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Cape Town stakes claim to Africa’s Nasdaq amid IPO dry spell

With listing costs that are a third of that charged by the Johannesburg Stock Exchange.
Image: Dwayne Senior/Bloomberg

South Africa’s newest stock exchange opens Thursday, pledging to lure firms from across the continent with listing costs that are a third less than charges by its competitor in Johannesburg.

TWK Agri Pty. will be the first company to trade on the Cape Town Stock Exchange, which was previously called 4 Africa Exchange Pty. before an overhaul that resulted in it becoming a full-fledged bourse, according to Chief Executive Officer Eugene Booysen. BKV Holdings will list a few weeks later.

The newcomer would like to become the Nasdaq of Africa, able to attract companies looking to raise capital in Kenya, Nigeria, Ghana and others, Booysen said.

While a wave of initial public offerings has swept across the world, firms in Africa’s most-industrialised economy — especially smaller companies — have been de-listing from the main exchange in recent years due to costs and onerous compliance issues. Cape Town’s bourse and other rivals such as A2X and ZarX have been using technology to cut listing charges in a bid to lure business.

“We reduce the cost, risk, time and complexity for companies looking to list,” said Booysen. “This, and owning our technology, enables us to target small and medium firms” valued at up to R2 billion ($132 million), he said.

Other than the Johannesburg Stock Exchange, the bourse in Cape Town will be the only one able to offer companies equity and debt trading, said Booysen. The exchange managed to get its debt listing rules approved last year, and is set to begin the trading of debt securities in October, he said.

While private equity has managed to find growth companies, South African exchanges have not been able to bring them to market, said Booysen.

South Africa has two fast-growing tech firms in branchless lender TymeBank, backed by billionaire Patrice Motsepe, and payments company Yoco, but both have raised funding from outside the equity-capital markets. TymeBank attracted $109 million in February, at a valuation of R8 billion. Yoco raised $83 million in July.

Rising investment in renewable energy worldwide should also bode well for South African firms, which could benefit from a new government policy allowing more private power generation. Such companies may sell equity to raise funds, providing the new exchange with business.

Opening a stock exchange in South Africa’s so-called mother city of Cape Town has the advantage of being located where most of the nation’s fund and asset managers are based. Booysen said there’s a commitment to unlock the segment of small and medium companies looking to access capital in the country, and also across sub-Saharan Africa.

The bourse is in talks with other African exchanges to share its technology offering and to work on a revenue share basis, said Booysen. The exchange estimates that shares worth R50 billion in total will trade by mid-2023, a more than seven-fold increase in the total market value from levels reached under its previous avatar.

© 2021 Bloomberg

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