June 2018 / South Africa

Allianz Group, one of the world’s leading insurers and asset managers with more than 88 million retail and corporate customers, has signed an agreement to acquire 8% in Africa’s reinsurer Africa Re. Under the terms of the agreement, the total cash consideration payable at closing would amount to $81m. Niran Peiris, Member of the Board of Management of Allianz SE, responsible for Global Insurance Lines & Anglo Markets, Reinsurance, Middle East, Africa, said: “Having identified Africa as one of the future growth markets, we continue to invest step-by-step in the continent. This investment in Africa Re is a major milestone for Allianz’s long-term growth strategy in Africa.” Through cooperation and innovation in various areas, Allianz and Africa Re aim to jointly support insurance penetration in Africa and the economic development of the continent. “This partnership with Allianz Group, a reliable and strong partner with a global network, particularly in agriculture and the emerging field of cyber insurance, will definitely strengthen Africa Re’s capacity to offer its clients services of higher quality,” said Corneille Karekezi, Africa Re’s Group Managing Director and CEO. The partnership, built on mutual business support, will enable co-operation in areas of reinsurance, business development, sharing of best practices, risk management tools, as well as training and technical support, especially in emerging areas and underserved markets. Africa Re, founded in 1976 by the member states of the African Union and African Development Bank (AfDB), has operations across the continent. It has a diversified set of shareholders, including 44 African states (35%), over 110 African insurance and reinsurance companies (34%), the ADB (8 percent) and non-African investors (23%). Africa Re, after 42 years operational experience on the continent, has in-depth business knowledge of the African markets and an expansive network across both regions and linguistic communities, allowing it unmatched proximity to its clients. “This partnership with Africa Re is a strategically complementary one for both companies, as well as being beneficial to our clients on the continent, who can rely on the support, experience, and cooperation of both Allianz and Africa Re,” Peiris said.

Ethiopia is opening the state-owned telecommunications company and airline to foreign investors for the first time, a move that indicates new Prime Minister Abiy Ahmed is more receptive to outside interests in Africa’s second-most populous nation. According to Bloomberg, Ethiopia will sell minority stakes to foreign and domestic investors in state monopolies such Ethio Telecom and Ethiopian Airlines Enterprise, the continent’s biggest airline, as well as Ethiopian Shipping & Logistics Services Enterprise, the state-run Ethiopian News Agency said late Tuesday, citing the ruling Ethiopian People’s Revolutionary Democratic Front. “Foreigners with knowledge and foreign capital can play a critical role in our growth,” it said. The East African country of more than 100 million people has long been a target of the biggest phone companies in Africa, including MTN Group Ltd. and Vodacom Group Ltd., the largest by sales and market value respectively. The government has until now been strict about keeping the industries in-house, but there are signs it’s opening up to the world since Abiy’s rise to power earlier this year. The move hints at Abiy’s intent for the nation ranked by the International Monetary Fund as Africa’s fastest-growing economy. He’s already reduced the role of Ethiopia’s military in construction and similar projects, and lifted a state of emergency introduced after former Prime Minister Hailemariam Desalegn quit in February. Ethiopian Airlines has turned the nation’s capital, Addis Ababa, into Africa’s equivalent of the Persian Gulf hubs, linking almost 70 global cities with almost 60 across the continent. It’s also planning to take equity stakes in new operators in Zambia, Chad, Mozambique and Guinea. Also on Tuesday, Ethiopia agreed to implement a peace deal signed at the turn of the century with Eritrea after Abiy undertook two months ago to normalise relations with its neighbouring long-time foe. The deal was originally signed in 2000 to end a two-year border war that killed thousands of people.

South African miner Tharisa on Wednesday said it has acquired a 26,8 percent stake in Karo Mining Holdings, deepening its exposure to the southern African country. Karo, which has interests in both platinum and coal mining in Zimbabwe, in March signed a $4.2 billion deal to develop a platinum mine and refinery in Zimbabwe. Tharisa said it had acquired the Karo stake for a total cash consideration of US$4.5 million. It had also provided Karo with an $8 million repayable debt facility to finance initial geological exploration and sampling work. The deal, it added, provided it with access to an area in the Great Dyke of Zimbabwe covering 23,903 hectares. Indirectly, the deal also shows that Karo’s mining activities will be on the land which Zimbabwe Platinum Mines last week agreed to release to the Zimbabwe government. Karo’s deal with the government includes establishing a platinum group metals (PGMs) mine, concentrators, smelters, a base metal and precious metals refinery, as well as power generation capacity for the operations with surplus energy capacity made available to the Zimbabwe power grid. In May, Tharisa acquired a 90 percent stake in Salene Chrome, a company which has been awarded three special grants under the Zimbabwe Mines and Minerals Act covering an area of approximately 9,500 hectares in the Great Dyke. Both Karo Holdings and Salene are owned by the Pouroulis family that controls Tharisa.

The US government through solar developer Gigawatt Global Cooperative UA has signed a deal with Economic Community of West African States, ECOWAS to build US $1bn of renewable energy projects in the region. The U.S. is supporting the project through its Power Africa initiative set up in 2013 under President Barack Obama’s administration, a program that had pledged to invest US $7 billion over five years. The advancement of this deal is an indication that the U.S. Agency for International Development has retained its ability to act even though President Donald Trump has slashed aid budgets and criticized U.S. involvement in poverty alleviation. “Energy poverty can be eliminated even in smaller or less developed ECOWAS states with the leverage of a regional strategy,” according to Yosef Abramowitz, chief executive officer of Gigawatt Global.

Boost in Electricity System

The deal will help develop the West African Power Pool which is a unit of the ECOWAS that was set up to implement the agreement and create a regional electricity system. The deal also builds on an agreement inked by the U.S. and Israel last year where the two governments pledged to work together to reduce energy poverty in Africa. According to Israel’s ambassador to Nigeria,Guy Feldman,the signed memorandum of understanding indicates that Gigawatt Global will install 800MWof solar and wind farms in Burkina Faso, Senegal, Mali, Nigeria and Gambia. The project development is planned to kick off in early 2019, including feasibility studies, training courses and the signing of power purchase agreements. “This MOU signed is a powerful metaphor to the West and the rest of Africa, which pave the way for future Israeli innovation,” said Feldman. Power Africa is expected to be a lead source of funds for the projects and is also anticipating to bring in other development banks and investors. The funds are expected to have a split of 80% debt and 20% equity.

The Limpopo Economic Development Agency (LEDA) has signed memorandums of understanding (MOU) and a memorandum of agreement (MOA) with nine Chinese companies who will invest more than US$10bn in the Musina-Makhado Special Economic Zone (SEZ) The signing ceremonies of eight of the MOUs and MOAs took place in Beijing. “There are four projects in the SEZ, namely the power plant, coking plant, alloy factory and steel manufacturing. Today we managed to confirm investment commitments in all of them,” said Ben Mphahlele, group CEO of LEDA. He added that the Musina-Makhado SEZ was advancing very fast and generating a significant amount of interest among potential investors. “The signing will be followed by due diligence as technical representatives of the companies visit the SEZ to do various assessments on the ground before implementing their plans. As we speak, there is a Chinese company that is conducting a feasibility study. We are looking forward to seeing the SEZ getting off the ground and beginning to change the economic landscape of Musina and Makhado by creating business and employment opportunities for the people of the Vhembe District,” said Mphahlele. He further added that described the positive impact of the SEZ to extend to other parts of Limpopo and other African countries such as Zimbabwe and Mozambique. Solly Kgopong, head of department at the Department of Economic Development, Environment and Tourism in Limpopo, said that the SEZ was projected to contribute enormously to the country’s national gross domestic product once fully operational.

East Africa economies are well placed to reap from the growing interest on investments in Venture Capital and Private Equity Funds, the East Africa Private Equity and Venture Capital Association (EAVCA) has affirmed. The region, according to EAVCA is likely to benefit from having an already established base for growth focused investment. This will help address the current gap in financing start-up companies which are still facing challenges, EAVCA chairman Ayisi Makatiani said, during the fourth Private Equity in East Africa Conference in Nairobi on June 14. According to Makatiani, East Africa is considered a hotspot for venture capital opportunities, reinforced by the fast paced adaption of technology, along with the enterprise mindset in the region. However, there still exist difficulties faced by Capital Ventures and Private Equity funds, which slows their investment activities. “As EAVCA, we want to position East Africa as the destination for venture capital. We have as an Association noted the gap in financing early stage businesses and startup companies and will be working to navigate some of the complexities encountered by Venture Capital in this region to allow them to increase their capital deployment and support of our younger businesses,” Makatiani said. Key challenges faces by VC’s include raising new funds, winning deals, valuation, legal framework and exits as per targets. He noted trends at the global level indicate an increased focus on growth funds, including venture capital, calling on East Africa states and their respective private sectors to create a conducive infrastructural and regulatory environment to attract more capital inflows. “In this day of globalization with increasing competition for fund allocation, we as a region must guard our position as an investment destination and protect our markets from disruptive changes that may create uncertainty, if we are to maintain our position as a hub for capital inflows,” Makatiani said. “Regulation and policies are some of the measures that contribute to risk profiling and we need to ensure consistency in our policy frameworks to ensure market stability for investment to prevail,” he added. East Africa has been a growth capital market, supporting small and medium sized businesses. In 2017, the region registered 29 Private Equity disclosed deals compared to 44 in 2016. The value of deals was however higher last year totaling US$5.2 billion, compared to US$1.7 billion in 2016. “The value of last year’s deals was boosted by the Vodacom-Vodafone deal and the Lake Albert Oil Project. These were major deals the markets witnessed in the year boosting the value despite a lower number of deals,” said Robert Waruiru, Associate Director, KPMG Advisory Services Limited. The value of the Vodacom-Vodafone deal totaled US$2.6 billion, while in the Lake Albert oil project in Uganda, Total signed an agreement to acquire an additional 21.57 per cent interest from Tullow for US$900 million. Meanwhile, pundits have predicted a brighter future for Private Equity funds in the region owing to its political stability and governments efforts to improve ease of doing business, which is attracting investors. “We however have to be keep on looking at solutions to challenges in Private Equity in the region,” AfricInvest Investment Director Faisal Jiwa cautioned. He noted that a country like Ethiopia, which is opening up for investments under the ongoing political transition, requires a lot of public awareness on PE’s. “A lot of education is needed. Private Equity investors need to educate the markets,” Jiwa noted. Meanwhile, entrepreneurs have been challenged to improve their business modules to attract more funding. “Most local entrepreneurs don’t know the best way to package their businesses for funds. This has seen them miss out on opportunities,” said Peace Osangir, Chief Operating Officer-Kopo Kopo Inc. Private Equity funds and Venture Capital have proved crucial in bridging the financing gap in the markets where most startups and SMEs have been struggling to finance their businesses. The capping of interest rates in Kenya dealt a further blow to SMEs who majority have found it difficult to secure loans from banks due to their “High Risk” profiling. “It has been a challenge to get funds which was worsened by the rate cap but with these alternative funds, SMEs can get convertible debt from Venture Capital without necessarily having collateral,” said Winnie Odhiambo, Associate Partner-I-Dev International. EAVCA has lauded governments in the region for continued improvements in regulatory frameworks, which are becoming more accommodative of private equity as an asset, making doing deals easier. “East Africa’s private capital landscape mirrors much of what we see in global markets: funds raised have been growing and new funds are on the rise, investor mix is getting more diversified, deals are getting more advanced and risk is reducing, as the players now appreciate the nuances of the market,” Makatiani noted. Kenya’s Transport, Infrastructure ,Housing and Urban Development PS Charles Mwaura called for Private-Public-Partnership to drive the growth agenda in Kenya where the government is implementing its Big Four plan, which covers manufacturing, health, food security and affordable housing. The EAVCA fourth annual conference held at the Radisson Blue Hotel brought together over 250 delegate and experts from pension funds, commercial banks, private equity and venture capital funds, impact investors, high net worth investors, business owners, industry associations, government officials and regulators.

The Crown Prince of the United Arab Emirates (UAE) marked his visit to Ethiopia by agreeing to inject more foreign currency into the country, providing a boost to Ethiopia’s manufacturing sector. On day one of his two day official visit to Addis Ababa Sheikh Mohammed bin Zayed bin Sultan Al-Nahyan, the Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE’s Armed Forces, met with PM Abiy Ahmed (PhD) and President Mulatu Teshome (PhD). PM Abiy surprised many by driving the Prince himself on the way from Bole International Airport to Bole Lemi Industry Park. According to the information disclosed on Friday, the UAE agreed to shoot USD one billion into the national coffer within few days. According to reports when PM Abiy visited the Gulf States recently, he convinced leaders to allocate Ethiopia much needed cash. In March the government reported there was less hard currency than expected and representatives from the manufacturing industry have reported on the dire effect lack of hard currency has on their ability to produce. Industries have suspended or reduced production or reportedly only have enough cash to operate for a few weeks. Now that help is on the way from the UAE, industry representatives are asking the government to give them priority over public projects. In the agreement the UAE also promised to invest an additional USD 2 billion in different sectors. The two countries have also agreed to waive visa conditions for diplomats of the two countries.

The Democratic Republic of Congo plans to start construction work this year on the frequently delayed Inga 3 hydro power project at a predicted cost of US $13.9bn, after receiving a joint bid from two previously competing consortia of investors. This is according to Bruno Kapandji, director of the Agency for the Development and Promotion of the Grand Inga Project.

Project Delays

DR Congo, Africa’s biggest copper producer and the world’s largest source of cobalt has been considering building Inga 3 for more than a decade to address a power shortage that has curbed mining-industry growth. A treaty signed in 2013 allowed the plant to export 2,500MW of power to South Africa. The plant would form part of a larger Grand Inga hydro power complex spanning part of the Congo River and produce as much as 50,000MW when complete, according to the World Bank. China Three Gorges Corp and Actividades de Construccion y Servicios SA of Spain submitted a joint bid on June 6 for the project that will produce 11,000 MW. “Our aim is to start Inga3 hydro power this year. The two consortia have given us a document in which they committed to creating a single consortium. We are in the process of preparing, discussing and negotiating the exclusive collaboration contract which will allow the single candidate to go to the market to find the financing.” Kapandji said.

Construction Process

The two consortia will work together and submit a joint offer to build and manage the hydro power and once a concessionaire company has been established, the developers will commit themselves to mobilizing the funds to pave way for construction. The initial phase plan of the project was supposed to produce 4,800MW .However, its capacity status changed after an increase in demand. According to Mr. Kapandji, The mining industry’s energy deficit has increased from about 500 megawatts to 1,300MW in the intervening years since the project was conceived. Construction of the power plant is estimated to take seven years.

Finserve Ltd, a subsidiary of Equity Bank has entered into an agreement with Chinese payment platforms WeChat and Alipay to facilitate the growing volume of trade between Kenya and China and present a great challenge to the dominance created by Safaricom’s MPesa. In a memorandum of understanding deal that was announced last week, Finserve and Singapore-based online payment company Red Dot Payment will collaborate to ensure business people travelling to China and those trading with Kenya can transact using these platforms. Under the agreement, Equity mobile payment platform Equitel will offer the base for both WeChat and Alipay. While MPesa charges a little fee for sending and withdrawal of funds, WeChat app is free to install and money transfer is free. Equity Bank is one of the largest regional banks in East Africa with presence in Kenya, Uganda, Tanzania, Democratic Republic of the Congo, South Sudan and Rwanda. The bank has said that it currently controls about 60 percent of e-commerce transactions in the East African region. It has been on a mission to nab international commerce as it also runs American PayPal. Chinese tourists will be able pay for various hospitality services using Alipay and WeChat Pay while East African traders will be able to purchase goods from China using the Chinese mobile payments. Alipay is part of China’s richest man Jack Ma’s empire that also include Ali Baba e-commerce site that is very popular with East African businessmen trading in China. WeChat on its part is a Chinese multi-purpose messaging, social media and mobile payment app. The app allows for social conversations, texting and sending money. The two platforms come at a time when trade between Kenya and China increasingly grows. Just a week ago, the Central Bank of Kenya announced that it was considering using Chinese Yuan as a reserve currency to facilitate trade between the two countries.

In the past 14 years, housing demand in Rwanda has hit a high. With the growing population in the country, the citizens have put a demand on the government. A lot of money has been splashed in the real estate investment to cater for the thirst of the market. It has been a blooming business one that has caught the eye of both local and international investors. A number of improvements have as well been made that has seen the rising in figures. Rwanda’s project of building affordable housing has led to Rwanda Development Board (RDB) seeking strategies to meet its target. The board has been involved in a number of partnerships, with the latest being an Israeli firm ready to step into business with the East African nation. The growing middle class has been the target market of the housing sector with the launch of affordable housing in the country being a major project to settle them. Low income earners have had house issue as well. Incentives have been made for investors to fund the project. The Government has collaborated with developers on the building of decent and affordable homes and attract investments in the sector. Such incentives include tax, electricity, water and proximity to roads. Affordable mortgage prices have gained the trust of a number of citizens based on their salaries. With the economy’s dynamic shift, low and middle income earners have shied off from some real estate investments, with the sector facing challenges all through. The housing gap catalyzed by increased population will be reduced by a significant number in 2022. Close to 17% of Rwanda’s population lives in Kigali, and being a strategic location the percentage may increase. To manage this, the government seeks to improve infrastructure in the rural areas and offer better housing for the citizens to settle. 83% of the population live in rural areas which then needs haste in settling the people. In 2016, it was forecast that Rwanda’s property market was a bubble ready to burst. Investors poured money in the market fueling the economic progress of the country. The government can continue investing in housing and infrastructure and draw outside investments to the sector.Large scale housing projects would not only save their pockets but suffice the appetite of the market in the country. The land value is a fraction high in the city of Kigali and the land is scarce. The Government can take advantage of the rural areas where there is an availability of great vastness of land to make housing projects. The income levels could not change overnight and with the consideration of this rural areas could be ideal regions for affordable housing. There is more to be done in the country in the real estate sector.