Archive for the 'Governance' Category
June 20th, 2011 by Tom Minney
Leading African and Middle Eastern private equity investor Citadel Capital (www.citadelcapital.com) said yesterday (19 June) that Egypt’s public prosecutor has lifted a travel ban imposed in April on its chairman Ahmed Heikal, according to a report on Reuters.
The company announced on 16 June that Citadel Capital Partners Ltd. (CCP), the vehicle through which members of the Executive Committee hold their equity in Citadel Capital, sold approximately 13.4 million shares in Citadel Capital with a total amount of approximately EGP 74 mn (US$12.4 mn) last week and lent the money to Citadel “to strengthen the firm’s cash position”.
According to the Reuters report, the Government had ordered Heikal not to travel while investigators probed corruption allegations against several business leaders and government officials linked to former President Hosni Mubarak. Heikal and former prime minister Atef Obeid were accused of links to profiteering and embezzling public money. Reuters reports that Citadel shares fell 10% after the ban on 14 April and have lost a third of their value since the start of the year. Citadel is listed on the Egyptian Exchange (CCAP.CA).
According to the report, Citadel said: “The public prosecutor has agreed today to remove the name of Ahmed Heikal, the company’s chairman, from the list of people banned from travelling.”
Reuters also says that Dubai-based Abraaj Capital (www.abraaj.com) has talked with Citadel about possibly buying a stake. FT Tilt also has an interesting story on the deal, discussing whether Abraaj is seizing an opportune moment and noting that Citadel shares climbed sharply in trading on 19 June.
CCP owns approximately 33% of Citadel Capital SAE shares as of 16 June 2011 and the company statement does not say who bought the shares. CCP has lent the funds to Citadel Capital “until regulatory approvals are obtained for the planned capital increase”.
According to the company, Citadel Capital has $8.7 bn in investments under its control. It “focuses on building regional platforms in select industries through acquisitions, turnarounds, and greenfields executed via Opportunity-Specific Funds. The firm’s 19 OSFs now control Platform Companies with investments worth more than $8.7 bn in 14 countries spanning 15 industries, including mining, cement, transportation, food and energy.
“Since 2004, Citadel Capital has generated more than $2.5 bn in cash returns to its co-investors and shareholders (on investments of $650 mn), more than any other private equity firm in the region. Citadel Capital is the largest private equity firm in Africa by PE assets under management (2006-2011, as ranked by Private Equity International).”
June 15th, 2011 by Tom Minney
Indian steel-to-outsourcing conglomerate Essar has cancelled deals to buy telecoms operators in Uganda and Congo and is putting its Kenyan operations, under the Yu brand, up for sale. It no longer views telecom as core or strategic, according to a report this morning 14 June in India’s Economic Times newspaper and in March agreed to sell its 33% stake in Vodafone Essar, India’s third-largest telecom operator (after Bharti Airtel and Reliance Communications), to UK’s Vodafone.
The arrival of India’s Bharti Airtel in Kenya, after it acquired Zain in mid 2010, had sparked a price war that fundamentally changed the attraction and investability of telecommunications in Kenya. Bharti operates in 19 countries in Africa and Asia and has 200 mn customers.
Essar had agreed in November 2009 with Warid, part of UAE’s diversified Dhabi group, that Essar would buy a majority stake in Warid Telecom’s operations in Uganda and Republic of Congo (“Congo Brazzaville”), with a reported enterprise value of $318 million. This deal fell through because required approvals were not received and the paper reported a statement from Essar on 14 June: “It was mutually decided between the partners – Essar and Warid Group – not to proceed with the deal closure as certain condition precedents pertaining to government clearance were not met.”
The assets are to be returned to Warid, and it is not clear how much they will pay Essar back.
The paper says Essar had bought the Kenyan telco for about $150 mn and invested a further $100 mn and is looking for a price of about $300 mn. Bharti had apparently said it is busy consolidating its Zain acquisition and other buyers are not interested. The paper said it was the third largest operator, competing with Safaricom, Orange which is part of France Telecom and Bharti Airtel.
June 11th, 2011 by Tom Minney
Giant UK development finance institution the CDC Group has announced a radical new business plan after a review of its organization and activities, following media and political criticism. Chief changes for the leading private equity investor are a return to direct investing from a fund of funds approach, and focusing only on low and lower-middle income countries in sub-Saharan Africa and South Asia.
At the end of 2010, CDC group was invested in a portfolio worth £1.9 billion ($3.1 billion), according to its website www.cdcgroup.com, invested in 143 funds managed by 71 managers and these funds had invested into 930 portfolio companies in 70 different countries. CDC had started investing into funds in 2004 after selling off stakes in Actis and Aureos funds. Like other leading development fund managers it aimed to build capacity among African fund managers.
The change comes after the review in 2010 by the Secretary of State for International Development, Rt Hon Andrew Mitchell MP. A new CEO is to be appointed.
Direct investments and ESG
According to the new business plan, as outlined in a press release, direct investments will be 20% of the portfolio by 2015, and CDC will target businesses with high potential development impact and manage these investments in a hands-on way to gain more expertise. Debt investments will be up to 20% of CDC’s total portfolio by 2015, so that CDC can target frontier markets where investment infrastructure is underdeveloped. Small and medium enterprises are a key target and it will offer guarantees to help businesses to obtain credit, commercial bonds and trade finance. CDC will also explore the role of technical assistance to make capital more developmentally effective. It will aim to match all its funding with equal amounts of third party capital.
In future CDC will concentrate exclusively on the low- and lower-middle income countries in sub-Saharan Africa and South Asia where 70% of the world’s poor live. In lower-middle income countries, CDC will focus on regions and sectors of need where capital is scarce and will avoid sectors which are already attracting capital from other investors.
The group will step up standards of environmental, social and governance (ESG) at investee businesses and there will be independent valuations of the development impact of funds. It says it will “lead the way among DFIs on openness and accountability”. CDC will update its investment code regularly and disclose more information about the organization, its investee businesses and its partners.
Innovation in deals and “appropriate” pay
It will also set up a new innovative finance division to explore opportunities in exceptionally challenging investment circumstances, which need innovation in deal origination and the ability to draw on a wide range of financing approaches.
It will also change the way it pays staff: “Remuneration will be appropriate for a publicly-owned body whose purpose is poverty reduction. CDC must be able to recruit and retain people with the right approach and skills to deliver the company’s development mission. CDC will follow applicable FSA guidance and EU legislation so that variable performance pay will be largely deferred and based on long-term performance.”
Andrew Mitchell MP, Secretary of State for International Development said: “This is a bold and exciting new departure for CDC. The reforms will help them direct their capital better, fostering economic growth in countries which need it most. CDC will be better able to drive investment into areas currently starved of capital. It will become more nimble, flexible and transparent, able to influence and control the impact of their capital and measure its success in reducing poverty, not simply in turning a corporate profit.”
The action begins
The new business plan is already in action. CDC this year invested $30 million in funds helping provide long-term loans and guarantees to address an acute shortage of capital for green energy in developing countries. CDC is investing $30m in a new agribusiness fund in Africa focusing on Zambia, Tanzania, Malawi and Mozambique. A further $30m has been invested in basic African infrastructure such as toll roads, ports, railways and energy.
Richard Gillingwater, CDC’s chairman says: “These reforms deliver a more versatile and pioneering CDC. Our ambition is make the biggest difference possible to lasting development.”
According to a story on the leading website www.privateequityafrica.com, CDC currently has an African private equity portfolio worth £877million, which includes the £122 million it invested in new businesses in 2010. The investor additionally committed funds to 8 Africa-focused managers in 2010, including a maiden fund Catalyst Principal Partners I focused on East Africa.
May 19th, 2011 by Tom Minney
The Rwandan Government plans to raise Rwf25 billion ($42.2 million) through the sale of its shares in Bank of Kigali Ltd (www.bk.rw) and telecom company MTN Rwanda (www.mtn.co.rw) in coming months.
The bank is Rwanda’s biggest lender by assets and it said the Government will sell a 20% stake to private investors in an Initial Public Offering (IPO) scheduled for June, according to a report on Bloomberg. In addition the bank will offer 25% of its shares to the public, according to the report, citing Chief Operating Officer Lawson Naibo. The Government owns 66.3% and will anticipate selling the rest of its stake later, according to John Rwangombwa, Minister of Finance and Economic Planning, during a press conference on 9 May on the budget framework. He is quoted in the New Times newspaper as saying: “BK is confirmed; we are to sell our shares through an IPO. We started the process and it’s expected to be concluded by September, including listing BK on the Rwanda Stock Exchange (RSE).”
Minister Rwangombwa said there is expected to be strong demand. Last November 2010, the Government sold 25% of Brassieries et Lemonaderies du Rwanda SA (BRALIRWA), a unit of Heineken NV (HEIA), and the IPO was 174% oversubscribed. BRALIRWA shares closed at RwFr 228, up 68% on the January launch price of RwFr 136.
BK plans to open 44 branches across Rwanda in 2011, and the stock should be attractive stock given its rapid growth and stability.
The Minister also said Government is in negotiations with MTN Group regarding its 10% stake in MTN Rwanda. MTN Group is majority shareholder and has the right of first refusal on any share sales. The Minister reportedly said: “We have two options; if MTN gives us (Government) the price we want, we will sell the shares to them directly while the other option is through an IPO depending on the other investor.”
The Treasury will include the expected proceeds in the budget for the next fiscal year. The Minister said: “This is part of the Government commitment to promote accelerated economic growth under its five year plan of EDPRS (Economic Development and Poverty Reduction Strategy 2008-2012) but also its the approach to liberalise the market.” Rwanda is a high-growth country and a top performer in improving its business and economic climate. It is working towards an ambitious long-term Vision 2020 that seeks to transform the country into a middle-income economy.
The Government remains keen to use IPOs to support the growth of the Rwanda Stock Exchange launched on 31 January by boosting market liquidity and ultimately supporting the country’s economic growth through attracting more inventors and increasing national savings.
The RSE has so far mainly attracted Treasury and corporate bonds, and 2 cross-listed Kenyan companies, Kenya Commercial Bank (KCB) and Nation Media Group. BRALIRWA is the only local listing.
May 13th, 2011 by Tom Minney
West Africa’s Bourse Regionale des Valeurs Mobilieres (www.brvm.org) regional stock exchange is still trading in Bamako this week, but next Monday (16 May) the market will reopen trading operations ino Abidjan, Cote d’Ivoire’s commercial capital. The market had moved operations and started trading in Mali on 1 March because of the violent crisis in Cote d’Ivoire (see our earlier report).
Senior management were already back in Abidjan and banks and stockbrokers were reopening on Monday (9 May) when AfricanCapitalMarketsNews phoned.
According to a report on Bloomberg, Abdelkader N’Diaye information systems director of the BRVM said trading was picking up as situation improved in Abidjan and banks in the city reopened. Former president Laurent Gbagbo was arrested on 11 April and Alessane Ouattara, recognized internationally as winner of last November’s election, was sworn in on 6 May. Forces supporting him had swept through the country in a swift campaign in early April after waiting months for successful international intervention, including from the African Union.
The BRVM smuggled senior management out of Cote’Ivoire in February after security forces loyal to ex-President Laurent Gbagbo occupied the BRVM on 11 February. In an amazing piece of Business Continuity Planning, the BRVM management had all systems including support systems running within 18 days. In March Bloomberg quoted BRVM head Jean-Paul Gillet saying: “We managed to restart the operations of the bourse after we reconstructed the system and the environment. The volume of transactions has been a bit affected, but the prices haven’t dropped as there has been no haste in selling.”
Most banks in Cote d’Ivoire closed about the same time and their branches were taken over. Without the usual custodians and stockbrokers, trading in Mali saw much lower volumes than in Abidjan.
The BRVM lists 39 securities and acts as the regional exchange for 8 countries as an African innovation when it opened in 1998. Sonatel, based in Senegal and including France Telecom as a shareholder, is the biggest listed company with CFA 1.65 trn in market capitalization. Other listings include 8 banks, including SGBCI (Societe Generale SA) and Ecobank Transnational Inc. Ivorian companies make up 33 of the 39 listings, according to BRVM website, and the BRVM Composite Index peaked at 174.89 on 11 Jan, but was 151.46 at close of trading today (13 May) after edging down all week. Michael Barnes, Head of Sales and Trading for Securities Africa said on Monday that much of the pent-up buying and selling had already gone through.
May 4th, 2011 by Tom Minney
Africa is soaring in its attractiveness to global private equity investors. In a survey by Coller Capital (www.collercapital.com) and the Emerging Markets Private Equity Association (www.empea.net), over the next 2 years, nearly 30% of global private equity investors (Limited Partners or LPs) investors plan to expand their PE investments in sub-Saharan Africa (including South Africa, SSA) and nearly another 10% plan to start investing. This puts Africa is ahead of markets such as Turkey, the Middle East and North Africa region, Russia/CIS, and Central and Eastern Europe.
According to an article on top African private equity website, www.privateequityafrica.com, fundraising for Africa is also growing fast. Year-on-year fundraising for sub-Saharan Africa was up 56% in 2009, compared to declines for Russia, Middle East and North Africa, India, Emerging Asia and the collective Central and Eastern European region and Commonwealth of Independent States.
Problems highlighted include 47% of LPs saying there are too few established fund managers in SSA and this is a primary deterrent to committing capital to the region. Political risk was a concern of 39% (highest in the world after Russia/CIS where it concerns 63%) and about 25% said the scale of opportunity to invest in SSA is too small (second to Middle East and North Africa, where 33% were concerned). Only 14% of respondents said they were discouraged by the difficulty of exiting their investments and only 2% said valuations are a problem (compared to India, where 58% said entry valuations are overheated, and 45% in China).
Erwin Roex, partner at Coller Capital, comments: “In reality, where competition is increasing in emerging markets private equity markets, it tends to be concentrated within a handful of sectors or a particular tier of the market where deals are large enough to attract global funds. Investors recognize there are still plenty of opportunities for skilled managers to supply value-added capital and to create returns for LPs.”
Two thirds of the LPs said they expect to boost the dollar value of their new investments in Emerging Markets in 2011/12, compared to new commitments in 2009/10. Three quarters look for economic growth as the main driver to increase commitments to emerging markets. More than half of LPs expect their emerging markets private equity commitments to generate returns of at least 16%, with about a quarter expecting this to be as high as 21% over the next 3-5 years. Only 33% of the respondents expected annual net returns of 16% from their global PE portfolios. Asia is the region that ignites the highest return expectations and Brazil replaces China as a top environment for fund managers (General Partners orGPs).
Two thirds of LPs (78% outside North America, 52% in North America) said environmental, social and governance compliance influenced their fund investment decisions and choice of fund manager (GP). They would also like to see higher participation from local investors, although some saw a potential misalignment of interests as likely to cause the friction.
Coller Capital partnered with EMPEA in the annual survey, undertaken in Jan-Feb 2011, which covered 156 global LPs, including 32% in fund of funds, 15% were direct foreign investors, 14% were pension funds, 13% bank and asset managers and 11% represented government-owned organisations.
May 4th, 2011 by Tom Minney
A panel is working on a proposed bill, to be called the “Financial Report Proclamation of Ethiopia”. If it is approved by Parliament, the bill will bring fundamental changes to Ethiopia’s financial reporting system by requiring compliance with international financial reporting standards (IFRS). It will apply to any company with assets worth Birr 2 million ($116,800), turnover of more than Birr 5 mn ($ 292,000), or at least 10 employees, which will then be categorised as a “public interest entity” and obliged to follow IFRS in their financial reporting.
According to a report in Addis Fortune newspaper, 4 experts are working on the draft. They are Botu Sintayehu and Brehanu Tadesse (legal experts from the Ministry of Finance and Economic Development), Munir Ahmed (instructor at the Civil Service College) and Amaha Bogale (public prosecutor for the Ministry of Justice).
The bill could be presented to Parliament in the next fiscal year (starting July).Penalties could include fines and imprisonment. Currently there is no legal requirement for compliance with accounting and auditing standards, but some laws do require the acceptance of general accounting principles and auditing standards.
The draft was inspired by similar bills in Mauritius, South Africa, and the United Kingdom (UK) that follow the common law legal system. Ethiopia uses a “continental” legal system and the panel categorised which laws to include in the proclamation and which to make directives.
Fewer details are given about board of directors, in terms of the draft. The Prime Minister will appoint the chairperson who is accountable to the Prime Minister and mandated to regulate whether the reporting system of the company complies with the standards. The board of directors will comprise 9 representative members from the government, the private sector, and industry and the chairperson and deputy chair positions should be filled by public auditors. The Prime Minister is empowered by the bill to determine the benefits of employees, including that of the CEO, before approval by board. The board members will serve for 6 years and could be re-elected after a 6-year absence.
Hikmet Abdella, country manager of the Association of Chartered Certified Accountants (ACCA) is reported as saying that adopting IFRS will make it easier for investors and businesses to evaluate the financial performances of organisations with which they might do business or invest in: “The standardised auditing system will enable the Ethiopian Revenues and Customs Authority (ERCA) to rely on external auditor’s reports for their tax collection. It will also afford banks the confidence to grant loans based on the financial statements of a company.”
Some experts who spoke to Fortune speculate that the bill would be expensive for small companies and generally challenging to implement.
The panel is set to have a fourth meeting during which the English provisions will be translated into Amharic, claimed sources.
April 4th, 2011 by Tom Minney
Tunisian financial authorities have ordered stockbrokers not to allow 123 companies to buy or sell securities. A report by Reuters says that there is a confidential list issued by regulator Conseil de Marche Financier, which is trying to investigate the extensive holdings of President Zine Al-Abidine Ben Ali’s extended family.
The list is mostly privately held Tunisian companies. It includes the parent companies of 2 listed Tunisian firms, BINA Corporation, majority shareholder of Carthage Cement as well as Princesse Holding which holds stakes in Ennakl Auto and Bank Ziytouna, as well as Dubai’s Shuaa Capital. Another holding company on the list is Tunisia’s Investec which is controlled by Marwan Ben Mabrouk, son-in-law of Ben Ali, and owns a stake in mobile operator Orange Tunisie. On 31 March the interim government seized Ben Mabrouk’s 51% stake.
A stockbroker told Reuters: “We were told not to let these companies invest or withdraw money from their trading accounts. Their accounts are frozen.”
A spokersperson for Shuaa Capital, an investment bank listed in Dubai, said: “Shuaa Capital has no past or current dealings with the former president of Tunisia.”
The interim government recently said it would freeze assets of 112 people close to the ousted president pending the completion of investigations into corruption.
Egypt is also seeking to investigate businesspeople who benefitted from links to Mubarak’s regime, and many people’s assets have been frozen there too.
March 31st, 2011 by Tom Minney
Rebel Republican Forces have made a swift advance through Cote d’Ivoire yesterday (30 March) taking the capital Yamassoukro and San Pedro, a key cocoa exporting report according to reports on Bloomberg and Reuters. They have been meeting very little resistance, as soldiers loyal to incumbent president Laurent Gbagbo have either joined them or retreated to Abidjan.
The RF have launched a military offensive to support the claim of Alessane Ouattara, who is internationally acknowledged to have won last November’s presidential election but was then blockaded in a hotel and protected by UN peacekeepers after Gbagbo refused to accept the result.
Meite Sindou, spokesman for Ouattara’s prime minister, Guillaume Soroare said the RF about 90 kilometres north of Abidjan, in a town called Adzope. Bloomberg this morning quotes an interview with Young-jin Choi, the head of the United Nations mission that the advance has been “much more rapid than expected,” and the troops are within “striking distance” of Abidjan.
Fighting in Abidjan, formerly a top West African commercial centre, has already been fierce and the final showdown could be violent. One million people are reported to have fled their homes. Gbagbo is calling the Young Patriots youth militia to boost his troops. Reuters reports: “The army called on Gbagbo’s often violent youth wing to enlist in the military. They have been fired up with anti-French, anti-foreigner and anti-U.N. propaganda, and on Wednesday, the army started openly handing out weapons to them. They have set up roadblocks all over town and have attacked U.N. staff and killed several West African immigrants and suspected Ouattara supporters, Human Rights Watch says.” Amnesty International on 29 March said armed forces from both sides had committed atrocities.
The international and African communities have not intervened militarily and many civilians have been killed – at least 470 deaths reported – and tens of thousands have fled to neighbouring countries. However, there have been many meetings to discuss the crisis and yesterday the UN Security Council voted to step up pressure on Gbagbo.
Bloomberg says the markets hope the 4-month political crisis may end soon. CI has a €2.3 Eurobond which is in default since missing interest payments on 1 February. On 30 March the bond rallied 7% to 42.688 cents on the dollar, according to data compiled by Bloomberg, breaking out of its range of 36-40 cents for recent weeks. Bloomberg adds that prices of cocoa for May delivery fell to $70 (2.3%) to $2,987 per metric ton by 5:20 p.m. in New York, their lowest in 10 weeks, on hopes that a quick victory could pave the way for a renewal of exports.
There is an international arms embargo in place and on 2 March the UN apologized to Belarus for wrongly saying it had supplied Gbagbo with an attack helicopter – the CI airforce used to have Russian Mi-24 attack/transport helicopters.
March 30th, 2011 by Tom Minney
Rebel advances in Cote d’Ivoire are boosting the price of the country’s €2.3 bn Eurobond, which are in default since 1 Feb, in London trading. According to Bloomberg today (30 Mar), the advance boosted the dollar-denominated bonds to their highest in at least 2 months on 29 March as they climbed 4.2% so their price was 39.875 % of face value last night. The yield fell 31 basis points to 8.6%, according to data compiled by Bloomberg.
The country seems to be moving back in civil war, and the Republican Forces, loyal to presidential contender Alessane Ouattara, have taken at least 5 towns this week and moved to within 240 kilometres of Abidjan. The RF stepped up their military campaign in the past month, mainly in the western cocoa- producing region, taking the towns of Duekoue, Guiglo and Daloa in the past few days, and the eastern town of Abengourou on 29 March.
Reuters reports that heavy fighting has flared in the northern Abidjan suburb of Abobo, under control of the Republican Forces. Forces loyal to Gbagbo were accused of shooting civilians again yesterday, adding to a toll in which 460 people are already reported to have been killed. Up to 1 million Ivorians have now fled fighting in Abidjan alone, according to the U.N. refugee agency and more across the country. At least 112,000 have crossed into Liberia to the west.
The problem stems from a stand-off after incumbent president Laurent Gbagbo refused to leave after a Constitutional Court ruling disallowed hundreds of thousands of votes, meanwhile using the military to blockade Ouattara in a hotel where he is protected by UN peacekeepers. Although ECOWAS and the African Union promised strong measures in December and January, they have been unable to muster support for a military intervention to remove Gbagbo and recently the RF started its advance. Last week there were renewed international calls for intervention, wondering what the difference is between Libya and Cote d’Ivoire. The previous civil war was brutal and yesterday Amnesty International already said “All parties to the conflict have committed serious human rights violations including unlawful killings and rape and sexual violence against women.”
Observers seem to hope that the Republican Forces can drive out Gbagbo in a quick campaign and this is the reason for the rising bond prices. The Eurobond was created after Cote d’Ivoire reneged on $3.5bn of “Brady bonds” in 2000. These were fixed-income securities created as part of a debt restructuring plan for developing countries and named after former U.S. Treasury Secretary Nicholas Brady. It issued Eurobonds in April 2010 as part of its debt restructuring at a yield of 10.181%. The default was declared after a 30-day grace period after the country was unable to pay a $29m coupon interest payment due on 31 December.
Cote d’Ivoire’s financial sector had been in chaos since January. The region’s central bank, BCEAO, shut its offices on 27 January in the commercial capital, Abidjan, after finance ministers of the West African Economic and Monetary Union (WAEMU) ordered it not to give Gbagbo access to national funds. Cocoa exports were also halted. Gbagbo ordered the nationalization of foreign banks which had closed during February.