(Bloomberg) -- South Africa is poised for a surge in initial public offerings and fund-raising activity as soon as next year, spurred by optimism that the continent’s biggest economy may be turning a corner after years of lackluster growth, said JPMorgan Chase & Co.
Positive sentiment has been building with the formation of a business-friendly governing coalition after the African National Congress lost its parliamentary majority for the first time since 1994 in the May 29 election. That’s triggered a wave of investment by multinationals, rallies in the rand and bonds and a rise of more than 20% in the benchmark stock index in dollar terms since June.
“We would expect primary activity to pick up,” said Edward Bell, managing director at JPMorgan in Johannesburg. “As equity market performance and valuations return to more appropriate levels, the incentive and the ability to issue equity or IPO a business becomes a viable option.”
The Johannesburg bourse is gearing up for an IPO in Pick n Pay Stores Ltd.’s Boxer unit, expected before the end of the year. Investors are also looking toward Anglo American Plc’s plans for the spinoff of its platinum and diamond businesses.
Other possible high-profile IPOs include Coca-Cola Co.’s listing of its African bottling business. Bloomberg previously reported that the beverages company may seek an $8 billion valuation for the division in 2025.
The Johannesburg Stock Exchange is intensifying efforts to attract inward and secondary listings, offering opportunities for businesses with African or sub-Saharan African ties, according to Bell.
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“Whether you talk to our research teams or our sales trading teams, the questions they are getting are much more about South African companies and outlook than they have been over the last four or five years,” he said.
JPMorgan, the largest US bank, predicted in October that South Africa’s economy would grow 1% this year and 1.4% in 2025. That’s after gross domestic product expanded by an average of less than 1% over the past decade.
While foreigners have sold a net $5.5 billion worth of South African stocks this year, domestically focused equities are starting to draw attention again as confidence in the economy grows. Banking shares including FirstRand Ltd., Standard Bank Group Ltd., and Capitec Bank Holdings Ltd. are among the top performers, all surging more than 25% since June.
Heightened activity in debt issuance across sub-Saharan Africa is also likely this year, Bell said.
“Emerging market debt investors are looking for sub-Saharan exposure as it provides good yield and the region currently has a more stable economic outlook,” he said.
The US bank is also looking to expand its presence in Africa, with Chief Executive Officer Jamie Dimon visiting Nigeria, Kenya, South Africa and Ivory Coast this month, marking his first trip to the continent in seven years. The investment bank employs 160 people across the region with the majority in South Africa, its main base, and has recently received licenses to operate in Kenya and Ivory Coast.
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--With assistance from Janice Kew and Monique Vanek.
(Updates with details on JPMorgan’s Africa plans in final paragraph)
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