Politics getting better, Ethiopia ready for business says Arkebe Oqubay at UK-Ethiopia forum

A packed room of investors and others assembled in London on 16 October to hear about business opportunities and the investment climate in Ethiopia. The occasion was the UK-Ethiopia Trade & Investment Forum 2018. The planned delegation had some changes, due to 16 October dramatic cabinet announcement where 50% of posts went to women, including top jobs such as Defence and Peace (Home Affairs). The conference was organized by Developing Markets Associates with WAFA Promotions.

Leader of the delegation was Arkebe Oqubay, Economic Advisor to the Prime Minister, who gave a detailed overview of events of the last 6 months and the big ambitions driving Ethiopia:
“Vision 2025 is to make Ethiopia the leading manufacturing hub for Africa, to sustain GDP growth of 11% for next 25 years, and 35% of exports for every year for coming years. This has created enormous opportunity for investors, including many opportunities for UK firms.
“We have been focused on human resources” he said. There are 50 public universities with 600,000 students, annually there are 100,000 graduates mostly form science, technology, engineering and mathematics.
“We need to build manufacturing capacity, every year our population increases by 2.3m, we need to create minimum of 1m jobs for the youth, including at least 100,000 jobs for university graduates. We need to generate more forex earnings and need to focus on exports, that is why we focus on manufacturing.

Dr Arkebe Oqubay outlining Government’s investment priorities (photo: AfricanCapitalMarketsNews)

“For the last 15 years we have been able to grow at 11% a year and for 2018 we will witness same rate of economic growth. For rapid economic growth to be sustained, it needs to be equitable. Ethiopia has increased average life expectancy, which is linked to poverty reduction. In 1990 the average Ethiopian lived for 44 years, and the African average was 50 years, but in 2016, the last year for which there are figures, the Ethiopian average life expectancy was 66 years and the Africa average was 60 years.”

Harriet Harman MP, Minister of State for Africa, UK Foreign & Commonwealth Office “Total trade in goods and services between UK and Ethiopia last year grew by 80%”

“In 2017 Ethiopia was recognized to show the highest growth rate of foreign direct investment (FDI) inflow with $4.2bn, of which 89% went into manufacturing, in line with the Government’s focus on industrialization. Ethiopia has been allocating more than 50% of federal budget to roads, railway lines, the largest air-cargo hub in the continent, and our largest focus on clean and renewable energy.” The FDI is expanding the industrial parks, which are being developed on principles of sustainability.

Politics first
Arkebe focused on political progress made since Abiy became Prime Minister in April:
1) Political reforms – ensuring all political parties come to the table, ensuring there is loyal opposition within the system to encourage and strengthen. This has been a rewarding process, all the opposition groups trying to work with the Government, political leaders who advocated violence have come back to peace and all have come to Addis and joined the dialogue.
2) Political and public dialogue, Abiy has listened to complaints and voices in all the regions.
3) Peace in the region is one of the major breakthroughs. Abiy approached President Issayas, the 2 countries are establishing diplomatic missions, people are moving in both directions, they are sharing infrastructure, ports and building communications. This was achieved without any intermediary. The aim is to make the Red Sea one of the most dynamic regions, all the countries, Ethiopia, Egypt, Sudan, Djibouti, Somalia, Yemen, Oman, UAE. Geopolitical peace will cut the cost of business and make it attractive to investments.
4) The internal process in the ruling EPRDF party. The Congress which happened in the last 2 weeks,fully backed the PM who was elected chair of the party with unanimous vote.

He also highlighted 3 challenges
1) “We have to create jobs for the youth, it’s a major factor of political turmoil, the only solution is to focus on job creation and new industries”.
2) “Our society is diverse, we are Christian but we are one of oldest Muslim countries, we have 80 diverse nationalities and our languages are completely different, like Japanese to English. We have to manage this diversity, and we set up the system of federalism, based on ethnic diversity. We are trying to make this more perfect from time to time.”
3) “The challenge is to make the political system pluralist and to build democracy. Democracy is fragile, look at Europe with 2 world wars and rise of fascism. Our 1995 Constitution allows all rights to be exercised. This is work in progress, we believe we are making good progress.”

Ready for business
The statement at the first industrial park opening after the successful EPRDF Congress: “We have been in political process and reforming, we are now back to business”.
One change is to open the logistics sector 49% to foreign investors, Ethiopian Airlines is linking with DHL Global Forwarding and there are huge opportunities as Ethiopia aims to become Africa’s logistics hub. Other sectors opening to foreigners include telecommunications.
Electricity costs 3 UScents per KwH, one of the cheapest prices in the world. Other attractions for manufacturers include duty free access to the EU and opportunities under the African Growth and Opportunity Act (AGOA) renewed for 10 years.
Advice for #FDI investors from Dr #Arkebe Oqubay “#Ethiopianization has been a good word, that was the motto in #EthiopianAirlines when managed by TWA in 1950s and 1960s”.

Buy Arkebe’s highly reviewed book on Amazon with this link (affiliate), published by Oxford University Press, and get details of his next book on China-Africa and Economic Transformation, due in 2019 also from OUP.

UK investors’ experience
UK firms talked of their investments

Saad Aouad, Founder and Chief Investment Officer, 54 Capital: Said they made their first investment in Ethiopia in 2014. They have invested $120m including: Addis Pharmaceutical Factory employs 1,000 at its factory in Adigrat, producing 80 pharmaceutical products to the $600m-$700m domestic market and set to expand, creating another 500 jobs; Aquasafe is a leading water bottling company, based in Debre Birhan; Bluebird platform takes stakes in food companies, personal care and Tena edible oil. With 168 investors on their books, 80% of them from UK, they have potential to make much more investment.

Reg Hankey, CEO, Pittards: Employs 1,600 with a “highly motivated, highly skilled workforce improving productivity every day”. Gloves made with Pittards leather, including at the Ethiopia factories, are sold to top professionals worldwide including 9 out of 10 top golfers and baseball players. The target is still to get to 5,000 employees, despite a road that is “not smooth”.

L_R: Darren Boyd (Tulu Moye Geothermal), Harry Anagnostaras-Adams (KEFI Minerals), Arkebe Okubay, Simon Tonge (DMA) (photo: AfricanCapitalMarketsNews)

Harry Anagnostaras-Adams, Managing Director, KEFI Minerals: There is $1bn of gold exports sitting in the ground at the Tulu Kapi gold project in Western Ethiopia. His company has already invested $60m in infrastructure and community projects and has top partners to bring in to make it work. “I desperately love my wife but she drives me crazy, that is Ethiopia. It’s a very alluring long-term game”.
Darrell Boyd, CEO of Tulu Moye Geothermal: Says geothermal 24 hour base load power is ideal for industrialization. They are planning £1.5bn investment to generate 520 MW geothermal over 4 phases in the coming 8 years. Now focused on phase 1 for 50MW with £200m investment in debt and equity. They are busy at site to get ready for geothermal drilling for 2nd quarter next year. “Ethiopia has done a lot of work over last few years to change its regulatory framework”.

Source UK Office for National Statistics

12 questions Silicon Valley investors ask – focus for African policymakers

African #tech superstar Alysia Silberg General Partner, Street Global Venture Capital, says she replies when asked what African policymakers can do to encourage investment into the tech sector in Africa, one focus is to look at the 12 investment questions of Silicon Valley:

1. Whether the government is stable?
2. Company incorporation structures and the limitation of liability?
3. The availability of reputable experts able to advise companies on their IP Protection and other assets?
4. Availability of legal recourse and the cost?
5. Whether or not there is a risk of asset seizure by government or any other organization?
6. The prevalence of fraud and corruption and whether it is a material risk?

L-R: Dawit Hailu (Wudassie Daignostic), Alysia Silberg (Street Global VC), Agnes Gitau (GBS Africa). Photo: AfricanCapitalMarketsNews

7. Reliability of infrastructure including financial and banking payments platforms and ease of international funds transfer?
8. Availability and productivity of a highly skilled workforce able to meet the needs of scaling business with a strong focus on Science, Technology, Engineering and Maths?
9. Whether or not “hotbed” exist for different niches and industries?
10. A progressive environment for diversity and women’s empowerment?
11. Whether any startups have succeeded at scale and its resultant effect on the surrounding ecosystem?
12. Availability of and ease of access to local capital for entrepreneurs, Not just for the first rounds of investment, but through a startup’s growth from startup to scaleup?

She was speaking at the UK-Ethiopia Trade & Investment Forum 2018 in London on 16 October 2018.

Rising debt tide threatens credit ratings across Africa

Credit quality across Africa has been declining, according to analysts speaking at a credit ratings event in London. Global rating agency Moody’s says the last 12 months saw 7 downgrades out of its 21 African sovereign ratings. Seven credit ratings are on negative outlook and only Morocco and Egypt are on positive outlook.
Several countries including South Africa stayed with high Baa3 ratings. South Africa has a Moody’s sovereign release date (updated on rating) on 12 October. Other rating agencies S&P and Fitch downgraded its local currency bonds to “junk” status, meaning below investment-grade, according to this story from Bloomberg. Namibia has Ba1 status, with a negative watch following an August review.
Zambia’s long-term issuer rating has been downgraded to Caa1 stable in July, below Democratic Republic of Congo (DRC) which was rated B3 negative in June. Mozambique is rated Caa3 negative. Other countries which have seen rating downgrades are Angola and Kenya, while Tanzania and Cameroon are on negative outlook.
The bad news comes despite good growth in some parts of Africa. Key concerns are the ways governments manage fiscal policy, with elevated budget deficits and rising debt levels, after many governments issued large amounts of foreign currency bonds. Some countries which have borrowed heavily to invest into developing infrastructure face governance questions on whether prices are inflated – Zambia is particularly affected. Debt problems are worse because of local currency declines.
Investors into Africa at a Moody’s event in London on 26 September are also worried about global financial conditions and shocks, but are more confident on domestic politics.
Lucie Villa, Moody’s Vice President-Senior Credit Officer, commented that South Africa’s economy is likely to accelerate in 2019 but to remain timid, while recognizing the challenges faced by National Treasury meeting different fiscal and social objectives. Most foreign investors into South Africa use the ZAR currency.
Daniela Re Fraschini, Assistant Vice President in the Sovereign Risk Group, says East Africa remains the fastest-growing region, with Kenya, Uganda, Rwanda and Tanzania all forecast to grow well. Kenya and Tanzania are more resilient because their economies are more diversified. Rwanda has been consistently more competitive.
Rising oil prices could bring good news for Nigeria, Gabon, Congo and Angola.
Moody’s has increased its credit ratings from 31 to 51 African banks and Akin Makejodunmi, Vice President and Senior Credit Officer at Moody’s, says Islamic finance could double its share of the sector, from 5% to 10%, given that 40% of the population are Muslims.

For more on Moody’s credit ratings on African governments and many corporate issuers, see www.moodys.com

SEC Nigeria leads FSD Africa programme to boost capital markets regulators

Left to right: Reginald Karawusa (Director, Legal and Enforcement, SEC), Laure Beufils (Deputy High Commissioner), Mary Uduk (ag Director General, SEC), Evans Osano (Director Financial Markets, FSD Africa), Richard Sandall (Senior Advisor, DFID Nigeria).

Funding organization FSD Africa is launching a 3-year programme to improve skills of Africa’s capital market regulators. The Securities and Exchange Commission SEC Nigeria is the first capital-market regulator after signing an agreement worth £450,000 ($585,200) on 28 September.
The programme will also be rolled out in Ghana, Kenya, Mozambique, Rwanda, Tanzania, Uganda, Zambia and Zimbabwe. FSD Africa is a non-profit funded by UK Aid, which is Department for International Development (DFID) and the British Government.
FSD Africa will provide funding over 3 years to build the capacity of regulators, providing technical assistance, encouraging closer collaboration among regulators and conducting research to support the development of new policies and regulations.
Evans Osano, Director Financial Markets at FSD Africa, says (emailed press release): “This partnership will unlock capital by improving investor and issuer confidence, reducing transaction costs and reducing the complexity and approval times for capital issuance. The programme will also support greater collaboration and knowledge sharing with other African capital market regulators.”
FSDA Director Mark Napier says: “Well-functioning capital markets can play a vital role in support of inclusive economic growth by channelling long term finance into infrastructure and other large-scale projects that create jobs and improve access to markets. Strengthening regulatory capacity in capital markets is an essential pre-condition for building investor confidence.”
Mary Uduk, Acting Director General of SEC Nigeria, says the collaboration will facilitate access to capital for private and public issuers and enhance the competitiveness of the Nigerian capital market as a global investment destination. SEC Nigeria is contributing £22,000.
According to a report in the local news Independent the project will promote regulation of financial technology; fund an audit of institutional capacity and implementing the recommendations; and back collaboration and knowledge sharing between regulators.
Laure Beaufils, Deputy High Commissioner, British Deputy High Commission Lagos, commenting on the programme, added that capital markets have an essential role to play to help unlock capital that can be invested in the real economy and that can contribute to job creation and inclusive growth.

Do Africa’s $372bn pension fund assets facilitate inclusive growth and social stability?

One of the key challenges pension funds face: identifying enough appropriate, local investment opportunities to invest ever-increasing contributions
• Deregulation of prescription will unlock capital to flow where it is required in Africa

RisCura’s annual Bright Africa 2018 report is a highly recommended read on Africa’s capital markets. Check out the interactive website and download the short report at brightafrica.riscura.com.

Africa’s pension fund assets are now thought to be $372bn, according to leading pension fund consultancy RisCura. Some 90% of these assets are concentrated in Nigeria, South Africa which has $307bn in AUM, or 82%, Namibia and Botswana. Further, a few large funds dominate, including: Government Employees Pension Fund (GEPF) in South Africa, Government Institutions Pension Fund (GIPF) in Namibia, Botswana Public Officers Pension Fund (BPOPF), and a few large funds in Nigeria.

(NOTE, in a comparable story in 2015 we noted that total pension fund assets in 10 African countries were $379 billion in assets under management (AUM),85% or $322bn of this was based in South Africa. The change since 2015 may partly be due to currency decline at the time of compiling the statistics)

According to the Organization for Economic Cooperation and Development (OECD), total pension fund assets in OECD member countries in 2016 totalled $38 trillion, of which $25trn is held in the US, followed by Canada ($2.4trn) and UK ($2.3trn), the three countries making up 78% of the total pension assets.

In OECD countries, pension funds made up 50% of the economy, measured in gross domestic product (GDP) in 2016, up from 37% in 2006, while in other countries measured (“non-OECD countries”), they rose to 20% of GDP from 12%.

The table below shows pension fund assets in selected different African markets, according to data collected by RisCura. Assets under management (AUM) total $306.7bn in South Africa (pension AUM are 104% of GDP), $16.8bn in Nigeria (lots of space to grow as pensions are 4% of GDP), $10.7bn in Kenya (16% of GDP), $10.5bn in Namibia (99% of GDP), and $7.2bn in Botswana (48% of GDP). There is huge potential for growth in Egypt where pension AUM are estimated at 1% of GDP, Tanzania (10%) and Uganda (7%), Ghana (7%) and even Zambia (3%).

African Pensions statistics collated by RisCura

In OECD and non-OECD countries, pension fund assets are predominantly invested into bonds and equities, with 45% of assets allocated to equities. As capital markets have grown and regulators have advanced, the proportion of African pension funds invested into equities has increased, but in Nigeria and East Africa local currency bonds predominate. Local regulation is a key driver of asset allocation and often does not match the opportunities: “In many countries assets are growing much faster than products are being brought to market, limiting investment opportunities if regulation does not allow for pension fund to invest outside of their own countries” says RisCura.

“African pension funds have a pivotal role to play in facilitating inclusive growth and social stability. Larger pools of capital allow for investment in economic and capital market development,” argues the Bright Africa report. It says there is an urgent need to build resources: “Local institutional investors add credibility and often serve as a catalyst for greater external interest. Local investors also allow global peers to leverage local knowledge and networks.”

RisCura urges other countries to follow the lead of South Africa, Nigeria, Namibia and Botswana (we can also add Kenya to this list) in allowing pension funds to invest into private equity – in Nigeria the National Pension Commission (PENCOM) allows for 5% of assets into private equity as an asset class, which would amount to $842m on 2016 figures, but 75% must be invested in Nigeria and general partners have to be able to invest at least 3% in the fund, limiting the options and size of investment.

The report also highlights a huge role for supporting Africa’s urgently needed infrastructure development (Africa Infrastructure Country Diagnostic estimates $93bn per year of investment needed). However, it is important that frameworks created are compatible with the mandates and risk and liquidity factors, as well as “mindful of prudential oversight and limits necessary for pension and savings investment” says RisCura.

For these stats and more on the changing dynamics of retirement in Africa, download the excellent Bright Africa report and visit the interactive website. More than half, 52%, of African males over 65 years and 33% of females were “active in the labour market” in 2015, compared to 10% older men and 6% older women in Europe. Pensions in Africa are also seeking to adapt to the fact that many Africans earn and save informally, including Micro Pension Scheme in Nigeria where the informal sector is thought to be 70% of the workforce with 38m potential contributors and the Mbao Pension Plan of Kenya, using M-Pesa or Airtel Money mobile transfer services.

First African fixed income ETF listed in Mauritius, tracking bond index

The African Development Bank (AfDB) and Mauritius Commercial Bank Group (MCB) have launched the African Domestic Bond Fund (ADBF). The pioneer exchange-traded fund (ETF) is accessible to investors through its listing on 18 September on the Stock Exchange of Mauritius.

Sunil Benhimadhu, Chief Executive of the Stock Exchange of Mauritius submitted the Certificate of Listing of the African Domestic Bond Fund to Mr Stefan Nalletamby, Director AfDB FInancial Sector Development Department and Mr Rony Lam, CEO of MCB Capital Markets.


The ADBF fund will track the performance of the AfDB/AFMI Bloomberg African Bond Index 25%Capped, an index that comprises African local currency sovereign bonds of 8 African markets: Botswana, Egypt, Kenya, Namibia, Nigeria, South Africa, Ghana and Zambia. It is intended that sovereign bonds of other countries will be included in the index in future.

It is the first multi-jurisdictional fixed income exchange-traded fund (ETF) in Africa. The Bank has committed $25 million and is acting as an anchor investor of ADBF. It was listed on Stock Exchange of Mauritius came on 18 September 2018.

Fund Manager is MCB Investment Management (MCBIM), a subsidiary of MCB Capital Markets. MCBIM is a pioneer of the pan-African fixed-income asset class, it launched the MCB Africa Bond Fund, an actively managed mutual fund focused on African fixed income, in 2014. The African Development Bank says the fund has consistently outperformed its benchmark.

The AfDB’s African Financial Markets Initiative (AFMI) aims to strengthen African economies by reducing their dependency on debt denominated in foreign currency (FX), increasing the range of available financing options, and acting as a catalyst for regional market integration.

According to the press release: Pierre-Guy Noel, chief executive officer of MCB Group, said: “We are delighted to partner with the African Development Bank in launching this pioneering fund. This attests to the Bank and MCB’s commitment to help develop the local currency fixed income markets on the continent and to the quality of our investment management capabilities. The fund listing on the Stock Exchange of Mauritius brings to investors the opportunity to access African government bonds conveniently.”

Cédric Achille Mbeng Mezui, Chief African Bond Markets & Coordinator of African Financial Markets Initiative (AFMI), said: “A key milestone has been achieved today with the listing of the first multijurisdictional Sovereign Bond ETF, namely the African Domestic Bond Fund (ADBF) on the Stock Exchange of Mauritius. Next steps: The dual listing on the Nigeria Stock Exchange and increased investment in this Fund.”

Liquidity and cost of trading on Africa’s stock exchanges – Bright Africa 2018

++ LATEST ++ Join webinar with Making Finance Work for Africa @mfw4a as #BrightAfrica principal author and head of #unlistedinvestment services at #RisCura Heleen Goussard shares key insights from the latest research on #PrivateEquity on 20 Sept. Don’t miss out. Register here. ++

RisCura’s annual Bright Africa report is a highly recommended read on Africa’s capital markets. Check out the interactive website and download the short report at brightafrica.riscura.com.

Africa’s equity recovery started in the last quarter of 2016, with an uptick in index returns across the different regions. Growth had stopped in African stock markets from 2014 to mid-2016. RisCura says this was “largely due to decreasing commodity prices and a flight to safety from global investors. In 2015 the region saw the lowest recorded growth rate since 1998.” Bright Africa singles out Kenya as “Africa’s overall winner in terms of listed equity performance”. It is relatively immune to the commodity cycle, has a business-friendly environment and is a beneficiary of continued integration of the East African Union. However, returns only represent a compounded annual return of 10% in US dollar terms.

These key challenges facing investors into African listed equities should top the agenda for capital-markets policy-makers, operators and regulators.

Liquidity
The Johannesburg Stock Exchange turns over a respectable $1.8 billion a day. After that, Africa’s stock exchanges “remain stubbornly illiquid”, according to Bright Africa. The second most liquid is the Egyptian Exchange (the report refers to one of its exchanges, the Cairo and Alexandria Stock Exchange CASE) with $72m traded daily. Next are the Casablanca Stock Exchange at $17m a day and the Nigerian Stock Exchange (NSE) $15m in turnover for 2018, each less than 1% of the JSE daily trade.

Daily turnover on the NSE soared 71% during 2018, due to a median increase in turnover of 125% across its 10 largest companies, all in the financial sector. The key boost was recovery in world oil prices seen towards the end of 2017, causing improved economic fundamentals and a boosting investor sentiment. Highest average daily turnover value across African exchanges, excluding JSE, and most of the market capitalisation are with the financial sector. Morocco has 30% of the financial sector capital (ex-JSE), followed by Egypt (18%) and Nigeria (15%).

Free float and liquidity
The “free-float” represents the proportion of a listed companies’ shares that are available for active trading and excludes: any directors’ holdings, shares with lock-in periods and those otherwise held without the intention of trading pursuant to a regulatory or commercial purpose. Excluding these shares from the liquidity consideration, we get a truer representation of the liquidity in an exchange. The JSE has an adjusted market capitalisation of $750bn and a free-float of 73%.

On average larger exchanges exhibit higher levels of free-float, as expected, but this is generally low across the exchanges. The free-floats of the Egyptian and Moroccan exchanges average 26% of their market capitalizations. Both exchanges have higher overall market capitalizations than Nigeria, but the NSE has a higher free-float at 46% of market capitalization, and so a higher adjusted market capitalization. The Ghana Stock Exchange tops the African rankings as the highest free-float (ex-JSE) at 66%, followed by Namibia at 61%. The lowest free-float level relates to the Bourse Régionale des Valeurs Mobilières (BRVM), free-float of only 2%.

Cost of trading and brokerage commissions
RisCura says: “The cost of trading on African exchanges is substantially higher than developed markets”.

Bright Africa report says it is difficult to obtain cost of trading information. “A significant portion of trading fees is made up of brokerage commissions… The limited pool of licensed brokers in each country results in very low power to investors to switch to a more affordable competitor. However, the low volume of trades on these exchanges means that brokers charge more on each trade to cover their costs. It’s a difficult position to get out of without incentivization for brokers to lower their fees.”

The report’s verdict: “Trading costs of up to 4% makes short-term trading strategies unviable, further reducing the liquidity in these markets. Egypt’s relative high liquidity, in comparison with Nigeria (which has a similar free-float), can at least in part be attributed to the significantly lower cost of trading.”

The cost of trading below represents the cost of a single transaction, but in order to realise profits investors would need to also sell shares resulting in double the costs. The substantial portion of other fees in South Africa, mostly represent Securities Transfer Tax, which is not charged in most developed markets.

Consensys ramps up blockchain rollout in African financial markets with new appointment

Leading #Blockchain innovator #Consensys continues to ramp up its role in shaping the future of financial services and capital markets in Africa with the recruitment of #fintech veteran Ian Bessarabia. He joins the team as Head of South African Operations to support the implementation of enterprise Blockchain solution.
Bessarabia has been working in fintech for 20 years, and has managed operations teams, project implementations and market-driven initiatives in an array of countries and across industry. He is best known in African and global capital markets for his work as Market Development Lead – Fixed Income, Foreign Exchange and Blockchain – Africa at Thomson Reuters and previously as Business Development Manager at SWIFT.

Ian Bessarabia


ConsenSys is a worldwide venture production studio that specialises in building decentralised applications (DApps), enterprise solutions and various developer tools for Blockchain ecosystems, focused primarily on Ethereum. Powered by smart contracts, and secured through encryption, the applications provide the benefits of transparency, auditability, and immutability that are unique to solutions based on blockchain.
In a recent post on LinkedIn Bessarabia wrote: “Blockchain has the power to transform the way businesses share information and deliver services. However, this relatively new technology needs to demonstrate clear value to businesses before it builds enough trust to go mainstream.
In a recent press release Bessarabia adds: “Much time has been spent analysing and challenging the underlying technology, and there is a pressing need to shift the thinking into a tangible business narrative, and pragmatic adoption. Expansion within the local financial sector will see our marketplace becoming Blockchain enabled. The idea is that every asset bought or sold would be on the ledger”.

Monica Singer

Monica Singer, South Africa Lead at ConsenSys, recruited him: “It provides me tremendous pleasure to take someone with the abilities and experience as Ian on board. We are on such an incredibly exciting journey and having Ian provide his input is a real boon for us.”
According to the press release: “(Ian) thrives on mentoring start-ups and early-stage initiatives looking at deploying technology for social good. As an ethical protagonist, he is also a participant of the Ethics and Governance Think Tank, run by The University of Pretoria’s Gordon Institute of Business Science” He is on the South African Financial Blockchain Consortium (SAFBC), a group aimed at educating and bringing the benefits of Blockchain to the industry for the benefit of the entire country.

What is Ethereum?
According to the Ethereum website it’s a way to build “unstoppable applications”:
“Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third-party interference.
“These apps run on a custom built blockchain, an enormously powerful shared global infrastructure that can move value around and represent the ownership of property.
“This enables developers to create markets, store registries of debts or promises, move funds in accordance with instructions given long in the past (like a will or a futures contract) and many other things that have not been invented yet, all without a middleman or counterparty risk.”

New $60bn US development finance institution arriving soon

The USA is creating a new International Development Finance Corporation with streamlined capacity for investment. It will replace the Overseas Private Investment Corporation and draw together several other US investment initiatives.

The IDFC is supposed to offer one stop for other investment support including technical assistance grants, finance for feasibility studies, development credits, first loss guarantees, debt financing including in local currency which will save currency risks for investors, and political risk insurance.

The bipartisan act was introduced by Senators Bob Corker and Chris Coons, and Congressmen Ted Yoho and Adam Smith. The Better Utilization of Investments Leading to Development (Build) Act passed the House in early August and the non-partisan policy think-tank Brookings Institution says both the House Foreign Affairs Committee and the Senate Foreign Relations Committee strengthened the development aspects xx. “A review of the legislation casts no doubt that the proposed… IDFC.. is first and foremost a development agency.” See the article for more on the structural elements and how it achieves coordination.

The new agency will pull together Overseas Private Investment Corporation (OPIC, the US Government development finance institution), some credit facilities under development agency USAID, US Trade and Development Agency and financing for feasibility studies in emerging markets
According to Aubrey Hruby, writing in the Financial Times: “The proposed IDFC will be OPIC on steroids. It will advance American interests in three critical ways: 1) it will enhance global competitiveness relative to US trading partners; 2) it will support US firms seeking opportunities in frontier markets and 3) it will eliminate institutional inefficiencies.”

Hruby says the new agency double the overall budget from $30 billion to a $60bn cap and will also be able to deploy equity as well as the debt which Opic was allowed to deploy, limiting the range of projects into which it could invest. By comparison, European development finance institutions can deploy contributions of some $10bn a year. In 2015, Chinese President Xi Jinping announced that funds available for Chinese entities in African markets would double to $60bn. It is estimated that total capital flows from China to Africa were between $70bn and $175bn over the decade 2001-2011.

The new IDFC will enable the US to align commercial and development interests and will provide more opportunities in the emerging economies which account for 80% of global growth since 2008. It will be used to mitigate risk and act as a catalyst.

Connect Africa is OPIC’s $1bn programme (photo credit www.opic.gov)

According to Hruby, projects that OPIC invested into supported more than $80bn in exports and created 280,000 jobs. It supports initiatives such as Connect Africa, an initiative to invest $1bn into telecommunications infrastructure in the next 3 years. Opic was also key to helping Bechtel coordinate and develop the Nairobi-Mombasa Expressway Project in 2016. Analysis by the conservative think tank Heritage Foundation says OPIC invested 27% or $6.28bn of its portfolio in Africa, of which half focused on Ghana, Kenya and South Africa.

Audrey Hruby is co-author of the award winning book The Next Africa, adviser to investors and companies doing business in Africa and a Senior Fellow at the Africa Center at the Atlantic Council.

Recent Africa share listings news

London and South Africa
Old Mutual Limited, an insurance company founded 173 years ago, moved its main listing back to Johannesburg on 26 June and has dual-listings in Namibia, Malawi, Zimbabwe and London, as reported by Bloomberg and Moneyweb. Old Mutual plc terminated its listing on the London Stock Exchange on 25 June, and spun off UK wealth manager Quilter plc which was listed separately on the LSE (and dual listed on the JSE) the same day with a market capitalization of £2.75bn based on a £1.45 share price. It also sold its US asset manager and Latin American units as it believed each unit would be worth more separately. The “home-coming” was marked with a parade in Sandton and events in Malawi, Namibia and Zimbabwe. Old Mutual had moved its head office and primary listing to London in 1999, according to Reuters, but now its prominent riverside London head office is being wound down, with staff down from 120 to 40 in 2018.
The stock was listed in Johannesburg at ZAR28.50, valuing the company at some ZAR140bn ($10.7bn). According to Sanlam analyst Renier de Bruyn, quoted by Bloomberg, the share price did not reflect the hoped-for “value unlock” and Old Mutual was at an “attractive” price-earnings ratio of 7.5x, compared to 13x for its biggest South African rival, Sanlam. Bloomberg quotes Brad Preston, chief investment officer at Mergence Investment Managers Ltd: “Old Mutual’s strategy of trying to build a completely global business I think clearly has failed. We’ve seen them reverse that completely.” It bought United Asset Management Corp in USA for $1.4 billion in 2000 and Skandia AB in Sweden for $8bn in 2006. Between mid-1999 and June 2018 Old Mutual’s shares in Johannesburg returned 480% while Sanlam’s returned almost 2,000%. Sanlam had focused on African markets and reached 34 countries, including buying out remaining shares in Morocco’s Saham Finances SA earlier in 2018 for $1.1bn. Old Mutual is only in 13 countries.
Next step will be the unbundling of shares in Nedbank Group by about December 2018. Old Mutual owns 53% since it bought in under apartheid capital controls in 1986 and it is expected to reduce that to 19.9%.

London
Microfinance firm ASA International listed on the London Stock Exchange on 13 July. Its 85% shareholder Catalyst Microfinance Investment had partially sold half its stake by offering 40m shares at GBP2.24 each. ASA International was set up in 2007 and is one of the larges and most profitable international microfinance institutions, with 1.8m clients, particularly low-income and underserved women entrepreneurs. It operates in Asia (7)%) and in Africa (30% of clients, including in Tanzania, Uganda, Kenya, Rwanda, Nigeria, Ghana and Sierra Leone. It has 1,387 branches and employs 9,000 staff.

Mauritius and London
Grit Real Estate Income Group, a pan-African real estate company based in Mauritius and investing in 7 countries Botswana, Kenya, Mauritius, Morocco, Mozambique, Ghana and Zambia with plans for Senegal and the Seychelles, raised $132.1m through selling 92.4m shares at $1.43 each, before listing on the London Stock Exchange main board on 31 July. The new funds are for more investments in Mozambique and Ghana. Previously there were 214m shares listed in Johannesburg Stock Exchange and Stock Exchange of Mauritius. Bronwyn Corbett and Sandile Nomvete built the Delta International Property Fund from R2.2bn to R11.8bn. It became Mara Delta Property Holdings and was then rebranded Grit and the company headquarters moved to Mauritius, according to this 2017 interview in Finweek magazine.
Corbett commented in a press release: “”We are delighted to have successfully completed our Listing on London Stock Exchange and we are proud to be the first London listed pan-African real estate group”. Earlier she was quoted saying the African real estate sector “offers some of the best returns in the global property market. We have a proven track record of generating income from our selective and diversified range of assets, built through our close and detailed understanding of the region’s property investment environment. The listing will support our aim to grow our portfolio further and become the leading real estate owner on the African continent outside South Africa.” The share price was set at net asset value and the aim is to yield 12% a year in US dollars.

Nigeria
The Federal Government of Nigeria listed a NGN10.7 billion ($29.5m) FGN Green Bond 2022 on the Nigerian Stock Exchange on 21 July. It offered a coupon of 13.48% and aims to finance initiatives including solar plants and hydropower.

South Africa
Anchor Capital became the 9th listing on the A2X Markets on 19 July through a secondary listing. It was listed on the Johannesburg Stock Exchange’s AltX platform in September 2016 after raising ZAR60m ($5.4m) through an IPO.