Managing Director of Open Capital Philip Gasaatura has said that an African IPO is not worth it for a company looking for quick returns or "fast money," as he puts it.
The question of whether an African IPO is worth it sparked a debate among investors in a panel session at the Inclusive Fintech Forum, in Kigali, Rwanda.
Philip Gasaatura who is also a mergers and acquisitions expert based in Kigali, likened an African IPO to "a lifetime journey," emphasising the patience and resilience required.
On the other hand, Yemi Keri, Co-founder of Rising Tide Africa and president of the African Business Angel Network (ABAN), expressed optimism, stating that in the long run, IPOs are worth it for the continent’s economic growth.
Bobby Pittman, Chairman of the Development Bank of Rwanda, also argued that entrepreneurs should not concentrate only on IPOs, as there are multiple exit strategies such as acquisitions and private equity buyouts that may be more suitable.
The viability of African IPOs
While IPOs is a way for companies to raise capital and gain market credibility, their viability in Africa is debatable. Panellists agreed that the maturity of local capital markets is a key determinant.
Keri highlighted the need for local pension funds and insurance companies to play a more active role in funding startups, "The South African Public Investment Corporation (PIC) is sitting on about $150 billion. If we could get more institutional investors believing in startups, it would be a game changer," she said.
However, institutional investors in Africa remain risk-averse, preferring stable returns over high-risk ventures. "Pension funds are used to fixed income investments and aren’t comfortable with the unpredictability of startups," Gasaatura noted."
The lack of updated regulations governing pension fund investments adds to the difficulty.
Meanwhile, Ike Eze, managing partner at Beta Ventures, stressed that African IPOs should be preceded by strong private markets. "An IPO is a destination, not a strategy. Before going public, companies need to focus on consolidation and scale through mergers and acquisitions (M&A)," he said.
Written by Omoruyi Edoigiawerie, a seasoned startup attorney with over a decade of experience. Learn more.
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What It takes to get an African IPO
For startups to be IPO-ready, they must meet several key criteria. Eze outlined the essential elements, including consistent revenue, strong corporate governance, stable financials, and a valuation of at least $50 million."You need to show stability, predictability, and a clear growth trajectory. Without that, investors won’t be interested," he explained.
However, Eze warned that even meeting these benchmarks does not guarantee an IPO. "The reality is that the IPO game is dominated by big players. If you’re not a $500 million-plus company, it’s tough to get attention on international exchanges," he added.
This means African fintech, Flutterwave — which is valued $3 billion — could be an attractive startup for foreign exchanges although the Nigerian stock exchange is courting the fintech.
Meanwhile, a recurring theme throughout the discussion was the critical role of early-stage investors in laying the foundation for future IPOs. Fadilah Tchoumba, CEO of ABAN, emphasised the need for more angel investors on the continent.
She said, Africa currently has around 2,050 active angel investors deploying $22.5 million annually, which far below the continent's potential.
Tchoumba argued that increasing the number of active angel investors to 50,000 and their investment pool to $200 million annually could significantly enhance the chances of African startups reaching IPOs. She also underscored the need for liquidity in capital markets and regulatory frameworks that protect investor rights.
The panel discussion underscored that while African IPOs are possible, they require a supportive ecosystem. Key components include patient capital from local investors, regulatory reforms, and a thriving private market that enables companies to scale before going public.
For IPOs to become a viable and transformative exit strategy for African startups, stakeholders must work together to address regulatory bottlenecks, build investor confidence, and create an environment conducive to long-term investment. The road to IPOs in Africa may be challenging, but with the right foundation, they could become an essential part of the continent’s startup landscape.
