Nigerian central bank moves to push banks to increase lending will be a damp squib, meaning an interest-rate cut is in prospect, says John Ashbourne, senior emerging markets economist at Capital Economics in London.
LSE’s Ibukun Adebayo: ‘London has completely changed its approach to Africa’
Ibukun Adebayo, co-head of emerging markets at the London Stock Exchange (LSE), says developing of local capital markets and improving governance are the new focus of the bourse's Africa strategy.
With 114 African companies listed, for a total valuation of £165bn, the London Stock Exchange has established itself as the second most important exchange for the continent, behind Johannesburg. Yet Ibukun Adebayo, the head of its African operations, says that the hunt for listings is no longer the exchange’s main priority. This Briton of Nigerian descent lays out the new strategy, and addresses the news of recent months.
You took charge of the African operations of the exchange 10 years ago. What was your first priority?
Ibukun Adebayo: Initially, we had Western-managed companies with African subsidiaries. We wanted to see more African-run businesses looking to raise capital overseas, rather than just relying on domestic markets. From around 2008, we had a boom of such companies, including with the listings of Nigerian banks Guaranty Trust and Diamond Bank.
So at the start you were primarily focused on adding new listings. Is that still the case today?
From 2016, we realised that, while our markets are absolutely right for certain issuers, they are not right for all issuers. We recognised that, rather than offer London-only listings, we would re-engineer our strategy to focus more on helping the development of local capital markets and improving standards of governance, positioning London as a centre for international pools of capital in addition to domestic listings.
How are you putting this idea into practice?
We provide the trading technology to a dozen different countries, including Botswana, Egypt and Tanzania. We’re also thinking about how we can help regulators improve their market classification. Only two countries – Egypt and South Africa – have emerging-market status, giving them access to greater pools of capital.
Who are some of your other partners?
We have a partnership with Nigeria, to create seamless dual listings in Lagos and London. We have a relationship in Kenya, where we are working with the Ministry of Petroleum and Mining to arrange the London listing of the national oil company, with a dual listing in Nairobi.
Elite has been extraordinarily successful, with about 100 African firms joining the initiative.
We’ve also developed a programme called Elite to scale up small companies and make them more investable. Elite has been extraordinarily successful, with about 100 African firms joining the initiative. The majority of these are in Morocco. Last year we expanded the initiative to West Africa’s BRVM exchange, and signed a memorandum of understanding with Kenya to launch there, too, with scope to assist companies across east Africa. The first cohort of Kenyan companies should be announced this year.
The London Stock Exchange has long been closer to anglophone Africa. Is the Elite initiative a way of opening up to other parts of the continent?
Morocco, a francophone market, was the first Elite partnership we announced. We build capital market partnerships irrespective of whether the country is anglophone, francophone or lusophone. The perception of our natural home is anglophone Africa, but I wouldn’t say that’s the case.
The first African company listed in London, in 1938, was a maker of mining detonators. Vivo Energy, the most recent, is an oil company. Would it not be time for the exchange, which now proclaims an ecological conscience, to take a step back from that sector?
London is a natural home for extractives: there is a deep concentration here of investors and advisers who understand mining and petroleum. But we take climate change very seriously. A lot of the work that we do is about channeling more resources into non-extractives, supporting greater climate-friendly issuance and investing. On London Stock Exchange’s main market, only one in four African companies are in that sector.
In 2018, the telecom tower companies Eaton Towers and Helios put their long-awaited IPOs on hold. Could these firms come back to market?
The telco industry is a huge opportunity in Africa. Some of the deals that you’ve mentioned have possibly fallen down on macro country-risk issues.
Helios operating in the DRC, for example?
Precisely. So we don’t think that has anything to do with our market, specifically, but just really with where the issuer is operating. There needs to be a mechanism to reassure investors about that risk. Once that’s done, I think you’ll see a broad flurry of deals in London. Those companies are at stages where they need capital to continue to grow.
The e-commerce company Jumia had a landmark IPO on the New York Stock Exchange last month. Are London’s peers catching up with it?
I would single out Jumia as being an anomaly. With some tech IPOs it’s about getting a high share price at the outset. We believe London provides a more justifiable valuation over a longer period of time.
The recent conviction of two former executives of Afren, a company active in Africa and listed in London, has tarnished the exchange’s good governance image. What have you learned from that event?
We can provide a safety framework for issuers and investors alike, and London does that better than any other jurisdiction, based on a fine balance between the needs of both sides. But, ultimately, there will always be market failures. One has to be realistic about the fact that some people operate outside the rules.
The last two years have been tumultuous, with the collapse of the planned merger with Deutsche Börse and the departure of your CEO. Has the exchange recovered from these woes?
Our results speak for themselves: in many areas our business is growing. Our new chief executive David Schwimmer’s support of Africa in particular has been immense. He accompanied the UK’s prime minister on her Africa tour last summer and spent time in Nigeria, Kenya and South Africa. He was also at the launch of our electronic trading platform in Johannesburg.
Bond issuance is rising across Africa. Is this an area of growth for the exchange?
Very much so. Since 2017 we’ve seen about $30bn worth of African sovereign bonds raised in London, most recently a $3bn bond from Ghana in March. The other area we think is equally of interest is the development of the local-currency bond market here in London. Last year we launched the first African local-currency bond, which was a Ghanaian cedi bond issued by the private sector issuer Quantum Terminals. We have a pipeline for other such deals, including in CFA francs.
Are there other markets yet to be conquered?
We want to engage with other African markets, including nascent markets. Angola, for example, has announced a privatisation programme, so it needs to develop its market very quickly. The London Stock Exchange could help in the areas of technology and regulation.
Finally, how are you planning for Brexit?
There are just so many unknowns at the moment, it’s difficult for us to make a comment that isn’t necessarily going to be a different point of view tomorrow.
But do you have contingency plans for each scenario?
Naturally. We are well-positioned.
This article first appeared in Jeune Afrique.