The African Business Review Jan-Feb 2014 | Page 10

REVIEW
The stock markets
and Africa’s growth potential
Africa’s stock exchanges are on the rise, Cyrille Nkontchou speaks with ‘Tunde Olupitan about the
opportunities for new African entrepreneurs.

A

frica, particularly, Sub-Saharan Africa, has seen rapid growth
in the number of stock exchanges and experienced a stock
market capitalization boom in recent years. Two decades ago
there were only five stock exchanges in Sub-Saharan Africa, excluding
the older markets in South Africa and Egypt. Today there are 23
domestic and two regional stock exchanges operating on the continent.
There are challenges to Africa stock exchanges to enable them to enter
a new phase of rapid and sustained growth. On the listing front, the
number of firms listed on African stock exchanges is small compared
to say markets in India and China where 3500 and 1700 are listed
respectively in comparison to 2000 listed across all African markets.
There is also the question of transparency and accountability.

Cyrille Nkontchou is the founder and managing partner of Enko
Capital Management LLP, an Africa-focused asset management firm
with offices in Johannesburg and London. He is also the founder
and executive chairman of LiquidAfrica Holdings Limited. Cyrille
Nkontchou spoke at the AVCA 9th Annual conference earlier this year
about IPOs as exit options for PEs in Africa. The African Business
Review went to speak to him to explore this further.

10 | The African Business Review

Stimulating Growth

Africa is seeing a growing demand for new issues. Opportunities to
list are increasing with 23 domestic and 2 regional stock exchanges
operating on the continent. Empirical evidence suggests that valuations
achieved by many private equity exits in Africa via a stock market listing
over the past 3 years yielded a higher return than could have been
achieved in a private transaction. While private equity firms in the US
and UK are increasingly using IPOs to exit transactions, African PE
firms are still dragging their feet and hence lag behind their developed
market peers when it comes to using IPOs to exit investments. [1]

Cyrille Nkontchou says that IPOs present a good opportunity
for African entrepreneurs and for the growth of the stock exchanges
on the continent as most new issues in Africa tend to do well and tend
to be over-subscribed, as a result of the imbalance between supply and
demand of new issues.

Although there are no tax incentives in any of the economies,
Cyrille Nkontchou stresses the financial incentives of being listed.
It is often cheaper to raise finance, especially equity finance on the
capital market, than among private market groups. For every dollar of