The Johannesburg Stock Exchange is positioning itself to host a secondary listing of Dangote Petroleum Refinery after the company completes its planned initial public offering in Nigeria.
The interest comes as Dangote seeks to raise about $5 billion through an offer expected to conclude in October. A recent $2.5 billion private placement for a 6 per cent stake implied a valuation of roughly $40 billion, setting a demanding benchmark for public investors.
A JSE listing could give the refinery access to South Africa’s large institutional investment market. It would not, however, answer the central question surrounding the offer: whether the refinery’s financial performance can justify a valuation far above those of comparable global refiners.
JSE Interest In Dangote Refinery
Dangote Refinery would be a valuable addition to any African exchange.
The 650,000-barrel-per-day facility is seeking capital to increase its processing capacity to 1.4 million barrels per day by 2028. Dangote is also developing plans for another refinery in Kenya as part of a wider expansion of its energy business.
For the JSE, securing the refinery would bring a major industrial company with operations and ambitions extending across several African markets. It could also reinforce Johannesburg’s role as a gateway for institutional investment into African companies.
South African investors have already shown interest. Representatives of the Government Employees Pension Fund, the Public Investment Corporation and Alterra Capital Partners visited the refinery in May to discuss investment opportunities.
The proposed listing also fits a wider effort to connect Africa’s fragmented capital markets. In April, the NGX Group brought together representatives from the JSE and other African exchanges to discuss cross-border listings, investor access and settlement infrastructure, using the Dangote Refinery IPO as a possible test case.
What Would a Secondary Listing Actually Change?
A secondary listing would allow Dangote Refinery shares, already listed primarily in Nigeria, to trade on the JSE.
This could make the company easier to access for South African pension funds, asset managers and retail investors. The JSE states that foreign companies with secondary listings are classified as domestic securities, giving them access to some local institutional investment mandates.
That matters because some funds face restrictions on how much they can invest directly in foreign-listed assets. A JSE listing could remove part of that barrier and allow investors to trade the shares through familiar South African brokers and settlement systems.
The refinery would remain primarily regulated by the market hosting its main listing. Under the JSE’s framework, a company with a secondary listing remains subject mainly to the rules of its primary exchange.
A second trading venue could improve liquidity and price discovery, but it would not automatically raise the refinery’s underlying value. Investors in Johannesburg would still examine the same earnings, debt, cash flow, governance and operational risks as investors in Lagos.
More importantly, Reuters reported that Dangote’s advisers were not planning a cross-listing at this stage. Other African exchanges may instead create depositary receipts, exchange-traded products or similar instruments that track the NGX-listed shares and their dividends.
The JSE’s interest should therefore be treated as a proposal, not a completed agreement.
Can African Markets Absorb a $5bn Offer?
A $5 billion IPO would be unusually large for any African exchange.
The target would equal slightly more than 4 per cent of the NGX’s total market capitalisation of about $116 billion as of August 4. The final amount will still depend on what Nigeria’s Securities and Exchange Commission approves.
Dangote’s advisers have held discussions with exchanges in South Africa, Kenya, Egypt, Ghana and Rwanda. Kenya alone could reportedly mobilise as much as $500 million, largely from pension funds and other institutional investors.
This explains why regional investor access matters. Raising the entire amount from Nigerian investors could place pressure on existing market liquidity, particularly if fund managers sell other listed shares to finance their subscriptions.
What Risks Would JSE Investors Be Taking?
Crude supply remains one of the refinery’s largest operating risks.
Nigeria has struggled to supply enough domestic crude to meet the refinery’s requirements because the government must also honour export contracts and oil-backed debt commitments. Relying more heavily on imported crude could raise costs and reduce some of the competitive advantage expected from operating in an oil-producing country.
The planned increase to 1.4 million barrels per day would make crude availability even more important. Brendon Verster, senior economist at Oxford Economics Africa, has warned that the expansion could require imported oil unless Nigeria raises production.
Execution is another concern. The original refinery took years longer than expected to complete and cost about $20 billion. Expanding it while pursuing another large refinery in Kenya creates funding, construction and management risks.
Investors must also wait for regulatory approval. On June 23, Nigeria’s SEC stopped unauthorised promotion of the IPO because no application had been submitted or approved at that time. Reuters reported on August 4 that the refinery had since submitted an application and expected a decision within weeks.
The two reports describe different points in the regulatory process. They do not confirm that the offer has received approval.
Expert View
Chinenyem Anyanwu, chief executive of Lagos-based Dependable Securities, said the planned offer had generated strong interest among Nigerian institutions, first-time investors, diaspora investors and foreign funds seeking exposure to a major African industrial asset.
That interest supports the case for distributing the shares across several markets. It does not settle the valuation question. Demand during a heavily anticipated IPO can reflect scarcity and brand recognition as much as a detailed assessment of long-term earnings.
For investors, the prospectus will carry more weight than the level of early excitement.
The JSE’s interest validates the refinery’s importance to African capital markets. It does not validate a $40 billion price.
The market test will begin when the SEC releases an approved prospectus showing what investors are buying, how the refinery makes money and what risks sit behind its expansion plans.