Archive for the 'East Africa' Category
March 9th, 2011 by Tom Minney
The International Finance Corporation (www.ifc.org), a member of the World Bank Group, on 8 March announced it was investing $10 million in equity in Catalyst Fund I LLC. The fund aims to stimulate employment and accelerate economic growth across East Africa by improving access to equity financing for emerging and mid-size companies.
Catalyst Principal Partners (www.catalystprincipal.com), a private equity firm based in Kenya, has raised $70 million for the fund. Other investors include the African Development Bank, the Commonwealth Development Corporation, Germany’s development finance company DEG and PROPARCO of France.
The fund will invest in growth companies with dynamic management to drive growth, regional expansion, consolidation, and performance improvement. Investments in target companies will range from $5 mn to $15 mn. It will be managed by Catalyst Principal Partners LLC, and aims to invest in Kenya, Uganda, Tanzania, and other East African countries. It will provide financial and management advice to up to 14 mid-size companies across different sectors.
Paul Kavuma, Chief Executive Officer of Catalyst, said: “We anticipate additional substantial commitments in the coming months to achieve our target fund size. We are particularly encouraged by the interest expressed from regional pension funds and insurance companies, noting that we have already received significant capital from reputable local institutions and private investors.”
Jean Philippe Prosper, IFC Director for Eastern and Southern Africa, said: “IFC is supporting this fund to help East Africa’s entrepreneurs gain better access to finance and promote the high growth and dynamic companies that encourage sustainable development and create jobs and new opportunities.”
IFC is the largest global development institution focused on the private sector in developing countries. Investments climbed to a record $18 billion in fiscal 2010.
March 7th, 2011 by Tom Minney
The Uganda Securities Exchange (www.use.or.ug) has today (7 March) extended its trading to 5 days a week, up from 3 days.
USE Chief Executive Joseph Kitamirike said at a press conference on 4 March that it would help meet local and international demand. It will also match trading on other East African exchanges such as Dar Es Salaam and Nairobi, as the exchanges harmonize in terms of an East African common market.
The Daily Monitor newspaper reports him as saying: “This development will offer investors maximum opportunity to execute investment decisions and respond promptly to market changes.”
He earlier told the paper reasons for the extension were: increasing demand for company shares, regional integration and the desire to make trading easier: “It’s just to give an opportunity for people to trade. People sometimes make their decisions on Tuesday but they have to wait until Thursday to trade. We cannot keep our market closed on days when we can be trading across the border. If your market is closed and the other markets are open then investors who come through your market don’t have access to others.”
There are 14 companies listed for trading on the USE, including 6 cross-listing with the Nairobi Stock Exchange.
Another cross listing being processed is for UK’s Tullow Oil PLC (www.tullowoil.com), which operates Uganda’s three oil blocks. African Alliance is the adviser but the listing application was held up over a tax dispute on Tullow’s $1.45 billion purchase of 50% interests in exploration blocks formerly owned Heritage Oil PLC stakes completed last July. This dispute is reportedly close to conclusion.
December 16th, 2010 by Tom Minney
The International Finance Corporation (www.ifc.org), a member of the World Bank Group (www.worldbank.org), and East Africa’s Securities Industry Training Institute (SITI), based at the Uganda Securities Exchange (www.use.or.ug) have signed an agreement to broaden training. This will boost opportunities for market participants, regulators and others in East Africa’s capital markets sector, with the aim of strengthening and supporting the growth of securities markets in the region.
SITI will be licensed to use IFC-developed securities markets training material for the next 10 years to train and certify thousands of securities market participants in Kenya, Rwanda, Tanzania, and Uganda. The material is developed by the Efficient Securities Markets Institutional Development (ESMID) Programme, a joint project by the Swedish International Development Cooperation Agency (www.sida.se), which provided $5.5 million, the IFC and the World Bank.
IFC Principal Investment Officer Aida Kimemia said in a press release: “Supporting the development of securities markets is a priority for IFC in Africa. This agreement will make available world-class training materials to thousands of people in East Africa, improving their skills and knowledge and giving them the tools that will support broad economic growth in the region.”
Joseph S. Kitamirike, Chairman SITI board and CEO, Uganda Securities Exchange, said: “We at SITI are very pleased to have cooperated with IFC to develop the training materials. We know that they are cutting edge and will help us develop the personnel we need to grow the securities markets in East Africa. On the strength of this successful cooperation with IFC, we are confident we will undertake more activities of this nature that will ensure proper market development.”
The ESMID programme aims to help develop well-functioning securities markets in Africa, with a goal of supporting key economic and social development needs with high developmental impact, such as infrastructure, housing, and microfinance. Despite efforts over the last 12 months this blog has been unable to contact the East Africa office directly to find out more, as the officers do not seem to reply to emails or phone messages.
Its funded programmes are to help simplify regulations and procedures for issuing and trading bonds; strengthen market infrastructure; build capacity of market participants; facilitate the regionalization of securities markets; and support demonstration transactions. In East Africa, it reportedly works with central banks, securities regulators, stock exchanges, and market participants, such as brokers, dealers, investment banks, and institutional investors. It also works in Nigeria, according to the website.
The ESMID-developed training material consists of 3 courses and 5 seminars: Fundamentals Securities Course; Securities Certification Course; Officers and Directors Course; Bond Trading Seminar; Corporate Finance Seminar; Corporate Governance Seminar; Bond Underwriting Seminar; and Portfolio Management Seminar.
The courses, which will be required for licensing of market intermediaries, have already benefitted more than 700 course participants in East Africa.
The IFC, a member of the World Bank Group, is the largest development institution focused on the private sector in developing countries. It says “our new investments climbed to a record $18 billion in fiscal 2010.”
December 12th, 2010 by Tom Minney
The eurobond recently issued by PTA Bank (www.ptabank.org) attracted bids for $650 million compared to a target of $300 million, according to a report in Kenya’s Business Daily (www.businessdailyafrica.com). Standard Bank and HSBC were the joint book-runners. The $300 mn bond started trading on the Luxembourg Stock Exchange www.bourse.lu on 9 November, according to a bank press release.
The report quotes Standard Bank Director of Investment Banking for Africa John Ngumi as saying the warm reception of the PTA Bank Eurobond in global markets is expected to set the tone for sovereign issuers such as the Kenyan Government, which shelved plans of a Eurobond of similar size in 2007 due to a volatile political environment and the onset of the global economic recession: “The deal is a milestone that opens up an important source of debt financing for African corporate entities and governments as they seek to diversify funding and accelerate economic development, especially infrastructure.”
He added that the transaction also illustrates the growing capacity of Africa-based financial institutions to place international financial transactions successfully.
Andrew Dell of HSBC said in a PTA Bank press release that the “deal was very well executed and dropped cleanly into the tight market window. This is a very important transaction for both the issuer and Africa more broadly. Development and trade finance has huge impact on the real economy and hence is a significant enabler of economic growth in and of itself.”
The successful issue followed a series of investor meetings in Zürich, Geneva, London, Hong Kong and Singapore.
Domestic interest rates are higher than international debt in hard currency and there are fears that more Government borrowing from local debt markets could send interest rates even higher. Eurobonds are listed on several stock exchanges including London and Luxemburg.
Eurobonds are typically denominated in international currencies, and the PTA Bank transaction was denominated in US dollars. The bond was priced to yield 7.125% and mature on 9 January 2016. It is the first part of PTA Bank’s new $ 1billion Euro Medium-Term Note (EMTN) whose proceeds will be used to support new trade and project finance lending in Eastern and Southern Africa. According to PTA Bank president Michael Gondwe, the EMTN programme will diversify the bank’s resource base and raise funding to meet financing requirements of small- and medium-size enterprises in the Eastern and Southern African region: “The international bond issue marks an important milestone in the bank’s resource mobilisation programme and is the first step in the implementation of a long-term strategy of engagement with international financial markets to access long term-capital.”
PTA Bank is formally known as the Eastern and Southern African Trade and Development Bank. It has 17 country members in Eastern Africa, plus China and the African Development Bank. It is rated Ba1 by rating agency Moodys and BB- by Fitch.
Aurelien Mali, Assistant Vice President in Moody’s Sovereign Risk Group, was quoted as saying: “PTA Bank’s rating reflects marked progress in recent years in strengthening governance and risk management policies and capabilities, which prevented NPLs from rising along with the recent expansion of the balance sheet,” says. “The ongoing improvements associated with PTA Bank’s strong liquidity have definitely strengthened the bank’s resilience to shocks.”
Moody’s, in its rating report, cites the Bank’s “proven resilience to shocks, which is supported by the Bank’s strong liquidity and its ongoing efforts to strengthen governance and risk management” is one of the key drivers of the positive rating. Moody’s also cites the strong shareholder support, particularly from China and AfDB, as evidenced by the unanimous decision of the Bank’s members to more than triple its subscribed capital base in 2007 as a major rationale for assigning the regional development financier a Ba1 rating.
Extracts from the Moody’s report say that earlier this decade, PTA Bank restructured its portfolio when gross Non-Performing Loans reached a peak of 60% of total assets. Since then, NPLs have continuously declined, dropping to 12% at the end of 2009, or 5% in net terms. The Moody’s report adds that the nominal value of NPLs has been stable for a number of years, and the bulk of the stock of impaired asset is a legacy from before the 2003 restructuring.
“Despite the financial crisis, the bank’s financial performance has been robust in terms of both return on assets (RoA) and on equity (RoE) in recent years. In 2009, RoA was 2.2% compared to the previous seven years’ average of 1.7%, illustrating the bank’s improving financial performance. RoE has been very strong, coming in at 10.1% in 2009. The bank also allowed a substantial allocation of net income to equity over the years, thereby strengthening the bank’s capital base,” says the report.
Moody’s says that the outlook for Bank’s rating “is currently stable, with the risks equally balanced. A continued rise in profitability alongside a decrease in both relative and nominal terms of NPLs “could lead to upwards rating pressure.”
December 3rd, 2010 by Tom Minney
PTA Bank, a multilateral financial institution based in Nairobi, successfully launched a US$300 million Eurobond in November. According to a press release from Standard Bank, this was the only corporate Eurobond from sub-Saharan Africa in 2010, the only one since 2007 and the first Eurobond from an east African issuer, either sovereign or corporate.
Standard Bank Group and HSBC were joint-bookrunners on this debut Eurobond. According to the press release: “The new 5-year Reg S bond was priced to yield 7.125%. This transaction is the inaugural issue under PTA Bank’s new US$ 1 billion EMTN programme and the proceeds will be used to support new trade and project finance lending in Eastern and Southern Africa.. PTA Bank is rated Ba1 by Moodys and BB- by Fitch.” EMTN is defined as a euro medium-term note and is flexible instrument issued continuously rather than in one tranche.
Florian Hartig, Standard Bank Group’s Global Head of Debt Capital Markets, said in the press release: “This is a landmark transaction for Sub Saharan Africa which will have important benefits throughout the region for future sovereign and corporate issuers. The transaction also demonstrates the strength of Standard Bank’s Eurobond distribution platform for Emerging Market issuers together with our expertise in African domestic markets.
“PTA Bank has proven to be a leader among Sub Saharan African bond issuers. Future issuers will benefit substantially from rapidly growing international investor interest in Eurobond issuance from the region.”
The PTA Bank is formally known as the Eastern and Southern African Trade and Development Bank and covers the Preferential Trade Area. It is owned by 19 shareholders, including 17 member states from eastern and southern Africa. The shareholders are: African Development Bank (institutional shareholder), Burundi, China (non-regional shareholder), Comoros, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Malawi, Mauritius, Rwanda, Seychelles, Somalia, Sudan, Tanzania, Uganda, Zambia, and Zimbabwe.
November 22nd, 2010 by Tom Minney
The Rwandan Government said today (22 November) that it aims to raise RwFr 22.1 billion (US$37.3 million) from the sale of its 30% stake in brewer Brasseries et Limonaderies du Rwanda BRALIRWA (www.bralirwa.com), according to a report on Reuters.
It will be the first initial public offering and the share is intended to be traded on Rwanda’s Over The Counter market. The share offer will run from 23 November to 17 December.
According to Reuters, Finance Minister John Rwangombwa told a news conference that the Government would sell 128.6 million shares, or 25% of the company, at RwFR 136 francs (22.9 US cents) per share. He said this is a discount to the valuation of RwFr 170 each share, in order to encourage buyers.
Government will sell the remaining 5% of its shareholding to Heineken Group, which earlier bought 70% of the brewer from the Government. BRALIRWA sells beers such as Amstel, Guinness, Mutzig and local brand Primus and has an estimated 95% market share and also bottles Coca Cola products.
Rwanda’s Capital Markets Authority (www.cmac.org.rw) launched the Rwanda Over-The-Counter market in January 2008 and is working with Government to build the capital markets. The exchange has so far mainly attracted Treasury and corporate bonds and 2 cross-listed Kenyan companies — Kenya Commercial Bank and Nation Media Group. Kenya’s Central Depository and Settlement Corporation (www.cdsckenya.com) said recently it will provide registrar services.
Reuters reports that earlier this month, the market authority said taxes had been cut in line with recommendations in East African common market proposals to attract investors and issuers. Withholding tax on dividends on listed companies is now 5% (down from 15%), tax on interest from listed bonds with a maturity of three years is now 5% percent from 15% and corporate income taxes were reduced to the lower rates ranging from 28% to 20%.
Future privatizations are set to be the sale of Government’s 10% shareholding in mobile telephone operator MTN Rwanda (South Africa’s MTN Group has 55% stake) and its 20% stake in the country’s biggest insurer, Societe Nouvelle d’Assurance du Rwanda (Sonarwa), where Nigeria’s IGI owns 35% of the shares.
July 7th, 2010 by Tom Minney
A UK-based investment and advisory firm concentrating on African venture capital managers has announced its first investment. Jacana Venture Partnership (www.jacana.org) on 29 June announced that it will invest in InReturn Capital (www.inreturncapital.com), a Kenya-based firm investing in East African small and medium enterprises.
Jacana’s aim is that by promoting a thriving venture capital industry in Africa it will enable small- and medium-sized enterprises (SMEs) to grow and help millions out of poverty through economic development and job creation. Jacana’s unique offering of capital and expertise will enable InReturn to reach its goals more rapidly. Access to finance is a major obstacle to the growth of African businesses.
According to Jacana’s mission statement, SMEs are a crucial driver of economic development in Sub-Saharan Africa. Every $1 invested in an SME generates an additional $10 in the local community and $1 of SME finance creates 3 times more jobs than an equivalent investment in microfinance.
International investors are increasingly interested in Africa but find it hard to choose SME fund managers in the target country since they often lack track records. Jacana mitigates this risk for investors by selecting high-quality teams and providing intensive support to local fund managers through a network of expert mentors – highly experienced private equity and venture capital professionals who can provide hands-on support to local teams. Stephen Dawson, Jacana’s Chairman, has over 30 years’ experience in UK private equity and is already actively involved with InReturn’s deal team in Nairobi.
Jacana selected InReturn as its first local partner because of its strong team and deal pipeline, after an extensive market review. InReturn’s East Africa Fund (target size $20 million) invests in SMEs in East Africa. The capital invested in InReturn’s business will support the expansion of the team into Tanzania and Uganda.
InReturn contributes to the profitability, sustainability and growth of the companies that it invests in through the active participation of its local investment team of 5 Kenyan and European professionals. InReturn East Africa Fund maintains a network of investors in Western Europe and has extensive financial and management experience.
Anthony Gichini, Managing Partner for InReturn Capital in Nairobi, said “Jacana’s investment of capital and expertise will help us to accelerate our business, and deliver returns to our investors as well as development impact in East Africa. Tanzania and Uganda are important markets for InReturn and we see significant opportunities to expand our team into these countries as we build our business together with Jacana”.
Jacana’s expertise, provided through its network of private equity expert mentors, will help InReturn to execute high-quality transactions and raise additional capital from international investors, using Jacana’s extensive contacts in the industry. Together, Jacana and InReturn aim to deliver attractive financial returns to investors in the fund, grow the private equity industry in Africa and thereby support the sustainable development of SMEs, leading to significant job creation in Africa.
Simon Merchant, CEO and co-founder of Jacana, commented in a press release: “This is the first step in growing our network of African partners, supported by international private equity experts. We are delighted to be working in close partnership with InReturn and look forward to supporting this excellent team in making successful SME investments in East Africa.”
Jacana aims to select the capital managers with highest potential growth for inclusion in the partnership network and then to work closely with them to create an attractive investment opportunity for international investors. Jacana is talking to several candidates for its next investment.
January 25th, 2010 by Tom Minney
A new fund is making good progress in raising up to US$55 million to be invested in business start-ups and small and medium enterprises in Kenya, Rwanda, Uganda, and Tanzania. The Fanisi Venture Capital Fund was set up with help from Norwegian Investment Fund for Developing Countries (Norfund) and incorporated in Luxembourg. Norfund is also an investor and a shareholder in the management company, Fanisi Capital Ltd.,,which is majority owned by Nairobi-based Amani Capital Ltd.
Fanisi has raised $40 mln in commitments and expects to reach its goal in the next 12 months. On 22 January, the Internatonal Finance Corporation (www.ifc.org), part of the World Bank group, announced it will invest $7.5 mln.
According to an IFC press release: “The fund plans to make investments between $500,000 and $3 million in a variety of sectors, ranging from manufacturing to technology, helping smaller enterprises and start-ups get the capital they need to create and expand businesses. It also will set up a business services support facility to help pipeline companies overcome technical and governance limitations, pre- and post-investment.”
It quotes Ayisi Makatiani, head of the fund’s investment team and CEO of the fund nabager: “IFC’s early and continued support to the Fanisi team has been extremely helpful, especially for a local and first-time fund management platform.”
IFC’s Gender Programme has agreed to support the business services facility, and IFC’s Rwanda Enterprise Development Programme will provide training support to the fund’s portfolio companies.
Haydee Celaya, IFC Director for Private Equity and Investment Funds, said, “IFC is investing in this local private equity fund that focuses in growing SMEs and startups at a critical time, when the region needs long-term financial and advisory support. The investment also will help build local fund management capacity.”
IFC is currently seeking a capital increase to strengthen its ability to create opportunity for the poor in developing countries—including by investing in private equity funds that target small enterprises in developing markets. Smaller enterprises are responsible for much of the job creation in the East African region.
January 21st, 2010 by Tom Minney
Egypt-based private equity fund Citadel Capital (www.citadelcapital.com) is to open an East African office in Nairobi during January. Citadel says it is independently ranked as Africa’s largest private equity firm, with US$ 8.3 billion in investments under control in 15 industries spanning 12 countries.
Citadel Capital listed for trading on the Egypt Stock Exchange (EGX) under the ticker CCAP.CA from Sunday 6 December 2009. Citadel Capital’s Chairman and Founder Ahmed Heikal said in a press release was not because management were selling, but in order to make it easier for Citadel to raise capital.
The fund plans to invest a further US$ 200-400 million over the coming two years in Kenya, Uganda and Tanzania, The fund is looking for investments in the region, including in agriculture, transport, mining, energy and financial services, including microfinance.
Mr Heikal says the move comes in the wake of investments in Sudan. To date, Citadel Capital’s investments in Sudan cover transport and logistics, financial services, cement, mining, agriculture, and oil and gas. “By the end of 2010, we will have invested more than US$ 900 million in that nation,” Heikal notes.
Citadel’s track record is of creating value across its investment footprint by transforming national leaders into regional powerhouses through smart deployment of capital and by attracting world-class management teams that have the know-how and experience to efficiently run day-to-day operations. These teams have the ability to help refine and execute the forward-looking strategies necessary to develop new business opportunities.
“Citadel Capital is uniquely positioned to apply the industry development model we honed in North African economies to markets in Kenya, Uganda and Ethiopia,” said Heikal. “East Africa’s appealing natural competitive advantages — including fast-growing consumer markets and large workforces — fit perfectly with our time-proven strategy of turning national players into regional champions.”
The firm’s expansion into East Africa will extend its business model into one of the world’s most fertile and unexplored investment environments.
It has already invested into ASCOM for Geology & Mining, the firm’s platform investment in the regional geological and mining services sector. This has established two joint ventures in Ethiopia and has been engaged in gold and other metal-exploration activities.
The African Development Bank (www.afdb.org) has invested in the Citadel Capital Joint Investment Fund, in support of its regional integration strategy. Attractions for the AfDB reportedly include success in job creation and poverty reduction, as well as the active role that managers take in the investee companies, which brings better governance, skills transfer, standardized processes, more competitiveness and better efficiency.
Citadel Capital fund managers have reportedly returned more than US$ 2.4 billion in cash to their co-investors.
January 19th, 2010 by Tom Minney
Agricultural private equity fund Agri-Vie (www.agrivie.com) will reach its target of raising $100 million for investment in agricultural projects by February or March, according to an interview with Reuters newsagency on 14 January. It says there is plenty of potential and plans a second fund of up to $300 million.
Earlier in January the fund, launched in March 2008, made 2 investments totalling $10 mln in 2 agricultural projects in Ethiopia and across the region, and it is close to finalizing a $4 mln investment in Tanzania.
Izak Strauss, executive director and chief investment officer, told Reuters they are also considering a second fund: “There is definitely an opportunity to do a second fund substantially larger than the first fund… probably (in the region of) $200 to $300 million.” This could launch in 2013 or 2014.
Agri-Vie, based in Cape Town, focuses on equity investments in a wide range of agribusiness in Sub-Saharan Africa, including processing and distribution. It is backed by the Development Bank of Southern Africa (www.dbsa.org) and private entities including W.K. Kellogg Foundation (www.wkkf.org).
Agriculture in Africa appears set for transformation from unproductive and undeveloped subsistence farming to more commercial farming as investors from Europe, Asia and the Middle East get large tracts of land and launch projects, often to tackle food insecurity in their own countries.
In the interview, Mr Strauss said Agri-Vie plans to invest up to $25 million into five new projects during 2010, including a new $4 million eco-tourism project in Tanzania.
Agri-Vie forecasts fast economic growth in East Africa, which it calls an “investment hotspot”.
He said Agri-Vie this month invested $6.7 million in New Forests Company (www.newforestscompany.com), a UK-based sustainable and socially responsible forestry company with established, rapidly growing plantations and prospects of diversified products for local and regional export markets. It has operations in Uganda as well as Tanzania, Rwanda and Mozambique. East Africa has been a net importer of sawn timber and electrical poles and NFC aims to replace these imports with locally-produced goods. NFC’s overall aim is to “deliver both attractive returns to investors and significant social and environmental benefits”, according to its website.
The company also invested $3.5 million in africaJUICE (www.africajuice.com), run by European and African entrepreneurs and establishing fruit production and processing operations to capture share in European and the Middle Eastern juice markets. The first farm is in Upper Awash in the Oromia region. africaJUICE claims the combination of ideal growing conditions in the area and Ethiopia’s closeness to target markets should help displace European companies’ reliance on importing fruit products from South America.
The company website says: “We plan to establish at least three production locations across Africa by 2014 and become a premier supplier of Fair Trade juice to the European market.”
Strauss said: “Its first operation is in Ethiopia, growing yellow passion fruit, mango and papaya… The first exports will happen from mid-this year.” africaJUICE is making a capital investment of some €12 million to rehabilitate and expand an existing state-owned fruit farm (“Tibila Farm”) to create a high-technology modern tropical fruit plantation and build a new processing facility, operating under Fair Trade principles.
According to africaJUICE’s website: “Our plan is to plant approximately 600 hectares of yellow passion fruit and 600 hectares of other tropical fruits such as mango and papaya over a period of four years. At the same time we will support the development of over 1,200 hectares of outgrowers (contract farmers) to supplement the supply and extend community participation. Our new fruit processing facility will produce pure juices, concentrates and purees which will be transported to market via established export routes.”
David O’Halloran, Director of africaJUICE, told African Capital Markets News: “Having started operations on the ground early in 2009, we are pleased with the progress so far on the new fruit plantings, infrastructure, operating approach and the processing plant and looking forward to juice production from mid-2010 onwards. We have also made substantial progress following our sustainable development philosophy with a number of initiatives underway or already executed and are excited that this new approach to development and investment is progressing well. We are also progressing well on the second and third projects and expect to be considering funding options for those in the coming 12-24 months”.