises women’s safety when they use mass transport.

Swvl’s gross revenues were $26m in 2020 and were forecast at $79m for 2021, rising to $141m in 2022 and $403m in 2023.

New listings boost for Egypt Exchange 

There is a healthy pipeline of new companies that could list their shares for trading on the Egyptian Exchange (EGX) in the coming months. These include both state-owned and private enterprises.

The public offering of state-owned football company Ghazl El-Mahalla SC is due before the end of March 2022. The long- awaited listing of Banque du Caire is also expected this year, if it is approved.

A non-banking financial services company called Ebtikar is expected to list in May or June. It is a joint venture between a leading Egyptian trading company called MTI and private equity investors B Investments and BPE Partners, with 10 subsidiary and affiliate companies and in 2019 it processed $1.2bn in transactions through its e-payment companies. It operates in some of the most underserved sectors in Egypt thus contributing to the financial inclusion of the Egyptian people. It was set up in 2017 and the listing had been expected last year.

Abu Auf, a distribution and export company dealing in dates, coffee and health foods, with a focus on organic farming, is another expected to list its shares for trading.

It was founded in 2010, although the business started selling wholesale dried fruits and nuts nearly 50 years ago, and by last year had 180 branches in Egypt and more than 1,000 warehouses. In an announcement last September it said it would offer 49% of its shares for sale and use the proceeds to fund expansion to other countries in the region.

Listings had been held back because of the Covid-19 pandemic. Action started again in September with the initial public offer (IPO) of shares in government- owned payments company E-Finance for Digital and Financial Investments. There was huge demand, with bids 61.4 times more than the shares on offer and the IPO raised $372m, making it the biggest listing in the history of the Egyptian Exchange.

Its share price climbed swiftly after trading opened on 20 October but has since fallen back to below its first day closing price, although still well up on the offer.

The previous privatisation was in 2019 when the government sold a stake in the Eastern Company.

Mohammed Omran, Chairperson of the Financial Regulatory Authority, said he expected more companies to join the trading boards: “Companies affiliated with the Egyptian Armed Forces are expected to be offered this year,” he said.

“I expect an increase in the number of IPOs during the current year,” he added, saying that he believed other business owners would be inspired by the recent successes. n

Encouraging 2021 returns by African exchanges 

Several African stock exchanges offered a good return to US dollar investors in 2021, although they underperformed compared to the developed markets which had an outstanding year, including the US S&P 500 stock index which rose 23.3%.

Ghana Stock Exchange was the only one to beat the S&P index, offering a gain of 44% in dollar terms. Leading shares included Scancom, aka MTN Ghana, Guinness Ghana and Fan Milk.

The Namibian Stock Exchange share price index was up 19.0%, just above the MSCI World Index which returned 16.8%. South Africa’s JSE was up 16.7% in US dollars, led by MTN which was up 164%, followed by Royal Bafokeng Platinum (up 151%) and then Investec (up 125%). The Johannesburg bourse tied with Stock Exchange of Mauritius, also up 16.7%. Morocco’s Bourse de Casablanca rose by 15.9%.

The continent’s laggards included Tunisia, which was down 4.2% but still did better than the MSCI Emerging Markets Index, which fell 5.9%. Other lower performers were Botswana (up 2.5%), Dar es Salaam Stock Exchange in Tanzania (up 4.0%), the Nigerian Stock Exchange renamed NGX (up 7.1%), and Nairobi Securities Exchange (up 7.8%).

The Egyptian Exchange gave investors a 9.8% return in US dollars.

The best-performing large share was pharmaceutical company Sothema in Morocco, with a 184% gain for investors.

Scancom, Ghana’s top mobile network operator, offered 82% growth after its mobile money system MoMo processed transactions in 2020 that were worth more than the country’s total economy (measured as gross domestic product).

Nigeria’s FBN Holdings returned a 75% gain for investors. It is the oldest financial holding company, with the largest network of some 117,000 banking agents. Its subsidiary First Bank of Nigeria ranks third by total assets. The group had a governance shake-up and improved non-performing loans.

Macro Pharma debuts in Egypt

The latest addition to the Egyptian Exchange is Macro Group Pharmaceuticals S.A, whose shares started on 10 February. The shares were issued through a book-build process in which advisers sound out potential institutional investors for interest and the price they are willing to pay. The result was that the biggest existing shareholders sold 251.3m of their shares through an international private placement to institutional investors, plus another 13.2m shares to Egyptian individual retail investors.

There was huge demand for the retail offer. Bids were made for 102.2 times the shares offered and investors received a small proportion of what they sought to buy.

The international offer was 1.8 times oversubscribed. The shares started trading at the offer price, which was E£4.85 ($0.31) per share, so the total market value of Macro Group when it started trading was $178m. The offer was run by EFG Hermes Promoting and Underwriting S.A.E. as sole global coordinator and joint bookrunner with Renaissance Capital Egypt for Promoting and Underwriting of Securities S.A.E. as the other joint bookrunner.

Mostafa Gad, co-head of promotion and underwriting at EFG Hermes, said foreign institutions, including from the Gulf and South Africa, had bought 75%-80% of the shares in the international offer.

Macro Group was founded in 2002 and is a fast-growing member of a subsector that analysts call ‘cosmeceuticals’ (pharmaceuticals and cosmetics). It has a 23% market share of its target therapeutic areas. It makes products at a plant in Badr City and 549 employees sell the products to doctors and pharmacies. It has also ventured into ‘nutraceuticals’ (foods that provide medical or health benefits).

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