IN line with global trends, 2015 was a challenging year for African capital markets in the wake of market volatility and the emergence of renewed global economic uncertainty in the latter part of the year, while the first half resulted in the highest levels of both equity capital markets transactions and proceeds raised in the past five years.

PwC released its 2015 Africa Capital Markets Watch publication yesterday, which analyses equity and debt capital market transactions that took place between 2011 and 2015 on exchanges throughout Africa, as well as transactions by African companies on international exchanges.

Equity capital markets transactions included in the analysis comprise capital raising activities, whether initial public offerings or further offers (FOs), by African companies on exchanges worldwide and those made by non-African companies on African exchanges.

Debt capital markets (DCM) transactions analysed include debt funding raised by African companies and public institutions.

PwC Africa Capital Markets Leader, Mr Nicholas Ganz says: "At 31 December 2015, African exchanges had a market capitalisation of about $1 trillion, with 23 percent of this value residing on exchanges outside of South Africa.

"Though the statistics cannot be interpreted in isolation, certain metrics commonly used to analyse global market performance, such as the market capitalisation-to-GDP ratio, suggest that untapped value remains in Africa's capital markets."

Overall, $12,7 billion was raised in 2015 in ECM activity across the continent and $41,3 billion over the past five years.

The 2015 showed a steady overall increase in IPOs of 12 percent in terms of transaction volume and 17 percent in terms of US dollar denominated value, as compared to 2014.

However, 72 percent of 2015 IPOs value and 54 percent of IPO volume was carried out during the first half of the year, reflective of the relatively higher levels of consumer confidence as compared to the second half.

In the past five years, there have been 105 IPOs raising $6,1 billion by African companies on exchanges worldwide and non-African companies on African exchanges.

The top 10 African IPOs by value in 2015 took place in South Africa and North Africa, namely Egypt and Morocco.

In 2015, capital raised from IPOs by companies on the Johannesburg Stock Exchange in US dollar terms decreased by 11 percent as compared to 2014, largely due to the weakening of the South African rand during the year; noteworthy is that the rand value of IPO capital raised on the JSE in 2015 increased by 11 percent over 2014 levels.

Capital raised from IPOs by companies on other African exchanges in US dollar terms increased slightly by 3 percent as compared to 2014.

In terms of volume, the JSE saw a 33 percent increase in the number of IPOs as compared to 2014, and listings on the JSE's AltX more than doubled. Over the past five years, the JSE has led African exchanges in terms of IPO transactions and capital raised was $2,7 billion.

In the second place in terms of IPO transaction volume after the JSE was the Bourse de Tunis with 23 issuances, while in second place by capital raised was the Egyptian Exchange with $861 million.

In third place in terms of volume was the Casablanca Stock Exchange with seven issuances, and third by capital raised was the Nigerian Stock Exchange with $751 million, over 70 percent of which relates to 2014 SEPLAT IPO.

Since 2011, capital raised from IPOs by companies on the JSE represented 45 percent of the total African IPO capital and 33 percent of the total transaction volume.

Coenraad Richardson, PwC South Africa Capital Markets Partner, says: "The JSE remains a significant anchor of African capital markets activity, with a ranking of second in the world for exchange regulation and a leading global ranking for ease of raising debt and equity capital, according to the World Economic Forum's Global Competitiveness Report 2015-2016."

On sectorial basis, the financial services sector dominated the African IPO market during 2015 at 46 percent of total value and 50 percent of total volume, followed by industrial, health care and consumer goods sectors in terms of value.

During the past five years, there have been 336 FOs, raising $35,2 billion by African companies on both African and international exchanges.

"Though the growth rate of 2015 FO activity did not match that of the prior year, the trend remained distinctively positive," said Mr Andrew Del Boccio, PwC Associate Director, Capital Markets, South Africa. During 2015, FO activity increased by 20 percent in terms of transaction volume and by 13 percent in terms of US dollar value as compared to 2014.

In 2015, capital raised from FOs by companies on the JSE, specifically, increased by 17 percent (in US dollar terms), whereas proceeds from FOs on other African exchanges decreased by 30 percent from $1,2 billion in 2014 to $827 million.

Over the five year period, the vast majority of FO activity was from sub-Saharan African countries, with 76 percent and 86 percent of total FOs volume and value, respectively. Between 2011 and 2015, capital raised from FOs by companies on the JSE represented 85 percent of the total African FO capital raised and 67 percent of the total transaction value.

Over this period, in second place in terms of both FO volume and value was the Egyptian Exchange followed by the Nigerian Stock Exchange.

On a sector basis, FOs were slightly lower than the five-year average in the financial sector during 2015. There was a significant increase in the technology sector from 7 percent on average to 23 percent, driven largely by a December rights issue by Naspers.

African DCM activity has declined since its peak in 2013. Over the past five years, 489 debt transactions took place on African debt markets or, more commonly, by African companies on international markets, raising $110,2 billion, of which 72 percent was US dollar-denominated.

The average of proceeds raised in 2015 was $411 million per transaction, $85 million higher than 2014's average of $326 million and 83 percent higher than the average per transaction over the past five years of $225 million.

Darrell McGraw, PwC Nigeria Capital Markets Partner, says: "Despite challenging economic times, which are felt heavily in Nigeria, 2016 will be pivotal as companies will be looking to reassess their strategies, which may include divesting of non-core businesses.

This will create an opportunity for cash-rich investors, or other corporates to tap into the local debt markets to raise domestic currency bonds. Until relative certainty returns to the currency markets, the popularity of US dollar denominated bonds is likely to taper."

Growth across the African continent will require continued investment in various sectors including infrastructure, agriculture, financial services, and telecommunications, alongside other industries more traditionally associated with Africa.

In 2015, the capital markets reflected this continued need for investment and continued appetite from investors with key portfolio allocations targeted toward emerging and frontier markets.