With African sovereigns and corporates in need of financing and yield-hungry investors increasingly drawn to the region as an opportunity away from the volatility in Europe, many potential investors are questioning where the real opportunities lie and what the best way to approach them is.
According to Melissa Butler of White & Case in London, Africa's capital markets and in particular domestic bond markets run by local exchanges and broker dealers should not be overlooked.
“This could be an interesting source of funding for issuers,” said Butler.
Nonetheless, one constraint that is limiting this growth is the lack of efficient access to these markets by issuers, she said. But she said this needed to be balanced with a transparent system that protects investors.
The tough stance adopted by regulators and listing advisors on the substance of disclosures was another potential hurdle cited.
With regulators being more proactive and investors asking more questions, it puts an onus on banks and clients to make sure they are properly ready when they access the market. Otherwise the deal is unsuccessful or the pricing goes up.
But, Amol Prabhu, director, legal, IBD emerging markets at Barclays, said the outlook for the next 18 months in Africa was positive, with many players focusing on the market.
“Within Africa there are probably about ten countries that are particular hot spots that people are looking at,” said Prabhu. “Everything is going on across M&A, private equity, project finance, as well as capital markets.”
Investors are looking at a variety of products in terms of capital markets as a financing tool. “There is a myriad of options that clients can access now.”