April 2019 / South Africa

Fund managers say ready to deploy up to US$1 trillion for investment in the continent

The African continent is set for a major shift in Private Equity investment trends after a major announcement was made in Nairobi this week. During the 16^th annual African Private Equity and Venture Capital Association (AVCA) conference, fund managers from around the globe, mainly the US and European markets said they are ready to deploy up to US$1 trillion for investment in the continent. This is through PE funds, a move that now places the continent at a strategic position to tap into the funds for investments in various areas. If tapped by local investment firms, the pool of funds could more than double the number and value of deals reported in the last six years, with regions such as East Africa, West Africa and Sothern Africa reaping big. “It is a plus for Africa,” said Baba Alokolaro, Managing Partner at Nigerian law firm- TNP (The New Practice),“From what we have seen, investors are taking Africa more serious than they had in the past,” Alokolaro who led a team of experts from TNP to the Nairobi event said the continent should angle itself for more deals this year, singling out Kenya as one of the countries set to benefit in East Africa. “We expect to see a lot of deals going forward. In East Africa, Kenya will remain a top investment destination,” he said. AVCA latest data shows the value of reported African PE deals between 2013-2018 was US$25.7 billion, on a total number of 1,022 deals. During the period, total value of African PE fundraising closed at US$17.8 billion. The highest value in the six years was recorded in 2014 (US$7.8 billion) which went down to US$2.5 billion in 2015, the lowest during the period under review. Last year, the value dropped to US$3.5 billion from US$3.9 billion in 2017, reflecting reduced investment activities by both fund managers and investment funds. West Africa leads in both the number and value of deals reported during the period, where it accounted for 26 per cent(volume) and 25 per cent-share of total deals. East Africa took a sizable share commanding 18 per cent of PE deals by volume , but lower on value which accounted for eight per cent of the US$25.7 billion. The Nairobi announcement hence places the continent at a strategic position to revitalize the markets. AVCA Chief Executive Michelle Essome has since expressed confidence over growth of the PE market in the continent. “We are positive the PE market will continue growing presenting a unique asset class for Africa. The growth will enable companies to expand, create employment and improve lives in the continent,” Essome said told journalists in Nairobi. AVCA Chairperson Tokunboh Ishmael said: “Our hope is that companies will grow to an extent where they will expand and increase intra-regional trade.” According to Tokunboh, who is also the Co-founder & MD of Alitheia Identity, growth in investments will strengthen the continent, giving Africa a stronger bargaining capacity in the global scene. East Africa Kenya has continued to dominate the region’s PE space as investment firms hunt for deals in different sectors. According to official industry data, the East Africa’s economic power house accounted for 59 per cent and 58 per cent of the value and volume of deals reported in the region respectively, between 2013 and 2018. Uganda took 19 per cent of the volume of PEs and 11 per cent of the total value. Tanzania accounted for nine per cent on both the volume and value of deals reported in the region. Ethiopia took an 11 per cent share of PE deals by value and seven per cent by volume, Rwanda six per cent (volume) and three per cent (value) while Djibouti had a seven per cent share of PE deals by value and one per cent (volume) of the total deals. 194 PE deals were reported during the six year period(2013-2018) valued at US$2.4 billion, of which US$6 million worth of the deals were median deal size. “The average growth rate in East Africa was almost six per cent from 2010 to 2018, with Djibouti, Ethiopia, Rwanda and Tanzania recording above-average growth rate,” AVCA says in its latest report. East Africa Venture Capital Association (EAVCA) data shows disclosed value for deals almost doubled to US$834.3 million last year, compared with US$446.78 million in 2017. Ethiopia has the potential to be a key market for PE investment, AVCA has since noted, given the size of its population (at 108 million) , the second most populous on the continent. This year’s event saw more than 500 top fund managers and strategic investors from across the globe meet in Nairobi to deliberate on industry challenges and investment opportunities, mainly in Africa. The fund managers collectively manage more than $1.5 trillion (Sh151.3 trillion) in assets. During the forum, the Kenyan government called on investors to put funds in projects that will help the realization of President Uhuru Kenyatta’s Big Four Agenda of Food Security, Universal Health Care, Affordable Housing and Growth of the Manufacturing sector.

Constructions works on Africa’s biggest Aids drug factory in Kenya has commenced and is being developed under a partnership between the government and the Global Fund and local drug manufacturers at cost of US $100m. County’s Medical Director Jackson Kioko confirmed the reports and said the facility is aimed at reducing the reliance of almost half of the continent’s countries on European imports and will dramatically reduce Kenya’s spending on its Aids epidemic.

In his recent state of the city address, Ekurhuleni mayor Mzwandile Masina said that the city is in the process of constructing three new mega projects – namely John Dube, Daggafontein and Leeuwpoort. The new cities, backed by the Gauteng government and the Department of Human Settlements, will have a total yield of 50,571 units, aimed at addressing the need for affordable housing in the area, he said. These ‘mega projects’ are just three of 30 earmarked for Gauteng, where the provincial government aims to undo the historic settlement patterns of the apartheid era. Masina said that 26,000 low-cost houses have been built over the last two years, with a vision to have the 50,571 units by 2021. A number of projects have been in the pipeline since before 2017, but were neatly compiled into an investment document in June 2018, and outlined by the Department of Human Settlements’ Gauteng Partnership Fund (GPF). “Mega projects emerge as a corrective measure for the challenges encountered in the first ten to fifteen years of the democratic South Africa,” the GPF said. “The initiative seeks to close the gaps, whilst redefining future cities in line with the dictates of the National Development Plan, and the Gauteng City Region (GCR) strategy.” According to the development plan for the project, the mega cities project is a R100-billion economic corridor investment, which ultimately aims to deliver more than 800,000 houses within 30 residential developments spread across the five development corridors in Gauteng. These corridors are:

• The Central Development Corridor – anchored on the city of Johannesburg as the hub of finance, services, information and communication technology, and pharmaceutical industries;
• The Eastern Development Corridor – built around the economy of the Ekurhuleni metro as the hub of manufacturing, logistics and transport industries;
• The Northern Development Corridor – anchored on Tshwane as the administrative capital city and the hub of the automotive sector, research, development, innovation and the knowledge-based economy;
• The Western Corridor – encompassing the economy of the West Rand district and the creation of new industries, new economic nodes and new cities; and
• The Southern Corridor – encompassing the economy of the Sedibeng district and the creation of new industries, new economic nodes and new cities.

The plan involves the redevelopment of cities in areas of existing infrastructure, as well as drawing investment into developing infrastructure in new areas. These are some of the biggest projects:

---

Lanseria Airport City Lanseria falls within Region A of the city of Johannesburg Metropolitan Municipality. The Mega Project for Integrated Residential Development at Lanseria Airport City is designed to be a mixed-use residential development, and business district. The existing Lanseria International Airport will anchor the success of the proposed Lanseria Airport City Mega Project. The project would create 50,000 residential units and approximately 5 million square metres of commercial floor space.

---

Cullinan Mega City The Cullinan Mega City Development is situated on a 180 ha land in Cullinan, within the City of Tshwane. It will be based just off Collin road and within a two kilometre radius to Cullinan CBD and four kilometres within the Cullinan Diamond Mine and Refilwe Township. It is also 45 kilometres from Tshwane CBD which makes it possible for residents to work and live within a reasonable distance, the department said. It promises a modern mixed-use new-town development with a range of housing types.

---

Daggafontein Mega City The Daggafontein Mega Housing Development is located within the Greater Springs Area, and is adjacent to Edelweiss Extension, South of the N17 Highway. It is designed to be a Smart City Development, with the aim of providing world class housing. This will include 15,511 subsidised housing units out of a total of over 17,000 units spread over an area of 750ha.

---

Goudrand Mega City The site is situated adjacent to Randfontein Road/Main Reef Road (K198) and West, and adjacent to Dobsonville Road. Currently the whole township is known as Goudrand Ext 4 and it will be subdivided into 15 different phases to be known as Goudrand Ext 5 to 19. The proposed Goudrand Ext 4 development is an integrated development consisting of 13,000 plus potential housing opportunities. The first phase of the development is a mixed use project comprising of 13,197 housing opportunities in a mix of 1,204 residential 1 bonded units, 1,325 residential 1 FLISP units, 10,668 residential 3 units, 5 educational sites, 3 shopping centre sites, and 7 crèche sites, 8 worship sites, a hospital site, a cemetery and municipal sites.

---

John Dube Mega City The John Dube Mega City project has already launched, with construction beginning in Duduza in Ekurhuleni. The development will include:

• A civic and business centre
• Seven primary schools;
• Three secondary schools would be built.
• Eight business facilities
• 53 parks would be established and community gardens
• Full medical facilities including a hospital.

The aim of the Project will be to maximise the unit yield whilst remaining environmentally sustainable and cost-effective.

---

Park City The proposed housing development would be among the largest residential undertaking of its kind in the history of Bronkhorstspruit, east of Pretoria. The housing development will have precincts with different architectural themes which will be fenced-off separately and have their own entrance and exit and electronically controlled gates. Within each precinct, there will be several blocks of apartments with biometric access control for residents. The estimated cost of the development is R4.05 billion, to be expended over an estimated period of 5 years. The project is a fully integrated development that will offer living, work and play opportunities within a secure environment over a total area of approximately 400 hectares. The proposed residential development includes the following:

• Free Standing Units (FSU) Housing Scheme
• Social Housing Scheme
• Community Rental Units
• BNG Housing
• Open Market Affordable Rental Units

It would also include education facilities, business parks and industrial areas.

---

The full list of proposed mega city projects is listed below: Central East North West South  

Oil major, Shell Petroleum Development Company (SPDC) has earmarked about $15 billion for investments in Nigeria’s oil and gas industry. The outlay will span over five years and across 24 oil and gas projects in the country. Speaking on the need for the West African nation to take advantage of the opportunities in the oil industry, the company’s Managing Director, Nosa Okunbor disclosed plans during the second edition of the Nigeria Oil and Gas Opportunity Fair (NOGOF). The company also has an objective of surpassing a 70 percent target in the deployment of wholly Nigerian human and material resources to achieve its standard of production in the next five years. “These remain exciting times for Nigeria as Shell along with its partners will be maturing several projects in support of Nigeria’s growth ambition,” Okunbor said adding that ongoing projects by the company are capable of generating thousands of jobs in the industry. According to him, a Final Investment Decision (FID) has been taken on the Assa North Ohaji (ANOH) gas project in Imo State, capable of producing 300 million standard cubic feet of gas per day at peak production. Upon completion, the plant is expected to supply gas into the domestic gas market and meet 70 percent domestic contents. “Benchmark for all these projects is to meet and where possible surpass the 70 percent Nigerian Content target. Employment opportunities are huge, not to mention the spin-off in allied services,” Okunbor noted. The ongoing Assa North Gas development project is seen as a major game-changer in Nigeria’s quest for energy sufficiency for power generation and industrialization. The plant is poised to boost the economy through job creation and by driving down the prices of gas sales, Nairametrics writes, consequently increasing consumers purchasing power. SPDC is the pioneer and leader of the petroleum industry in Nigeria. It has the largest acreage in the country from which it produces some 39 percent of the nation’s oil. Despite recent controversies surrounding the operations of the British-Dutch company, it continues to play a significant role in the development of Nigeria’s oil and gas sector. Last year, the federal government received a sum of $6.3 billion from SPDC and Shell Nigeria Exploration and Production Company Limited (SNEPCo).

Tanzania is set to negotiate with international oil and gas companies the commercial terms for development of a $30 billion liquefied natural gas plant in its southeast region of Lindi. The Ministry of Energy said the talks will begin in April and are expected to be concluded by September. “As the government, we are keen to implement this key project for the country’s economic progress,” said Energy Minister Medard Kalemani. For nearly two years now, the multimillion-dollar project has been in limbo due to delayed signing of a host government agreement, which governs the rights and obligations of the parties involved with respect to the development, construction and operation of the project. Long-term framework This agreement will set out the long-term framework for the LNG plant, which is not a part of the original production sharing agreement. “A deep-water LNG plant is a large project that requires large upfront investments. To ensure that all parties benefit from such a project, a stable and predictable framework for more than 30 years of the plant is essential. We trust that the government of Tanzania has a long-term view on this major industrial investment,” said Erick Haaland, a spokesperson for Equinor, a Norwegian company that is leading a group of firms interested in Tanzania’s gas. The long-awaited agreement will also address the nature of participation by the the national oil company — Tanzania Petroleum Development Corporation — and the fiscal framework. The framework will also allow Tanzania to get full value from the resources. Equinor with its partner Exxon Mobil Corp holds Block 2 offshore Tanzania with a 65 per cent and ExxonMobil 35 per cent. The government through TPDC has an offer of 10 per cent stake. Blocks 1 and 4 are held by Shell and Ophir Energy. The gas project is estimated to add over 2 per cent points to the country’s annual economic growth. “LNG exports could significantly boost government revenues,” said Shell Tanzania in a report. The government’s share of revenues for the project is expected to be more than 60 per cent, which will consist of direct income from government’s rights, income from TPDC participation as well as taxes. Discussions for the commercial framework started in 2016 as the government claimed it in needed time to define the fiscal and operational framework of large investments, and to protect firms against adverse changes in national law for the benefit of the country. Dr Kalemani said the government must be “content with the kind of agreements that we as a country are going into before signing the deal, to avoid entering into dubious deals.” He noted that an LNG plant is a costly project, which all parties must strike an agreement before it takes off. Gas firms say concrete investment decisions are on hold, awaiting the outcome of the negotiations. Gas reserves The country has an estimated 58 trillion cubic feet of natural gas reserves. Royal Dutch Shell Plc, which drilled 18 wells where 16 trillion cubic feet of natural gas has been discovered, said their focus now is the host government agreement, which will set out the legislative, regulatory and fiscal terms of the project. Tanzania has been exploring natural gas for more than 50 years, and started talks for further development in 2016. Tanzania has abundant energy resources, which include natural gas, coal, uranium, hydro, biomass, solar, wind, geothermal, tidal and waves that could potentially transform the country’s economy if utilised effectively. The Energy and Mineral sector has been clouded with uncertainty suspicion and vague contracts that have prevented the country from developing the resources at the speed it should have. Since 2015, the extractives sector has seen a series of events ranging from amending laws to firing and charging of government officials suspected of being involved in shady deals.

Jumia’s historic initial public offering has gone live trading on the New York Stock Exchange—and its stock shot up.

After the ceremonial ringing of the NYSE bell by company executives, Jumia’s first official day of trading on the New York Stock Exchange began. And, as investors specialized in backing e-commerce companies in emerging markets predicted to Quartz Africa, Jumia garnered investor interest and  enjoyed an impressive first day run. Its stock, which was priced at $14.5, closed up 75%.

While the sharp jump on its first day of trading signals a positive outlook from investors, it is by no means a permanent trend as another recent high-profile tech IPO proves. After launching amid strong interest and gaining on its share price on its first trading day, ride-hailing company Lyft has broken its IPO price just two weeks after its launch.

Jumia’s major executives including Sacha Poignonnec, co-CEO of Jumia Group, and Juliet Anammah, chief executive of Jumia Nigeria, were present to ring the opening bell on the exchange ahead of the launch. With its shares priced at $14.5 after initially setting a share price range between $13 and $16, Jumia offered 13.5 million shares for purchase and raised $196 million. The stock opened at $18.95.

The listing is a watershed moment for Africa’s tech ecosystems as Jumia, the largest e-commerce company on the continent with operations 14 countries, is the first Africa-focused tech company to launch on NYSE or any major global exchange—and that novelty was played up throughout the launch event.

JUBA, April 15 (Reuters) - South Sudan has received a $500 million financing facility from African Export Import Bank (Afreximbank) to fund power transmission, infrastructure and farming projects, it said on Monday. South Sudan, the world’s youngest country after its split from Sudan in 2011, has some of the largest reserves of crude in sub-Saharan Africa, only a third of which have been explored so far. It is emerging from years of conflict after a peace deal in September. “We want to help South Sudan make the investments it needs to develop,” Benedict Oramah, the bank’s president, was quoted as saying in a statement issued on behalf of the government. “We are seeing a country beginning to rise from the ashes and offering opportunities to its people. Afreximbank will support those who want to go to South Sudan.” Cairo-based Afreximbank, which focuses on boosting trade in and with Africa through financing, had assets of $12.46 billion in 2017, with $10.84 billion of that being loans. It is owned by a range of shareholders including African governments and central banks. The bank has provided another $200 million in financing to South Sudan in the previous two years, Oramah said. Melissa Cook, the managing director of African Sunrise Partners which has clients doing business in South Sudan including banks, said the business climate had started to improve. “It is not the easiest place to go into, but worth it,” she was quoted saying in the statement.

The economic value of mobile technologies and services is expected to hit $70billion – representing 9.5 percent of GDP by 2023 in West Africa, the Mobile Economy West Africa report has revealed. The report is compiled by GSMA, an association of mobile operators worldwide, and noted that countries increasingly benefit from the improvements in productivity and efficiency brought about by increased take-up of mobile services. In 2018, the report also revealed that mobile technologies and services generated US$52billion of economic value representing 8.7 percent of GDP in West Africa – a figure that is expected to reach almost US$70billion, representing 9.5 percent of GDP, by 2023. Speaking at the opening of the two-day GMSA Mobile360 West Africa conference in Abidjan, Cote d’Ivoire, John Giusti – the chief regulatory officer for GSMA – said tech innovators are relying on mobile platforms to drive digital inclusion. He also added that by end of the year, the 3G network will overtake 2G to become the leading mobile technology in West Africa. “Beyond addressing consumer’s concern for mobile data, 3G and 4G are driving efficiency and empowering new and innovative services”. Different types of mobile technology have their own impact on the productivity of the national economy: basic mobile voice and text services allow workers and firms to communicate more efficiently and effectively (for example, reducing unproductive travel time), while 3G and 4G technology allows workers and firms to use mobile data and Internet services, the report noted. This improves access to information and services, which in turn drives efficiency in business processes across many industries, including finance and health. It further boosts tech start-ups in the ecosystem of West Africa, explaining that in Ghana, Vodafone has established partnerships with tech incubators including MEST Africa while Orange supports CTIC in Senegal and CIPMENT in Niger. 3G adoption in the sub-region has doubled over the last two years as a result of continued operator investment in network expansion to previously underserved areas, the report noted. On 4G, the report revealed that it is beginning to gain traction in the ECOWAS sub-region. The sluggish initial take-up of 4G was mainly due to delays in assigning 4G spectrum. The Minister for Digital Economy of Cote d’Ivoire, Claude Isaac De, urged governments to collaborate in tackling cyber criminality; and added that digitising “our society” will increase employment for the youth. According to him, the proliferation of mobile technologies and services “is one of the leverages we have to bank on for the future”. The mobile industry plays an increasingly important role in accelerating social progress in West Africa, contributing over $4billion to funding the public sector through consumer and operator taxes in 2018. GSMA represents the interests of mobile operators worldwide, uniting more than 750 operators with over 350 companies in the broader mobile ecosystem; including handset and device makers, software companies, equipment providers and Internet companies, as well as organisations in adjacent industry sectors.