Archive for the 'Agriculture' Category
November 4th, 2012 by Tom Minney
South Africa’s JSE Ltd (www.jse.co.za) continues to expand its commodity derivatives range. It has added silver and platinum “quanto futures” to its existing gold, copper and Brent crude quanto futures launched earlier this year. It is also helping develop the South African grain market by allowing Safex silo receipts to complete a futures contract, so that producers and buyers can trade grain with a bid or offered premium depending on location, for instance if a buyer wants grain in a particular location.
The JSE has partnered with Rand Merchant Bank, which is the initial market maker. The commodities are referenced as part of the JSE’s existing licensing agreement with the CME Group.
Commodity gain, without currency pain
According to a JSE press release on 1 Nov, a quanto future is a derivative instrument which, on the JSE, is a ZAR-denominated commodity investment product which delivers the same payoff as a pure USD-denominated commodity investment. This lets investors gain exposure to the foreign underlying commodity without being exposed to the USD-ZAR exchange rate. It simplifies decisions and allows investors to focus only on the returns of the underlying commodity.
Chris Sturgess, Director of the JSE’s Commodities Division, says: “We have seen keen interest expressed in the new Quanto Futures we offer and by adding silver and platinum to the product offering, we continue to provide derivative market participates with opportunities to easily access the international commodities markets.”
Growing grain markets
Trading in grain silo receipts to settle grain futures contracts is likely to benefit both producers and buyers, according to another JSE press release. Producers can negotiate a better price for stock in the specific silo represented in the receipt by placing an “offer” onto the system for a premium over and above the Safex price. Buyers such as millers and processors will benefit through access to bid at all registered delivery points at a premium per ton, regardless of whether or not physical grain is on offer. Buyers will be able to bid for preferred delivery locations. Previously no bids were permitted without available stock on offer.
There are more than 200 registered delivery points. The silo owner continues to guarantee the quality and quantity of the physical stock on the Safex silo receipt. However, the JSE guarantees the cash-flow process and settlement, so there is no risk of counterparty default. Settlement will take place over a 2-day cycle, meaning a trade is settled the next business day after trade, eliminating the delayed payments generally associated with cash market transactions.
The price when making physical delivery is a function of Safex’s mark-to-market price on the day, less the location differential (indicative transport cost) to the registered delivery point. With this new functionality the value of grain at each delivery point can be negotiated transparently between buyer and seller and included in the final settlement price.
The JSE says it offers a first-world trading environment, with world-class technology, surveillance and settlement, in an emerging market context. It is among the world’s top 20 largest equities exchanges by market capitalisation.
July 10th, 2012 by Tom Minney
Voxtra East Africa Agribusiness Fund (www.voxtra.org), a Norwegian social investor, has completed an inaugural investment of US$1.5 million in Mtanga Farms Limited (MFL), a commercial farm in Tanzania which grows seeds, crops and livestock. This is first of Voxtra’s target of 8 to 10 investments targeting companies with pivotal roles in improving the livelihoods of smallholder farmers. The adviser for MFL was the UK’s Lion’s Head Global Partners (www.lhgp.com).
MFL is an integrated agri-business based in Iringa, Tanzania. Its farms on 2,600 hectares of land that was previously farmed but had been long neglected in 2009, when MFL secured its long-term lease of the land. It has made progress in rehabilitating the land and putting in place essential infrastructure. The focus is on high-value seed crops, centred around setting up a seed potato operation providing clean seed potatoes to smallholder farmers across Tanzania. It also works in protein including growing animal feed, livestock breeding and downstream processing of meat. The company is run by a dedicated team of farmers and business developers, and is now recognized as the leading integrated farming operation in the Southern Tanzanian Highlands. Core to the company’s strategy is the provision of improved seed material to local smallholder farmers.
Voxtra’s investment will enable MFL to take its seed potato business to a commercial scale, triple its farmed acreage and significantly ramp up its expanding livestock operation.
Leading impact investors
Several leading impact investors are backing Mtanga Farms, including Thirty Degrees East (Mauritian investment company), Lion’s Head Global Partners, Calvert Foundation (US), Nigerian investment firm Heirs Holdings and its philanthropic arm, The Tony Elumelu Foundation, as well as the African Enterprise Challenge Fund.
African green revolution
According to a LHGP press release: “African agriculture needs a green revolution that is powered by an emerging class of sustainable small and medium enterprises. SMEs are best placed to increase local food production and integrate local farmers into value chains and create employment.” Kim Wahl, Chairman of Voxtra, said: “MFL is a prime example of a business whose commercial success goes hand-in-hand with its social impact. The company is already playing a catalytic role in transforming potato farming in Tanzania, and we are excited about this opportunity to help grow the business.”
In partnership with the Tanzanian Government, MFL recently announced the registration of 4 new potato varieties – the first varieties to be released in Tanzania in 30 years. Whilst potatoes are a major cash and food crop for Tanzanian smallholder farmers, the lack of clean seed material has long been a major impediment to farmers’ productivity. MFL’s clean seed potato will enable a tripling of smallholder farmers’ yields: whereas the national average potato yield is 5-7 tonnes/ha, smallholders have demonstrated yields of 15-20 tonnes/ha when planting clean seed. By scaling up its production of clean seed potato, MFL will provide a pathway out of poverty for a sector employing an estimated 150,000 smallholder farmers.
Voxtra intends to make use of its technical assistance facility – funded by the Norwegian Agency for Development Cooperation (NORAD) – to evaluate, support and increase the social impact made by MFL.
About the investors
The Voxtra East Africa Agribusiness Fund invests growth capital in commercially viable but capital-constrained agribusinesses that play pivotal roles in improving the livelihoods of smallholder farmers. First closing was on 9 November 2011, at NOK 65m (approximately US$12m). Among the shareholders are institutional investors such as Norfund, Grieg International and Kavlifondet, as well as private individuals in Scandinavia.
Lion’s Head Global Partners is a UK-based merchant bank, offering financial advice and fund management with a focus on emerging markets and Africa. For more information, visit www.lhgp.com.
Thirty Degrees East is a private Mauritian-based investment company focused predominantly on East Africa and South Africa.
The Calvert Foundation provides impact investment opportunities that aim to bring a financial return to investors and a social benefit to low-income communities in the U.S. and around the world. A pioneer in the impact investment field, Calvert Foundation investors have created over 528,000 jobs, built over 20,000 affordable homes, and financed over 27,000 non-profit facilities and social enterprises through investment in the Community Investment Note. Learn more at www.calvertfoundation.org.
Heirs Holdings is an African proprietary investment company with a long-term investment horizon in key economic sectors that can propel Africa’s economic development. Heirs Holdings is committed to the economic transformation of Africa through investments that create both economic prosperity and social wealth. For more information, visit www.heirsholdings.com.
The Tony Elumelu Foundation is an Africa-based and African-funded not-for-profit institution dedicated to the promotion and celebration of excellence in business leadership and entrepreneurship across Africa. As a 21st century catalytic philanthropy, the Foundation is committed to the economic transformation of Africa by enhancing the competitiveness and growth of the African private sector. Founded in 2010 by Tony O. Elumelu, MFR, the Foundation identifies and addresses systemic challenges that inhibit African entrepreneurs. For more information on The Tony Elumelu Foundation, visit www.tonyelumelufoundation.org, follow us on Twitter @TE_Foundation or like The Tony Elumelu Foundation Facebook page.
The Africa Enterprise Challenge Fund (AECF) invites private sector companies to compete for investment support for their new and innovative business ideas in agri-business, rural financial services and renewable energy. To qualify for AECF funding, a business idea must have a positive impact on the rural poor in Africa, delivering increased employment, reduced costs, and improved productivity. The AECF runs competitions open only to for-profit-companies. For more information on the AECF please visit www.aecfafrica.org or email info@aecfafrica.org.”
June 2nd, 2012 by Tom Minney
The African Development Bank (www.afdb.org) has approved an equity investment of US$100 million to Agvance Africa, which the bank claims in a press release is the first fund of funds focused on African agribusiness. Agvance Africa’s strategic objective is to increase private equity and other investment flows into the agribusiness sector to address growing food security concerns and unleash the largely unexploited potential of African agriculture and agribusiness sectors.
Agvance will be managed by Credit Suisse Customized Fund Investment Group (CFIG) and will target total capital commitments of US$500m.
It expects to invest in 12 to 15 best-in-class private-equity funds targeting portfolio companies along the agribusiness value chain and across the continent. Agvance Africa will catalyze investment into the agribusiness sector, channeling capital to labour-intensive activities, leading to inclusive job creation and promoting innovative, environmentally sustainable approaches to agribusiness.
AfDB has also played a key role in developing the Agvance concept, with support from the Fund for Private Sector Assistance (FAPA), and will work closely with the CFIG to design a state-of-the-art environmental and social management system, in cooperation with the World Wildlife Fund (WWF). According to the press release, Agvance will work closely with partner development finance institutions (DFIs) and will aim to generate “a multiplier effect on resources available for the development of the agriculture and agribusiness sectors”.
Agvance Africa is in line with AfDB’s strategy to support private sector development on the continent, which has included private equity and venture capital investments. AfDB’s public sector window is cooperating with the UN Food and Agriculture Organization (FAO) and the UN Industrial Development Organization (UNIDO) in the context of African Agribusiness and Agro-industries Development Initiative (3ADI).
Founded in 1999, CFIG currently has one of the largest dedicated alternative investment teams in the world and is uniquely qualified to manage Agvance Africa, given its substantial assets under management, dedicated team and demonstrated private equity investment expertise.
Speaking from the G8 Summit in Camp David, which pledged action to promote sustainable agriculture, AfDB President Donald Kaberuka said: “There was broad consensus that it is the right thing to do, it is doable and it’s good for the world. The summit was about growth, and growth in Africa begins with agriculture.”
Mouhamadou Niang, Manager at AfDB’s Private Sector Department, said in a press release: “This initiative has the potential to catalyze unprecedented levels of investments into the agribusiness sector throughout the African continent. The potential will of course only materialize through efficient and responsive implementation. I have no doubt that with the combined experience of the international fund manager, its local African banking partner, the World Wildlife Fund (WWF)as environmental advisor, and AfDB’s oversight as sponsor, this transformative goal will be achieved in the medium term,”
AfDB’s board of directors approved the anchor investment on 16 May in Tunis.
April 24th, 2012 by Tom Minney
A new securities exchange in Lusaka (Zambia) is installing tried-and-tested bond and derivative trading software and says it will be ready to launch operations next month, May 2012. BaDEx has trading platforms that include spot and derivative trading in bonds, currency, commodities (such as derivatives on metals and silo certificates on the spot market) and a variety of other derivatives including agricultural commodities, precious metals, equity and energy.
There is also a central scrip depository system (CSD) with a separate core management, risk solution, surveillance and settlement systems and platforms. The CSD will apparently link to CSDs in South Africa, Europe and the US and with the central Bank of Zambia’s real-time gross settlement system.
BaDEx, also known as Bond and Derivatives Exchange, reports that it was licensed by Zambia’s Securities and Exchange Commission on 1 January 2012 and the licence covers all securities under the Securities Act – bonds, equity, derivatives and commodities. It has signed a contract effective 12 March with South Africa’s STT (www.sttsoftware.co.za, which has also provided the JSE’s bond trading software for many years), for STT to immediately deploy trading, clearing, settlement and surveillance systems, and systems for auctioning government securities that will be suitable for the central bank, among others.
Dominic Kabanje, CEO of BaDEx, told AfricanCapitalMarketsNews that the exchange is a public-liability company owned by “banks, pension funds and private companies including the major securities dealers in Zambia”. He says they started with 6 local stockbroking members (approach stockbrokers Madison Asset, Integral Initiatives, Intermarket Securities, Laurence Paul Investment Services, Pangaea Renaissance, African Alliance Securities for more information) but are also looking for remote members, working with a South African merchant bank.
Mr Kabanje said they are now doing primary listings. BaDEx will start secondary trading using an online, Internet-based platform when the systems go live and are also seeking to partner with an international clearing house. In a press release he said they had been excited for 18 months: “We are glad to have finally concluded and signed the contract with our software systems vendors. STT applications have been tried and tested in the South African financial markets at the Johannesburg Stock Exchange (JSE), who have used this software for the past 18 years.
“We are currently setting up a network of domestic and foreign-based settlement banks, local and remote foreign members and dealers, institutional underwriters, a clearing house as well as primary panels of domestic, regional and international investors. We plan to link up all willing domestic and regional banks, institutional investors, pension funds, treasury departments, the local central bank, the government debt management office and the local member brokers to our system by providing interfaces and online access to our platforms.
“We will also shortly join the international community of CSDs in South Africa, Europe and the United States initially to facilitate faster and smoother clearing of international securities transactions. The applications from STT and others will enable us to do this and in addition will allow us to compete internationally for bond and derivatives business”.
“I do not see any obstacles from the Zambian side for companies wishing to list. Even SA companies can list on BaDEx. We want Zambian companies to dual list on JSE and BaDEx. At BaDEx we are implementing SADC protocols on the free-trade area as well as enhancing intra-regional trade. An exchange is one such conduit for regional trade. We will, however, have to deal with the problem of exchange controls in SA.”
Michelle Janke, STT’s Managing Director, said the company was happy to reach further into SADC: “We have worked closely with the executives of BaDEx for more than a year, and the closely formed relationship will stand us in good stead over the coming months whilst we deliver all the software applications and prepare the new securities market in Zambia to go live. We hope that in due course through an ongoing cooperation between BaDEx and regional merchant banks we can assist in transforming Lusaka into a key financial hub within the SADC region. We will be there to make this happen operationally.”
Products to be traded include: corporate bonds, municipal bonds, currency futures and options, interest-rate derivatives (including swaps), equity derivatives and commodity derivatives on underlying copper, cobalt, gold, oil, wheat, soya and maize spot markets, bond derivatives market, spot bond market, spot and currency derivatives market, commodities derivatives (including metals) and the commodities spot markets (with silo certificates), agricultural derivatives market, spot equity and equity derivatives markets, precious metals derivatives market and energy derivatives market.
April 6th, 2012 by Tom Minney
The making of the market – this article by Dr Eleni Gabre-Madhin, CEO of the Ethiopian Commodities Exchange (www.ecx.com.et) gives a fascinating, self-critical and revealing account of the creation of the exchange and the sometimes breakneck pace at which the market grew and took on new commodities such as coffee. It’s very good, and well worth reading in full, http://www.ifpri.org/sites/default/files/publications/oc70.pdf.
Particularly important is the idea that a commodity exchange will only have traction in Africa if it improves the lives of smaller rural farmers and traders. Eleni puts focus on “the market institutions needed for quality grades and standards, warehouse receipts, market information, coordinated trading, payment systems, and contract enforcement. All of these, I argued, should be established in a holistic and integrated fashion, rather than in the piecemeal approach observed all over Africa in different donor interventions. I pushed further, presenting for the first time the idea that a commodity exchange was precisely the holistic platform that would integrate all of these elements.”
These were the aims of the ECX, according to a 2005 concept paper: “a commodity exchange would build the needed institutions from the ground up for grading and certifying quality, issuing warehouse receipts, trading, relaying market information to all actors, enforcing contracts, and ensuring payment and delivery. But that was not all. Ethiopia’s commodity exchange would be designed to serve smallholder farmers and small traders, it would not exclude those with less education or less capital, and it would balance the interests of all actors and of the public and private sectors. A commodity exchange would not aim to eliminate traditional markets around the country, but rather to build up these informal markets by adding technology and systems to bring more transparent, more efficient, and more reliable trading to all concerned.”
Later she details the achievements, including: “The value of ECX trades has risen by 368% to reach US$1.1 billion in 2010–11 (NB the Ethiopian fiscal year-end is in July, its calendar year in September, due to a different calendar). Our storage operations have grown from one warehouse in Addis Ababa to 55 warehouses in 17 regional locations, and from 5,000 tons to a total capacity of 250,000 tons. In 2010–11, we graded, weighed, stored, handled, and delivered 4.7 million bags without a single delivery default.
“Membership is at 243, and our clients, who trade through our members, number about 7,800. Farmer cooperatives representing 2.4 million smallholder farmers make up 12% of our membership. We have electronically linked our clearinghouse to 10 partner commercial banks, and we settle US$20m or more daily on a “T + 1” basis (that is, the day after trade)— the only stock or commodity exchange in Africa to do so. In other words, anyone can sell to anyone in Ethiopia and be assured of payment the next morning. We have not had a single payment default, shortfall, or delay since our start. This is a financial revolution in itself.
“Our market data reach far and wide. We ‘push’ price data in real time, in less than 2 seconds, to outdoor electronic ticker boards in 32 rural sites; to our website, which attracts visitors from more than 107 countries daily; to 256,000 mobile subscribers through instant messaging; and to the radio, TV, and print media. Users can also “pull” market data through our toll-free phone-in service, which received more than 1m calls in September 2011. That’s 61,000 calls each trading day, of which 70% were from rural users. This is nothing short of an information explosion in Ethiopia, and we are pushing further still.”
She adds that farmers are now getting 70% of the end price, compared to 38% before the ECX, and this means more investment in production and quality, with volumes in some grades tripling. A new financing system means farmers can use warehouse receipts as collateral for bank loans, bringing new financing to rural areas.
Many are interested in potential for commodity exchanges in Africa as a way of increasing agricultural productivity and combating poverty but it is worth recalling that the ECX only launched after nearly 15 years of studies and research both in Ethiopia and other African markets. It shows that big development success stories are not achieved overnight, or without deep thinking and strategy, coordination and hard work, as well as determination to keep going through mistakes, hostility and downturns.
It also shows the a major contribution markets will play in Africa’s coming development.
March 22nd, 2012 by Tom Minney
JOHANNESBURG – The JSE (www.jse.co.za) says it will introduce its third wheat futures contract, with a cash-settled contract based on hard red winter wheat, referencing the Kansas City Board of Trade’s (www.kcbt.com) benchmark settlement prices. The new contract will be introduced on 28 March with expiry dates in July, September, and December 2012 and March 2013.
KCBT President & CEO Jeff Borchardt said: “The Kansas City Board of Trade is proud to be partnering with the Johannesburg Stock Exchange to provide their market users access to our Hard Red Winter wheat futures contract, the global benchmark for bread wheat pricing. JSE’s respected position in global commodities trade made the idea of working with JSE quite appealing. This is KCBT’s first such license agreement with an overseas exchange.”
Chris Sturgess, Director: Commodities at the JSE, commented: “We are very pleased to be working with the Kansas City Board of Trade, which celebrates its 156th anniversary this year. Not only do they have a wealth of experience, we also share their commitment to integrity and service for the market we serve. This also represents a further step toward globalizing South Africa’s commodity markets.” Hard red winter wheat is similar in type and milling quality to South African-produced wheat, which means local market participants can consider this alternative product for price-risk management purposes specific to their wheat exposure.
This is the JSE’s third wheat futures contract and the second international wheat contract, all traded on contract sizes of 50 metric tons. The JSE’s local wheat contract is its second most liquid agricultural product. The JSE listed its first international wheat contract under license from the CME Group in July 2011.
According to Sturgess: “Offering 3 wheat contracts enables traders not only the choice on which product to hedge their wheat-price risk but also through our electronic trading system the functionality to trade the spread between the various markets. This should complement volumes across all 3 product types.”
South African local traders have had access to global commodity markets since 2009, when the JSE signed the first licensing agreement with the CME Group for a corn futures contract. It currently offers contracts on corn, wheat, soybean, soybean meal and oil.
As with other foreign-referenced commodities, Rand Merchant Bank and Nedbank Capital will be market-makers, ensuring active price quoting off the liquidity of the international market. Individual investors and corporate entities are able to invest with no limits. Pension fund managers and long-term insurance funds are subject to their 25% foreign allocation limits. And asset managers and collective investment schemes will be subject to their 35% foreign allocation limits.
Why invest in or trade wheat futures?
Wheat futures provide a way for South Africans to:
- Effectively manage the price risk with a view either on the domestic market or to more easily access the international market via the contract, which will be traded in the local currency
- Hedge or gain exposure based on expectations of directional price, spread movement or volatility in wheat either as an outright position or versus the domestic market
- Realise arbitrage and spread opportunities between the CBOT contract, KCBT contract and the local contract
- More effectively evaluate both the current and future world supply and demand for wheat and the various qualities
- Identify short- and long-term cyclical price and volatility patterns for wheat.
Full product specs can be found at: www.jse.co.za/commodities. The JSE is among the world’s top 20 largest equities exchanges in terms of market capitalisation. It is currently ranked the 20th largest exchange by the Futures Industry Association (FIA) for derivatives
August 19th, 2011 by Tom Minney
Reuters reported recently that South Africa’s E. Oppenheimer family and Singapore’s sovereign fund Temasek Holdings have set up a $300 million private equity fund called Tana Africa Capital to invest primarily in consumer goods and agricultural sectors across Africa. The fund will target Africa’s growing young population and also focus on agricultural production and processing of farm produce and, to a lesser extent media, education and healthcare. The prime target will be the bigger economies, but it will not avoid smaller economies.
James Teeger, group managing director at E Oppenheimer & Son, told Reuters: “The initial capital commitment is $300 million, so 150 from each partner. We felt that was an appropriate amount to help the team make 5 to 6 investments over the next few years.” He would not say when Tana Africa hoped to close its first investment but he said the fund has a strong deal pipeline.
Reuters reports that Africa is increasingly attracting interest in investment, focusing on its abundant resources, fast-growing population and rising personal incomes. Reuters said Siemens AG said last year it aimed to invest $254 m in Africa by 2012. Global private equity group Carlyle, based in Washington D.C., said in March it was entering sub-Saharan Africa, targeting investments in consumer goods, financial services, agriculture and infrastructure.
May 31st, 2011 by Tom Minney
The London Stock Exchange (www.londonstockexchange.com) has long been a global centre for capital, particularly where African investments are concerned. It is also the world centre for Eurobonds and several leading African equities are traded in London. There are several reasons to come to London, either through listing or cross-listing, including being closer to investors and sources of capital such as funds and investment trusts and also because investors may find it more attractive to invest in companies that are listed on a well-known and recognized stock exchange. A few international exchanges, including London, Toronto and Australia, are also known as centres for world mining equities and attract specialized listings..
The LSE’s Main Market lists 18 equities for trading that focus on Sub-Saharan Africa. These are mostly South African firms covering food, industrials and mining and the history began with AECI in 1937 and Tongaat-Hulett in 1939. The main board also includes Zimbabwe’s hotel group Meikles, Hwange Colliery and financial services firm NMBZ; Kenya’s Kakuzi food products and Zambian miner ZCCM. All listings after NMBZ (1997) were incorporated outside Africa, including Channel Islands Jersey and Guernsey, Bermuda and UK. The list doesn’t include the “London Five” – Anglo American, BHP Billiton, SAB Miller, Old Mutual and Investec –of giant firms who caused controversy when they moved from South Africa. Africa is now a small part of their operations.
AIM, the LSE’s international market for smaller, growing companies, was created in 1995 for businesses seeking growth capital, including early-stage and venture-capital, as well as more established companies. Sub-Saharan Africa scores only 55 among the 3,000 worldwide companies. The list is dominated by mining companies, many incorporated in UK, offering investors exposure to gold, diamonds, gemstones, uranium, platinum, coal, iron and other metals and minerals spread across Africa from South Africa to Liberia and Sierra Leone. Also on offer are financial services, farming and fishing, water, computer services, real estate, industrial machinery and alternative fuels. Most of the countries of operation are English-speaking, but others include Mozambique and Somalia.
May 4th, 2011 by Tom Minney
A private equity fund that invests in housing, agriculture, education and health says it has raised more than $250 million for its first fund, Vital Capital Fund I. Eytan Stibbe, founding managing partner at Vital Capital Investments LP (www.vital-capital.com) and chief investment officer was reported as telling Bloomberg yesterday (3 May) the fund aimed to invest in Angola, Ghana and Mozambique.
The fund includes retired U.S. Army General Wesley Clark among its advisory board members, is a proponent of “impact investing,” a strategy that places capital in ventures with social or environmental goals.
Stibbe says Vital Capital has already invested in Kora Housing, a developer of affordable housing in Angola. It aims to raise another $250 million.
March 9th, 2011 by Tom Minney
Emerging Capital Partners (www.ecpinvestments.com) has won an award as “Best Private Equity House in Africa” named by EMEA Finance magazine (www.emeafinance.com). This recognizes ECP’s achievements in raising over $613 million for its third pan-African fund, ECP Africa III (AF III), making it the largest fund ever raised for growth equity investing across Africa. It brings ECP’s total assets under management to $1.8 billion.
ECP is praised for committing over $1 billion to diverse investments across all of Africa and impacting growth and development in over 40 countries. It is the second consecutive year ECP won the award.
Hurley Doddy, a founding partner and Co-CEO of ECP said in a press release: “We are extremely proud to receive the award for “Best Private Equity House in Africa” for a second consecutive year. Africa’s profile as a compelling investment story has accelerated in pace over the last two years, so we feel ever more privileged to be held up as the leading firm among our many excellent peers.
“The fact that we were able to raise over $613 million during a time of great financial uncertainty proves that we are certainly not alone in believing in Africa’s potential. Our dedicated focus and extensive presence on the ground adds operational value unrivalled by our peers. We look forward to continuing our success across Africa throughout 2011 and beyond.”
Doddy told Reuters agency in an interview on 7 March that Africa offers plenty of scope for private equity investments, with at least another decade of strong growth expected from consumer goods, broadband internet and financial services. After years of explosive growth in cell phones and banking, he foresees the new growth sectors will also include TV over Internet, insurance and real estate.
Recently, ECP has deployed over $180 million from AF III in 4 investments which provide new services and increase opportunity in 17 countries: Financial Bank, a Togo-based commercial bank with operations in Benin, Cameroon, Gabon, Chad, Mauritania and Guinea; Wananchi Group, a high-speed Internet provider serving Kenya and Tanzania; Groupe NSIA, a West African company providing insurance to Benin, Togo, Senegal, Guinea Bissau, Ghana, Mali, Guinea, Cameroon, Congo and Gabon; and Thunnus Overseas Group, a leading canned tuna provider supplying France with over 25% of its canned tuna products from bases in Madagascar and Cote d’Ivoire.
The group has already made more than 50 investments and 20 successful exits in Africa. Past investments include Nigerian wireless network operator Starcomms and pan-African mobile operator Celtel International, sold to Kuwait’s MTC for $3.4 billion in 2005 before MTNCI was rebranded Zain last year and its African assets were bought by Bharti Airtel. Doddy told Reuters: “Those companies are now quite big. The rates of growth are declining so we’ve been getting out of our last investments in that segment of the telecom business, looking maybe to get in some other segments,” he said.
One such example is Kenya’s Wananchi, a triple-play telecoms firm which bundles broadband internet, cable television and voice telephony into one package and is rolling out its services to 9 east African countries. “A country like Kenya may be over 50% in terms of cell phone penetration but Pay TV, broadband are still at the 1% and 2% type range, so once again we probably have another decade of growth in that type of business,” Doddy said.
He saw further growth in Nigeria’s banking sector, a favourite of frontier market investors, and predicted financial services including insurance would also generate high returns. Changes in land ownership laws would also allow lucrative real estate investments and growth in mortgage lending. Soaring food prices in recent quarters meant investors were increasingly interested in Africa’s agricultural potential, with swathes of arable land that could be put to more productive use. “We’ve seen a real uptake in people looking at agro-businesses here.”
Popular uprisings in North Africa might slow investment in the short term but could unlock the region’s economic potential in future. “Those places had been held back by governance that needed to be changed…I think it is reasonable to expect higher growth rates in North Africa if you look over the next decade.”
He said there was increased interest from Chinese and Indian investors but viewed these as potential co-investors or exit opportunities rather than direct competition.
“If you have a good cash-generative business here in Africa, almost anywhere in almost in any sector, somebody is probably interested in buying,” Doddy said.
The EMEA Finance award is to be presented at annual Achievement Awards charity dinner in London in June.