Category Archives: General post

General posts

Should investors head to Africa or Asia in the hunt for returns?

Sub-Saharan Africa is set to grow at around 6 per cent a year, faster than India. Asia, excluding Japan, is projected to grow at 7 per cent, but these rates are regularly revised down.

Fifteen of the world’s 29 fastest growing economies in the world are in Africa.

Africa is now where the Brics were a decade ago, signalling huge growth potential.

Ten of Africa’s 54 countries have a GDP per capita greater than China, while 17 are greater than India.

Africa is at an earlier stage of its development than Asia. As Asia shows, returns come in the early years. £1000 (€1193) invested in Asia in 1988 was worth £4016 five years later – equivalent to 27 per cent annualised growth. The same sum invested in 2008 is worth just £1517 today – a more pedestrian 7.5 per cent.

Africa’s growth today is investment-led, not sparked by a surge in mineral prices, as happened in the 1970s. Foreign direct investment into Africa increased fivefold since 2000 and 5 per cent in the last year. Growth includes countries like Ethiopia which do not have significant mineral wealth. Rwanda, without natural resources, has been able to sustain a growth rate of 8 per cent thanks to sensible economics. Africa’s resource-rich states are better managing their wealth: Botswana used its diamond wealth to develop quickly, growing from one of Africa’s poorest countries at independence in 1966 to become a democratic, stable, and upper middle-income country.

Africa’s total stockmarket capitalisation grew from $245bn (€180bn) in 2002 to more than $1tn in 2010. According to African economic expert Paul Collier, returns on investment in Africa are higher than in other regions: the average return on capital for companies was two-thirds higher than that of comparable companies in China, India, Indonesia, and Vietnam.

Africa has a median age of 20 years compared to 30 in Asia, and the number of working age people will double to 1.1bn by 2040. With rising costs, Asia is no longer the low-wage factory of the world. And entrepreneurial Africans are returning to establish businesses on the continent. Africa has more cities of over 1m population than Europe and has more $20,000+ earners than India. All this is powering consumer facing service sectors, sectors where growth is not correlated with the rest of the world – a tempting combination.

Agriculture is a key sector for growth. Africa has 60 per cent of the world’s uncultivated arable land. Food distribution is improving as transport infrastructure develops and agricultural policies improve. The agriculture sector can diversify into processing. Africa is a big exporter of raw agricultural products.

With its richness of resources, young and growing populations and a greater commitment to political and economic reforms, it would be a brave and likely foolhardy choice to ignore the growth potential of Africa in the decade ahead.

Africa Renewable Energy Fund gets US$ 65 million equity package

The Board of Directors of the African Development Bank (AfDB) approved on Wednesday, November 13, a US $65-million equity investment package in the Africa Renewable Energy Fund (AREF) comprised of US $25 million from its statutory resources, US $35 million from the Sustainable Energy Fund for Africa (SEFA) and US $4.5 million from theGlobal Environment Facility (GEF). AREF is a private equity fund that will invest in small- to medium-sized renewable energy projects in Sub-Saharan Africa (SSA), excluding South Africa, with a targeted fund size of US $150 million to $200 million.

The resources needed for Africa to adapt to climate change and embark on low-carbon growth paths are estimated to range from US $22 billion and US $31 billion per annum between now and 2015. However, few pan-African infrastructure funds have scope to make clean technology investments, whereas there is a dearth of funds that are dedicated to renewable energy investment or that have an investment focus targeting SSA.

AREF will have a significant impact in facilitating greater private capital inflows into clean energy technology industries across Africa, while lowering greenhouse gas emissions currently associated with the energy sector. By investing in clean technology solutions, AREF will assist Governments in meeting their renewable energy (RE) and carbon emission targets, while contributing to job creation, income generation, increased delivery of services and Government revenues.

AREF has been set up to contribute to the investment needs and, through the demonstration effect, catalyze the additional investment required to build sustainable RE industries across SSA. The AfDB played a key role as the lead in the fund’s conceptual development, including the structuring of the fund and selection of the fund manager. AfDB and SEFA are co-sponsors and anchor investors in the fund each bringing a US $25 million equity participation. SEFA will additionally provide US $10 million to AREF’s Project Support Facility (PSF) to prepare and structure bankable projects. Lastly, the Global Environment Facility (GEF) will invest US $4.5 million in equity from an AfDB-managed public-private partnership platform program.

Berkeley Energy LLP (BE), AREF’s manager, established in 2007, raised a US $110 million Renewable Energy Asia Fund (REAF) in 2009 and deployed 80% of its capital within three and a half years. The REAF investment remit is substantially similar to AREF, with the BE team demonstrating over 60 years of relevant project development experience in emerging markets, including experience within the team of delivering operating energy assets in Africa.

The AREF mandate, aligned with the AfDB’s Ten-Year Strategy for 2013-2022, is focusing on energy security and inclusive green growth as the pathway to sustainable development and creating broad-based prosperity. The fund is also well aligned with the Bank’s Energy Policy, the Banks’ Clean Energy Investment Framework and Climate Change Action Plan, which aim to help its member countries to transition to a cleaner energy mix and support investments to reduce Africa’s vulnerability to climate change.

Harvard Business Review outlines 7 reasons why Africa’s time is now

The latest edition of Harvard Business Review outlines 7 reasons why Africa’s time is now. Here they are:

  1. It’s a huge market opportunity,
  2. it is becoming more stable,
  3. It will soon have the World’s largest workforce,
  4. Mobile is expanding,
  5. Intra-African trade is in its infancy,
  6. 20% of Government spending goes into education, and
  7. it contains most of the world’s uncultivated arable land.

 

 

Ghana Supreme Court upholds John Mahama’s 2012 Presidential election

Ghana’s Supreme Court has dismissed an appeal by the opposition to annul President John Mahama’s narrow victory in last year’s disputed election.

The NPP had alleged that Mr Mahama won the election fraudulently, a charge his NDC party denied.

However, the court ruled that he had been “validly elected” after beating the NPP’s Nana Akufo-Addo by 50.7% to 47.7% in the December 2012 election.

Ghana is generally seen as a beacon of democracy in the region.

The case was broadcast live on television and radio in a rare sign of judicial transparency in Africa, says the BBC’s Akwasi Sarpong in Accra.

‘Spellbound’

Nearly 30,000 security officers were deployed across Ghana to prevent any violence after the court verdict.

Presidential election results

  • John Dramani Mahama, NDC – 50.70%, 5,574,761 votes
  • Nana Akufo-Addo, NPP – 47.74%, 5,248,898 votes

Crowds of governing National Democratic Congress (NDC) supporters broke into songs of celebration when it was announced.

Mr Akufo-Addo said he was disappointed but would respect the decision of the nine judges.

“I urge all our supporters to accept the verdict – and in peace,” he said.

NDC general secretary Johnson Asiedu Nketia said he was happy with the verdict, as he knew the party had done nothing wrong.

Ghanaians have been spellbound by the eight-month case, following it closely on radio and television, our reporter says.

Court cases are not usually beamed into the homes of people, he says.

The New Patriotic Party (NPP) had asked the court to scrap some four million votes, alleging the result was tampered with to guarantee Mr Mahama victory in the first round of the election.

The NDC argued that any mistakes made by polling station officials while recording ballots was not an attempt to subvert democracy, and there were insufficient grounds for the court to overturn the result.

Despite the legal challenge, Mr Mahama was inaugurated in January.

Indian automotive major Mahindra & Mahindra to set up assembly plant and service centre in Ghana

The plant will be built on a 9.5 acre plot in the capital city of Accra.

The move is aimed at capitalising on the massive growth in the region, with 3,500 sports utility vehicles (SUVs) and pick-ups sold in the last seven years.

Earlier this year, the Mumbai-headquartered Mahindra group had announced plans to increase its presence in African countries and grow its business by 50 per cent this year.

Accra, Ghana, is expected to be the fastest growing African city for millionaires

Ghana’s capital Accra is expected to be the fastest growing major African city for millionaires over the next eight years, according to recent research by UK-based New World Wealth.

Accra’s number of high net worth individuals (HNWI) – with net assets of US$1 million or more, excluding their primary residences – are expected grow from 800 in 2012 to 1,500 in 2020.

New World Wealth projects the growth in millionaires by using a number of variables, including economic growth in country, income distribution trends and recent HNWI growth trends in the city or country.

Africa’s fastest growing cities for millionaires (2012 – 2020)

Rank City Growth rate per annum Millionaires in 2012 Millionaires in 2020
1. Accra 8.0% 800 1,500
2. Nairobi 6.3% 5,000 8,100
3. Lagos 6.2% 9,800 15,800
4. Luanda 6.0% 2,400 3,800
5. Dar es Salaam 6.0% 1,900 3,000
6. Algiers 5.0% 2,300 3,500
7. Casablanca 4.5% 2,700 3,800
8. Durban 3.7% 2,700 3,600
9. Pretoria 3.5% 2,500 3,400
10. Johannesburg 3.4% 23,400 30,600
Only includes cities with over 800 millionaires in 2012.

Caribbean bank buys significant stake in Ghana based HFC Bank

Republic Bank (RepBank) – an independent Caribbean lender headquartered in Trinidad and Tobago, an island country off the coast of Venezuela – recently bought a significant stake in Ghana-based HFC Bank.

RepBank initially purchased an 8.9% stake in HFC in December 2012, and recently increased its shareholding to 32.02% following the acquisition of shares previously held by private equity firm Abraaj Group. The deal makes RepBank the largest single shareholder in HFC.

HFC was formed in 1990, listing on the Ghana Stock Exchange in 1995. The bank existed as an independent mortgage finance institution until 2003, when it expanded into universal banking, providing a wide variety of financial services. HFC currently has 27 branches across Ghana, and is working to expand its reach.

But why would RepBank be interested to own a part of a Ghanaian financial institution? It seems that some of its clients in the Caribbean are eager to do business in Africa.

“Africa, and in particular Ghana, has been a key growth area for international business, and several of our Trinidad and Tobago corporate clients have been actively exploring those markets,” commented David Dulal-Whiteway, RepBank’s managing director, in a statement released towards the end of 2012.

The Hong Kong Trade Development Council (HKTDC) says the future is Africa

The HKTDC have suggested that Africa is the future for traders, especially from Hong Kong.

Please click here for full details.

 

Ghana discovers new mineral reserves

Ghana has discovered new mineral occurrences in base metals such as lead, copper and zinc, the Minerals Commission announced here on Wednesday.

The minerals discovered in Nkwanta in the northern parts of the Volta Region will be further investigated to ascertain their quantum.

Opening a two-day Africa Mining Investment and Development Summit (AMIDS) 2013 here on Wednesday, Chief Executive Officer of the Minerals Commission, Benjamin Aryee said the discoveries were made in 2010 under the Mining Sector Support Program funded by the European Union (EU).

He said the discoveries were part of government efforts to diversify the country’s mineral base to ease the impact of price volatility for gold on the mining sector and the economy in general.

Carrefour enters into sub-Saharan Africa

French retailer Carrefour, the second largest in the world, at the end of last month announced that it will enter eight countries in sub-Saharan Africa. 

Carrefour – which operates a mix of hypermarkets, supermarkets and convenience stores – said it will enter the West and Central African countries of Côte d’Ivoire, Senegal, Ghana, Nigeria, Cameroon,Congo, Gabon and the Democratic Republic of the Congo. The company already has a franchise partnership in North Africa.

Carrefour is, however, not entering sub-Saharan Africa by itself. The group has announced a joint venture with CFAO, a distributor of vehicles and pharmaceuticals in 32 African countries. CFAO is majority owned by Toyota Tsusho, the Toyota Group’s trading arm.

CFAO has also announced that it plans to establish “dozens” of shopping centres across Africa, with the first one expected to open in Cote d’Ivoire’s commercial hub Abidjan in 2015.

“Carrefour can anchor new shopping malls being built by CFAO to attract the growing number of wealthier Africans who can afford brands and modern retail/convenience stores,” commented Mike Dennis, a retail analyst at Cantor Fitzgerald.

A threat to existing players?

South African companies such as Shoprite and Massmart (owned by Walmart) have been major players in the growth of modern retail in sub-Saharan Africa. Some Kenyan supermarket chains – including Nakumatt and Uchumi – have also expanded outside their home market. So should these retailers be concerned by the entry of Carrefour?

Shoprite already has a substantial footprint across 17 sub-Saharan African countries and is not likely to be too worried by Carrefour’s entry. Shoprite CEO, Whitey Basson, last year told Reuters that he sees potential for over 700 stores in Nigeria alone.

Massmart’s parent company Walmart is the world’s number one retailer and has even deeper pockets than Carrefour.

Shoprite, however, only has a presence in three of the countries that Carrefour will enter. Of the eight countries that Carrefour is targeting, only two (Nigeria and Ghana) are English-speaking. Neither Shoprite nor Massmart has a presence in French-speaking West Africa.

Carrefour’s announcement comes at a time that an increasing number of multinationals are eyeing Africa’s fast growing economies. The most recent high profile deal in the retail sector was Walmart’s 2011 acquisition of South African group Massmart, which also has a footprint in many countries across the continent.

“In our view, the window is not closing fast in Africa but only slowly opening with some US retailers buying into Africa via South Africa and a lot of new retail management coming from Europe to run South African and African companies,” said Dennis. “As the per capita income grows so I suspect more retailers will look at joint ventures to enter Africa, and like Carrefour they will be via distribution companies.”

 

Mobius Weighs Private Equity as Way to Access African Growth

Mark Mobius, who oversees $53 billion in emerging markets, said he’s considering private equity investments as a way of tapping growth in Africa.

“We are looking at the private equity side of things in Africa,” Mobius, executive chairman of Templeton Emerging Markets Group, said in a phone interview from Moscow on June 28. Templeton has about $1 billion invested in Africa.

Templeton Africa Fund has its largest investments in Nigeria, South Africa and Egypt.

UBS AG, the biggest Swiss bank, said in May it will expand its wealth-management services in Africa as economic growth rates surpassing 5 percent boost demand for banking services.

SUB-SAHARAN AFRICA TOPS THE LIST OF THE WORLD’S MOST APPEALING EMERGING MARKETS

According to the Emerging Markets Private Equity Association’s 2013 annual survey of limited partners, “For the first time in the Global Limited Partners Survey’s nine-year history, none of the BRIC markets (Brazil, Russia, India and China) broke into the top three most attractive markets” for investment, the 16-page report notes.

The EMPEA polled 112 investors from more than 30 countries for the report, which covers average return expectations, average allocations, emerging market attractions and deterrents, and popular means of investment.

Click here for the report.

General Electric to expand its investments in Africa

US-based multinational General Electric has indicated that it is in the process of expanding its investments into sub-Saharan Africa as part of the recently announced Power Initiative. General Electric can point to a 100-year record of involvement in Africa and has operations in several sub-Saharan African countries, one of which is Nigeria where it has already identified projects in which it can participate.

In the past year, General Electric and the Federal Government of Nigeria have signed several memoranda of understanding agreements outlining cooperation in the energy, healthcare and rail transportation sectors. Ground breaking for a US$250 million manufacturing facility in the port city of Calabar in Nigeria took place on 18 June 2013. General Electric Nigeria’s president and CEO, Lazarus Angbazo, is of the view that Nigeria is a country where the General Electric portfolio – the full General Electric portfolio – fits perfectly in terms of the needs of the country and the capabilities of the country.

Angbazo further indicated that General Electric intends to invest up to $1 billion over the next five years, including the aforementioned $250 million, with the balance to be spent in services and support.

Private jets in Africa – increasing appetite

Nigeria is believed to be the second fastest private jet market in the world after China.

There were 420 business jets estimated to be in operation in Africa in 2012. This should rise to 670 by 2022.