June 10th, 2013 by Tom Minney
EVENT TOMORROW 11 JUNE: Private Equity Africa Awards at The Mayfair Hotel, London – the top event for the African PE community. In the afternoon a limited-space VIP panel discussion on “Strategies for Success: Deal Origination, Valuation and Exits” (14:00-17:00). Awards gala dinner follows from 18:00-23:00. Awards are: Exit of the Year, Portfolio Company of the Year, House of the Year, Deal of the Year (large-, mid- and small-cap categories), Advisor of the Year. For more information and to book places, check the awards website www.peafricasummit.com.
Global institutional investors (“Limited Partners” (LP)) have selected Sub-Saharan Africa (SSA) as the most attractive investment region, according to research from the Emerging Markets Private Equity Association (EMPEA). The leading Private Equity Africa website reports this is the first time the region has beat the leading emerging markets: Brazil, Russia, India and China (BRICs).
According to the press release from EMPEA: “For the first time in the Survey’s history, none of the BRIC markets broke the top three most attractive markets for investment… (The) latest survey of institutional investors reveals that Sub-Saharan Africa, Southeast Asia and Latin America excluding Brazil are poised to see the greatest increase in new private-equity commitments across the emerging markets over the next two years, edging out Brazil, China and India as the most attractive destinations for dealmaking.”
SSA was only 5th in the attractiveness ranking in the 2012 survey. Some 60% of LPs expect returns of 16% or more per year from their SSA investments (68% expect similar high returns from their Southeast Asian investments). According to EMPEA: “Nearly 54% of LPs plan to begin or expand commitments in Sub-Saharan Africa, 49% in Southeast Asia and 46% in Latin America excluding Brazil. Sub-Saharan Africa is poised to see the largest influx of new investors, followed by Turkey and Southeast Asia.”
Southeast Asia and Latin America ex- Brazil came in second and third, respectively, on the attractiveness index. Historically Brazil, China and India have dominated. It is the first time in the survey’s 9-year history that none of the BRICs made the top 3 places on the index. LPs are concerned that there is very hot competition and that prices (entry deal valuations) are very high in countries such as India which is down from 6th to 9th place on the index. The Middle East and North Africa region has dropped to last place. However, Brazil has seen the greatest fall in recent years since being ranked as the most attractive market for investment in 2011.
Read the PEA story, which says that reasons LPs are heading for SSA include the rise in the number if fund managers with track records, the significant investment opportunities, low entry valuations, and fast-growing markets, boosted by strong demographics, economic growth and improved regulation. One institutional investor commented in the survey: “These markets are very attractive because of the growth and greater pool of managerial talent, the development of local capital markets, and the ability to build on lessons learned.”
Nadiya Satyamurthy, senior director at EMPEA, comments: “A growing number of limited partners are now further along in executing their private equity strategies in emerging markets.” he said that many started by aggressively increasing allocations and funneling commitments to the BRIC markets. “Signs that LPs are slowing the pace of their commitments and diversifying beyond the BRICs suggest a maturation of portfolios. We seem to be entering the next stage of growth for the asset class as track records begin to develop across Sub-Saharan Africa, Southeast Asia and parts of Latin America.”
According to PEA’s analysis, SSA’s political risks have also become less of a worry for LPs and only 36% cited this as a deterrent (compared to 66% in the 2012 survey). Investors are also a lot less concerned about the low number of established fund managers (General Partners/GPs) focused on Africa, with only 36% expressing this as a concern, down from 50%. LPs increasingly favour GP teams that demonstrate strong operational expertise in target sectors – a trend across all emerging market regions.
The investors also value the length of the working relationship among GP team members when choosing. However, the LPs are less concerned about the presence of an anchor investor and the names of the other LPs in a fund. For SSA, the LPs continue to favour regional funds, as compared to country-specific funds – a trend observed in other emerging markets regions.
Overall, nearly 60% expect raise their commitments levels to emerging markets up to 2015. The LPs continue to believe that emerging markets private equity will outperform developed regions.
EMPEA surveyed 112 LPs, with disclosed global private equity assets under management of nearly $430 billion and undrawn commitments of over $180bn. The pool included public and corporate pension funds, insurance companies, sovereign wealth funds, banks, asset managers, endowments, foundations, family offices, development finance institutions, multilateral organizations and funds of funds. Here is the link to the full survey.
August 25th, 2011 by Tom Minney
Tiny, small and medium businesses in Egypt and Tunisia, later Algeria and Morocco, are set to benefit from a new €30 million ($43.2 mn) SANAD Fund for MSME (www.sanad.lu). This was set up in August 2011 by German development bank KfW Entwicklungsbank with funding from the German Ministry for Economic Cooperation and Development and the European Commission and will offer debt and equity financing to partner institutions in the Middle East and North Africa (MENA) region that serve micro, small and medium enterprises (MSMEs). Other target countries include Middle Eastern countries such as Lebanon and Jordan.
The fund is expected to attract further investments from public and private bodies. The partners who will help invest the money will be banks, microfinance institutions, financial service providers, leasing and factoring companies, guarantee funds or venture capital funds. The fund will also offer them technical help to build their skills and reach.
Development finance alternative asset manager Finance in Motion GmbH (www.finance-in-motion.com) and Oppenheim Asset Management Services S.à r.l. (www.oppenheim.lu) will manage the new fund which will be structured as a Luxembourg-based Specialized Investment Fund, SICAV-SIF, involving different share classes.
By facilitating access to finance in the region, SANAD – literally “support” in Arabic – aims to strengthen the MSME sector and local financial markets in the MENA region in line with the principles of responsible finance.
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).”
July 15th, 2010 by Tom Minney
From when trading started at 10am last Sunday, 11 July, NASDAQ Dubai (www.nasdaqdubai.com) is routing all trades in its listed equities through the trading platform of Dubai Financial Market (DFM – www.dfm.ae). NASDAQ Dubai is one of the leading exchanges contesting the crown of financial centre of the Middle East and North Africa, and also has potential for channeling investments into African countries.
Trading for the first few sessions this week was reported to have gone well and several brokers were said to be inquiring about membership.
NASDAQ Dubai describes itself as: “the international financial exchange serving the region between Western Europe and East Asia. It welcomes regional as well as global issuers that seek regional and international investment. The exchange currently lists shares, derivatives, exchange-traded commodities, structured products, Sukuk (Islamic bonds) and conventional bonds.”
The move has been prepared since last December, and is part of a consolidation between the exchanges and aiming to boost liquidity on NASDAQ Dubai. Essa Kazim, Managing Director and Chief Executive Officer of DFM, said in a press release: “Cooperation between the two exchanges will increase, driving the expansion of Dubai as a centre of capital markets dynamism and innovation. Today’s outsourcing is a major step for us and the region. Through these growing links, DFM gains a wider array of product offerings and international expertise, while NASDAQ Dubai benefits from DFM’s high liquidity and enormous base of over 552,000 investors.”
Clearing, settlement and custody functions for NASDAQ Dubai equities also migrated to DFM’s systems on 11 July under an outsourcing agreement. Jeff Singer, Chief Executive of NASDAQ Dubai, said: “This new structure brings together more than half a million individual investors on DFM with NASDAQ Dubai’s institutional investors, many of them based outside the region. It positions Dubai as a leading international capital markets hub, providing investors with excellent liquidity and issuers with a choice of regulatory frameworks.”
In May 2010 DFM acquired two thirds of the shares of NASDAQ Dubai through an acquisition of shares from Borse Dubai and NASDAQ OMX, the international exchange group. Borse Dubai still owns one third of the shares. NASDAQ Dubai remains a separate exchange regulated to international standards by Dubai Financial Services Authority (DFSA), which gave approval for the outsourcing last week. DFM is regulated by the United Arab Emirates’ Securities and Commodities Authority. NASDAQ Dubai remains a separate company inside the Dubai International Financial Centre (DIFC). It retains its own legal framework, listing rules and Members.
DFM and NASDAQ Dubai equities are now displayed together on the DFM website www.dfm.ae. NASDAQ Dubai equities also continue to be displayed separately on the NASDAQ Dubai website www.nasdaqdubai.com. Brokers who are members of NASDAQ Dubai access the DFM trading platform either directly, or through NASDAQ Dubai’s Market Place Services function, or through another broker.
Under the outsourcing, NASDAQ Dubai’s equities remain listed on NASDAQ Dubai and are not listed on DFM. Trading of equity derivatives continues to take place on NASDAQ Dubai’s own trading platform and systems.
NASDAQ Dubai’s opening hours are now 10am to 2pm UAE time (6am to 10am GMT) Sunday –Thursday. These are also DFM’s opening hours. Previously, NASDAQ Dubai’s opening hours were 10am to 5pm UAE time (6am to 1pm GMT) Sunday-Thursday.