Archive for the 'Financial Services' Category

Kenya licences first ethical Islamic finance fund

Kenya has licensed its first ethical fund, an Islamic fund issued by FCB Capital, a sharia-compliant investment bank. It is a fully-owned subsidiary of First Community Bank and the first to offer a Collective Investment Scheme geared towards ethical investing under Islamic capital markets product range.
“Kenya has ambitions of becoming the Islamic finance hub of East Africa as part of our wider aspiration to become an international financial centre,” said Stella Kilonzo, Chief Executive Officer of the Capital Markets Authority, at the licencing of First Ethical Opportunities Fund on 7 March, according to press reports in Xinhua and Coastweek. She said the CMA will continue to encourage stakeholders in Islamic finance to explore opportunities available for structuring, issuance and investment shariah-compliant products such as Real Estate Investment Trusts (REITs) and bonds.
She also called on Islamic finance institutions to work with CMA and the joint financial sector regulators in Kenya towards the establishment of a full-fledged single Shariah Advisory Council/ Board to enhance the consistent application of Shariah rulings. She said the council could provide guidance on product authenticity within the entire Islamic finance industry in Kenya.
Stakeholders in Islamic finance should also work together to develop the skills of professionals with expertise in Islamic financial advisory services and investment. CMA is also focusing on broad market education, tax harmonisation and formulation of policy and legal frameworks to help accelerate the growth of these new products. First Community Bank has participated in shariah-compliant components of infrastructure bonds issued by the Government of Kenya from 2009.

Silk Invest says Egypt elections will be turning point

Mark Voss of fund manager Silk Invest (www.silkinvest.com) foresees a turning point for the Egyptian market in a recent note. He also notes growth in Tunisia, with companies back to pre-revolution levels, tourism boom in Morocco, giant growth in Ghana and telecom payments innovation in Kenya.
He says the company clearly sees value in the market, but the evolving politics has cast a cloud on investor sentimenty. “We believe this is now lifting as the country’s election commission chief announced a roadmap for parliamentary elections – and a crucial step in transitioning to civilian rule, from 21 November to 4 March 2012. This should also pave the way forward for the Presidential elections by early next year. Going forward, we suspect that this may mark a turning point in the market’s fortunes.” He adds that there is no shortage of lenders to help the country get back on its feet. He adds that core inflation was 6.9% in August from 8.7% in July and Suez Canal revenues climbed 8.5% year-on-year in August.
Also on the post-revolutionary theme, he looks at Tunisia and said it “continued its upward trend with many companies now back at their pre-Jasmine revolution price levels”. Tourism in Morocco was surging and by end of July was up nearly 10% year on year.
For the rest of Africa he pointed out that the IMF forecasts 13% GDP growth for Ghana this year and noted the Chinese gave a US$3 billion loan for further infrastructure developments. In Kenya: “interest rates were notched slightly up to help control inflation and reduce local currency volatility. Following an unexpected increase in harvested maize, food inflation in the country is expected to decline”. Telecoms innovation continues full speed in Kenya, as Airtel Kenya unveiled an online payment system enabling mobile subscribers to use handsets to make purchases online, while Safaricom and I&M Bank launched a service that allows M-pesa customers to transfer money from their accounts to a pre-paid visa card – which can be used globally.

British American Investment launches Kenya IPO

British American Investment Company (Kenya) Ltd (www.british-american.co.ke) launched its initial public offer (IPO) on 12 July, aiming to list on the Nairobi Stock Exchange. It aims to raise KES 5.58 billion (US$62.2 million) for expansion in the offer which is open until 5 August.
British American is issuing 650 m new ordinary shares at KES9 each. East African retail investors and foreign investors have each been allocated 30% of the shares, institutional investors 37% and employees, agents and individual life policy holders get the remaining 3%.
The offer was launched by Prime Minister Raila Odinga. He urged more people to use insurance products, and said market penetration is only 2.3% of GDP, according to Kenyan Broadcasting Corporation. The Standard newspaper reports him saying “I would like to take this opportunity to assure investors that Kenya is on a renewal path.”

Expansion: “missing middle” and new products
According to a report in Kenya’s Business Daily newspaper, of the money raised KES1 bn will be used for new investments and entry into the regional market while KES 1.3 bn would be used to grow its Kenyan insurance businesses and to expand its asset management business, including launching new funds for Kenyans in the diaspora as well as local and international investors.
The company will use KES2.5 bn to set up real estate investment trusts when the proposed law comes into effect and to develop property investments, including commercial buildings and housing units. KES750 m is to offset a loan from Commercial Bank of Africa (CBA) and KES 300 m is for offer expenses.
The paper reports British American’s chairman Nicholas Ashford-Hodges saying funds raised would be used to boost the company’s operations in Kenya and expand to regional markets: “This IPO will give British American an opportunity to increase the scope of its operations and widen its footprint.”
The company hopes to seize emerging opportunities through innovative products such as micro-insurance and bank-assurance. According to the Standard, managing director Benson Wairegi said the company is developing more products for the retail market and small and medium-sized businesses: “We seek to fundamentally redefine the scale and scope of the insurance sector in Kenya and the wider region. Our established model of scale, reach and multi-layered selling will also be extended to the retail market and SMEs in the wider geographical region.”

Regional expansion – Uganda, Tanzania, South Sudan, Rwanda

On 7 July, BAT launched an insurance services business in Uganda through a subsidiary, Britam Insurance Company (Uganda) Limited, which has a capital of UGX5.6 bn ($2.2m). It also aims to open offices in Tanzania, Rwanda, and Southern Sudan.

Profit turnaround
British American is also the holding company of British American Insurance Company (Kenya) Ltd and British American Asset Managers Ltd (BAAM).
The market capitalization of the new company will be KES19.4bn ($216.3m), the highest among listed insurance firms. CfC Insurance Holdings, which was listed by introduction in April, was valued at KES6.85bn as at the close of trading yesterday, Jubilee Holdings Ltd at KES8.86bn, and Pan African Insurance at KES1.92bn, according to the paper.
Business Daily reports that British American Group posted KES2.7 bn in profits after tax last year, up from KES421 mn loss in 2009. The company made KES4.68 bn (KES 196m in 2009) in investment income and KES220 m (KES 32 m) in other income.

Helios closed giant $900 mn African private equity fund

Pan-African private equity firm Helios Investment Partners (www.heliosinvestment.com) announced that it had raised $900 million for its second Africa-focused private equity fund. The final close for Helios Investors II L.P. was at the target set, and a 13 June company press release says that the fund was over-subscribed with more than $1 billion of demand. It is the largest Africa fund raised.
The new fund will follow the investment strategies of Helios’ first fund, looking at new businesses, growth equity investments, structured investments in listed entities and large leveraged acquisitions. It is focusing on high-growth sectors including sectors which have been deregulated, are core to the economy and where Helios has expertise, including telecommunications and media, financial services, power and utilities, distribution and logistics and fast-moving consumer goods (FMCG). The target investments are $25 million to $250 mn of equity per transaction ion various forms. It aims to make investments over 4 years and to hold assets for 3-5 years.
Helios II fund has already made 3 investments:

  • It acquired Interswitch, Nigeria’s leading electronic payments processing company for $110 mn;
  • It established Helios Towers Africa which builds and operates telecommunications tower businesses across Africa, and acquired portfolios of telecommunications towers in Ghana, Tanzania and the Democratic Republic of Congo (DRC);
  • It acquired Continental Outdoor Media, Africa’s largest outdoor advertising company.

Helios has also recently announced the acquisition of Shell’s downstream fuels business across Africa.
According to the press release: “Continued political and market liberalisation and strong economic growth have prompted global investors to evaluate investment opportunities in Africa more closely. The Fund’s potential to make attractive risk-adjusted returns with comparatively low correlation to developed markets enabled it to attract a diverse investor base, which includes support from institutional investors in the predecessor Helios fund, as well as first-time commitments to Africa from a broad range of endowments and foundations, funds of funds, corporate pension funds, sovereign wealth funds and development finance institutions across the USA, Europe, Asia and Africa.”
Helios’ team of investment professionals have good understanding of African markets and global private equity experience. Helios has also developed a Portfolio Operations Group, who work with the managers of the companies which the fund invests into, in order to create value within the firm’s portfolio by driving operational improvements.
Helios Investment Partners operates funds and related co-investment entities, aggregating more than $1.7 bn in capital commitments, and is one of the largest investment firms focusing on Africa. It was established in 2004 by partners Tope Lawani and Babatunde Soyoye who still lead it and is among the few independent pan-African private equity investment firms founded and managed by Africans.
Helios’ portfolio companies operate in more than 25 countries and in various industrial sectors. The firm has experience across a broad range of industries and investment types – leveraged buyouts, recapitalisations, joint ventures, seed-stage venture capital, restructurings, and strategic public equity investments.
Limited partners in Helios’ funds include several leading global funds of funds, endowments and foundations, sovereign wealth funds, family offices, high net-worth individuals and development finance institutions. According to website www.privateequityafrica.com, 72% of its commitments are from private and institutional investors and the rest from development finance institutions.

African private equity deal-making soars: $1.8bn transactions by May

Private equity funds focusing on Africa are becoming more active and making more deals. At least 12 deals were closed in the first five months to May 2011, compared to 19 deals in the whole of 2010, reports leading website Private Equity Africa which cites data from the research house Preqin.
The disclosed total value of the investments was $1.8 billion, compared to $600 million of deals made in the whole of 2010. Private Equity Africa reports that at least 5 more investments are set to be closed by June this year, according to its sources.
The peak was in 2007, when investors closed $7 billion across 34 deals, according to Preqin data. Current levels of aggregate deal making values are similar to those seen in 2008. Then came the global financial crisis and both deals values and volumes have slumped. 2010 saw the lowest number of deals since 2006.
Prominent among this year’s deals, according to the report, is Nigeria’s ACA Capital which invested into a $750 mn transaction in Union Bank, while New York headquartered Vine Capital Partners led a consortium of investors to recapitalize Afribank, based in Lagos.
Egypt’s Citadel Capital backed a $39.5million turnaround investment in Tenth of Ramadan for Pharmaceuticals and Diagnosing Products (Rameda). The deal was structured through its subsidiary Sphinx Private Equity Management.
Financial technology investments were to the fore. Horizon Equity Partners exited its financial technology portfolio company, Peresys, in South Africa through a $56.4million trade sale to Australia’s IRESS, generating 14 times returns on cost. Adlevo Capital’s specialist technology fund made its first transaction, partnering with Helios to back a $110 mn InterSwitch deal. In the same sector, Sarona injected $300,00 in Mobile Transactions Zambia, described on Grassroots’ Business Fund website as “the fastest growing company in Zambia and one of the fastest in Africa”.
A partner at an Africa-focused private equity investment company in London told Private Equity Africa: “We have been very busy this year. We have already done more deals in 2011 than we did in the whole of last year.”

Emerging Capital Partners (ECP) awarded “Best Private Equity House in Africa”

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.