Archive for the 'Oil & gas' Category

African IPO pipeline includes $3bn Vivo Energy

Investors have been snapping up Africa-focused IPOs (initial public offers) of shares and more capital-raisings and stock-exchange listings are in the pipeline. Biggest of the upcoming African IPOs is a reported share offer by Vivo Energy, while miner AfriTin, investment and real estate company Cytonn and property company Hystead also said to be heading for the markets.

Earlier this month, Wall Street Journal reported that Netherlands-based Vivo Energy, which is licensed to distribute Shell fuel and lubricants in 16 African countries, is working with investment banks to act as underwriters. Its offer, planned for the London Stock Exchange, could value the company at $3 billion.

Vivo Energy (photo credit Vitol Africa)


Vivo was created in 2011 after Shell sold 80% of its downstream operations in 14 African countries to Dutch firm Vitol Africa BV and private equity fund Helios Investment Partners in a deal worth $1bn and then sold the balance to them for $250 million earlier this year. Vivo operates 1,800 Shell fuel stations and sells Shell-branded products such as liquefied petroleum gas and lubricants to aviation, marine and mining in 16 markets.

AfriTin is a newly formed tin company which is acquiring the tin assets of Bushveld Minerals in Namibia and South Africa and announced plans for a £2m ($2.6m) capital raise on the AIM market operated by the London Stock Exchange. The assets will include 85% of Uis Tin Project, the former workings of Uis mine in Namibia, and assets in South Africa including Mokopane and Zaaiplaats Tin Tailings project.

Pieter Prinsloo, CEO of South African real estate investment trust (REIT) Hyprop, focused on shopping centres, said it was looking to list UK subsidiary Hystead separately on the Johannesburg and Luxembourg stock exchanges in the first half of 2018, according to this news report. Hyprop owns 60% of Hystead, which has interests in 4 malls in Montenegro, Serbia, Macedonia and Bulgaria valued at EUR460m ($535m). Hyprop listed on the JSE in 1988 and has property assets in malls in South Africa, Ghana, Zambia and Nigeria.

Kenya’s Cytonn Investment plc changed into a public company in August using a 2015 provision in the Companies Act. It said it plans to list 10m shares by introduction on the Growth Enterprise Market Segment (GEMS) of the Nairobi Securities Exchange in mid-2018. CEO Edwin Dande said on CNBC . It is not raising new capital but seeking to diversify sources of funding and increase corporate governance, transparency and accountability.

CampusKey houses 4,000 students in 6 locations in South Africa. It says it will list on th JSE when it gets to 10,000 beds and says this is on track for 2019.

Thanks to research contribution by Enko Capital, which invests in IPOs and other African opportunities.

UK regulator accused of dropping standards to woo $2 trillion listing

Investment institutions are protesting moves by the UK capital markets regulator, the Financial Conduct Authority, to alter listing standards to accommodate a potential $2 trillion listing on the London Stock Exchange. Meanwhile rumours are growing that Saudi Aramco may be dropping its plans for a £1.5bn initial public offer on the New York, London or Tokyo Stock Exchange in addition to the Tadawul (Saudi Stock Exchange).

According to this article in the Financial Times, a trend towards “uber compliance” for listed securities means Aramco is thinking of selling shares to sovereign wealth funds, possibly led by China, as an alternative to a public listing which would have been the world’s largest float.

On 15 October, Aramco said the giant listing is still on: ““All listing venues under review for optimal decision, IPO process is on track for 2018”.

Plans for a giant £1.5bn ($2bn) initial public offering of only 5% of Aramco’s capital are a key part of Saudi Arabia’s Vision 2030, which plans to wean the economy off reliance on oil, where it made up 90% of public revenues until 2014. However, in the short term it may signal Saudi intentions to use price-fixing cartel the Organization of Petroleum Exporting Countries (OPEC) to push up oil prices and boost the valuation.

Outgoing LSE CEO Xavier Rolet accompanied British Prime Minister Theresa May for a visit to Aramco in April, while Andrew Bailey, chief executive of the FCA, agreed the regulator had met the potential listing candidate before a consultation on revising the listing standards. Many observers think there is political pressure on FCA and LSE to win the listing from New York and prove that London is still competitive as Brexit uncertainty and economic damage impacts UK.

Consultation on the FCA’s new listing rules closed on Friday 13 October. It would be the world’s largest float.

According to writer Nils Pratley in The Guardian: “Furious fund managers sense a bad case of a regulator planning to lower standards to suit ministers’ short-term desire to persuade Aramco to float in London rather than New York.

“The investors’ objection is straightforward: why on earth would we want to create a ‘premium’ listing category for state-owned companies while not enforcing normal investor protections?

“Under the FCA’s proposal, the likes of Aramco would be allowed to ignore some basic principles. They would not have to get approval from outside shareholders for transactions with the state. They would not have to give independent shareholders a vote on who should serve as independent directors.

“There clearly could be a place for such companies in London, but you would hardly award ‘premium’ status, a label that is meant to indicate the highest governance protections. The regulatory regime would look like a pushover, which may succeed in drumming up some short-term business but could seriously damage London’s status as a good place to invest.”

On 18 October, the world’s biggest wealth fund warned the FCA that the listing changes would be a “step back”, according to an article in City AM. Norges Bank Investmnet Management, part of the Norwegian Central bank which manages assets on behalf of Norway’s $1trn fund, which has $44bn invested in LSE companies, wrote on 13 October to FCA:

“Ultimately, investors expect today’s high standards of shareholder protection to apply to the premium listing category, whether controlled by a sovereign state or private investors. We fear that relaxing these rules would reduce the voice of minority investors and undermine the independence of the board.”

NBIM said the changes would be a “step back” in terms of investor protection, especially for minority shareholders, and would threaten the London Stock Exchange’s standing as a best in class corporate governance framework: “We believe the FCA should consider a more balanced approach that takes into consideration the interests of all stakeholders in the listing environment.” Other protests about relaxing the listing rules have come from a wide range of institutions, including the Institute of Directors and investor group the International Corporate Governance Network which said the plans were “fundamentally flawed” and increased risk. The Investment Association boss Chris Cummings said the change: “could impact on London’s reputation and future as one of the world’s leading financial centres”.

FCA’s Bailey had told Parliament that people would not need to invest in the new listing if they did not like the governance. According to this article , he wrote: “We do not think protections for investors will be weakened. Plainly, absent the new category, sovereign-controlled companies would be unable to choose a premium listing; they would therefore not be bound by any of the premium listing requirements that might otherwise offer additional protection for investors.”

Bailey said some criticism of the proposal left the “incorrect impression that the premium listing is monolithic in form, and therefore, that any issuer included in that category must also be included in the main FTSE UK index”. Financial services advocacy group The CityUK supported the FCA’s “open-minded approach to regulatory change”.

Ashley Hamilton Claxton, corporate governance manager at Royal London Asset Management, said it will be “bad news” for London if the proposals are put in place: “It looks like the FCA is consulting on amending the existing listing rules to accommodate the peculiarities of one company, which is not a very effective strategy for regulating the market as a whole. If the proposals in this consultation document are implemented, it will be bad news for London and will reverse the progress we have made in recent years to uphold strong governance and protect minority shareholders.”

According to the Financial Times: “A market regulator that makes transparent and fair rules, respecting both property rights and investor choice, will attract business in the long run. If, on the other hand, attracting business becomes a short-term goal, and rules are tailored to land big deals, regulation becomes marketing, and the long-term outlook becomes much less attractive.”

Saudi Aramco says its 2018 listing is on track (photo Reuters/Ali Jarekji)

Africa Progress Panel urges triple energy win – for people, power and planet

APP_KA_quote

Africa is a potential low-carbon superpower and can show the world how to fight poverty, grow economies and fight climate change at the same time. It is a crucial message for 2015, when critical climate talks will set the future direction of the world’s weather and world leaders commit to achieving sustainable development goals.

Kofi Annan’s Africa Progress Panel today (5 Jun) issues its report Power, People, Planet: Seizing Africa’s Energy and Climate Opportunities. It calls on governments, private investors, and international financial institutions to unlock the Africa’s vast potential for renewable and a low-carbon energy and fight poverty by delivering universal access to electricity by 2030. The report is available for download here.

Source: Africa Progress Panel

Source: Africa Progress Panel

The report says Africa does not have to choose between economic growth and low-carbon energy development. Just as the continent leapfrogged decades of telecoms development with cheap rollout of mobile telephony, Africa has the sun, wind, water and geothermal resources to fire up energy without damaging the world climate.

Power against poverty
Many Africans cannot escape poverty because 621 million of them do not have access to electricity and they pay a heavy price in resources, time and environmental decline for energy such as firewood, which they use for lighting and cooking. A rural woman in northern Nigeria spends around 60 to 80 times more per unit of energy consumed than a resident of New York or London.

“Our report calls for a 10-fold increase in power generation by 2030,” said Mr Annan, adding: “Africa needs to utilize all of its energy assets in the short-term while seizing the opportunity to put in place the foundations for a competitive, low-carbon energy infrastructure.”

The Africa Progress Panel report highlights the scale of Africa’s energy deficits. Power shortages cut the region’s growth by 2-4 per cent a year, holding back job creation.

Electricity consumption in sub-Saharan Africa (excluding South Africa) is less than that of Spain. On current trends it will take until 2080 for every African to have access to electricity. The APP report identifies Ethiopia, Kenya, Rwanda and South Africa as emerging front-runner countries in the global transition to low-carbon energy.

There is a $10 billion-a-year opportunity in tackling deficits and the report authors estimate that households living on less than US$2.50 a day collectively spend this amount on energy-related products, such as charcoal, candles and torches.

Source: Africa Progress Panel

Source: Africa Progress Panel

“This is market failure on an epic scale. Low-cost renewable technologies could slash the cost of energy, benefiting millions of poor households, creating investment opportunities, and cutting carbon emissions,” said Mr Annan. “African governments should take responsibility for tackling corruption in energy utilities, strengthening energy governance to facilitate private investments, and increasing investment in energy infrastructure.”

The report urges African governments to redirect the US$21 billion spent on subsidies for loss-making utilities and electricity consumption for the rich, towards connection subsidies and renewable energy investments geared towards the poor.

It estimates the energy-sector financing gap will be US$55 billion each year until 2030. The panel members call for strengthened international cooperation and a global connectivity fund to reach an additional 600 million Africans by unlocking private investment and expanding public investment in on-grid and off-grid energy provision. Aid donors and financial institutions can do more to unlock private investment through risk guarantees and mitigation finance.

Time to end “climate negotiations poker”
Africa brings a message of hope for December’s climate talks, set for Paris. The world’s leaders must commit and act to implement agreements to cut emissions and limit global average temperature increase to 2OC above pre-industrial levels. Africa contributes the least to man-made climate change and already endures the worst effects such as droughts, floods, falling crop yields and rising temperatures. A bigger increase would mean these changes could spiral out of control within a few years.

The African Progress Panel report challenges African governments and the international community to scale-up the level of ambition ahead of the summit. It recognizes that the EU, the US and China have raised their levels of ambition but says current proposals fall far short of a credible deal for keeping global warming within the 2ºC limit. It condemns Canada, Australia, Russia and Japan for effectively withdrawing from constructive engagement of climate.

APP member Bob Geldof contrasted the “comfort blanket mood music” surrounding the Paris climate summit with current policies: “G7 and G20 governments tell us they want a climate deal. Yet the same governments – the UK, the United States, Germany, China, Brazil and India – are spending billions of dollars of taxpayer’s money subsidizing the discovery of new coal, oil and gas reserves. They should be pricing carbon out of the market through taxation, not subsiding a climate catastrophe that threatens the lives of millions of Africans and jeopardizes our children’s future.”

“This is a moment for bold global leadership and decisive action by governments around the world,” said Mr Annan. “Playing poker with our planetary and the lives of future generations is not a smart move.”

Private Equity Africa ranks top 10 deals in 2014

Leading website and magazine Private Equity Africa lists the top 10 Africa private equity deals from 2014. They use data from Preqin.

1. Helios Investment Partners – Helios Towers Africa – $630m
This is the second year that Helios Investment Partners took the top slot when it led a consortium to inject $630m of growth capital into telecommunications service provider Helios Towers Africa (HTA) in July. It was US-based private equity investor Providence Equity Partners’ first deal in Africa. The IFC’s African, Latin American and Caribbean Fund also invested for the first time in HTA. Existing investors Quantum Strategic Partners, Albright Capital Management and RIT Capital Partners also backed the tranche. (Helios’ big deal in 2013 was to partner with BTG Pactual and Indorama to bring $1.5bn investment into Nigeria-based oil and gas exploration company, Petrobras Africa.)

2. Emerging Capital Partners leads consortium – IHS – $490m
Emerging Capital Partners (ECP) led the consortium that invested $490m in Nigeria-based telecommunications towers company IHS. The latest 2014 funding round brought in Goldman Sachs was a new investor and the IFC Global Infrastructure Fund and African Infrastructure Investment Managers (AIIM) were also in. IHS is part-owned by Investec Asset Management, the first private equity investor to fund its expansion. Other existing investors are ECP, Wendel, sovereign wealth fund Korea Investment Corporation (KIC) and the Netherlands Development Finance Company (FMO). KIC first backed IHS when it joined Investec and ECP in a $1bn financing round in 2013. Standard Chartered Bank contributed $70m in senior debt specifically set apart to finance expansion into Zambia as part of the capital package

3. Abraaj – Liberty Star – confidential
South Africa’s Liberty Star Consumer Holdings (Libstar) manufacture and distributes food. It sells private-label products to retailers, own-brand products and third-party packaging and ingredients to the food industry. Abraaj acquired a majority stake in the company through a secondary buyout from Metier, Old Mutual Private Equity, Development Partners International and Lereko – which have all exited the company. Libstar management took a minority stake in the buyout. The deal value is confidential.

4. Atlas Merchant Capital – Union Bank of Nigeria – $270m
The investment was channelled through Atlas Mara Co-Nvest, its $325m investment vehicle listed on the London Stock Exchange. Atlas Merchant previously held 9.05% in Union Bank, inherited when it took over ADC African Development Corporation in early 2014. It committed the capital by exercising an option to acquire 20.89% of the financial services company.

5. IFC-Asset Management Compan & Temasek – Seven Energy – $255m
More sovereign wealth fund action in April, when Singapore’s Temasek partners with IFC Asset Management Company (IFC-AMC) to invest $255m in Nigeria’s Seven Energy, an oil and gas exploration and production company. Temasek contributed $150m for a 25% stake. Previous investors in Seven Energy include Actis, Investec Asset Management, Africa Finance Corporation, Capital International Private Equity and Standard Chartered Private Equity. Seven Energy’s $600m capital-raising round included $335m in debt of which the IFC African, Latin American, and Caribbean Fund contributed $30m.

6. Kohlberg Kravis Roberts – Afriflora – $200m
KKR’s first deal for Africa, in July, was approximately $200m in Afriflora, an Ethiopia-focused agriculture production company that cultivates, produces and sells roses based on Fairtrade standards. The company operates as Sher Ethiopia. The investment is part of KKR’s $6.2bn European Fund III.

7. Carlyle – Tiger Automotive – confidential
It was fast-moving Carlyle’s third deal of the year from its maiden $698m Africa-focused fund, closed earlier in 2014. It bought South Africa’s vehicle accessories distributor Tiger Automotive (TiAuto) in November. It partnered with Old Mutual Private Equity (OMPE) to buy the company from Ethos Private Equity. TiAuto operates through 7 divisions, including Tiger Wheel & Tyre, Tyres & More, YSA and Treads Unlimited and primarily distributes branded tyres such as Continental, Yokohama, Michelin, Pirelli, Goodyear, Achilles, GT Radial and Hankook.

8. Stanchart – Sphinx Glass – $180m
Standard Chartered Private Equity backed a deal and partnered with Saudi Arabia’s Construction Products Holding to buy Egypt-based industrial production company Sphinx Glass from Qalaa Holdings (formerly Citadel Capital) in May for $180m. Sphinx Glass operates under license from US-based PPG Industries, a specialist float glass technology provider. Qalaa sold it as part of a strategy to shed non-core assets.

9. Rocket & Kinnevik – Jumia – $148m
Hotshot tech investors Rocket Internet and Kinnevik put another $148m into their consumer shopping platform Jumia in December. US-based private equity investor Summit Partners owns part of Jumia and JP Morgan Asset Management has also previously invested. Jumia owns consumer shopping websites offering branded consumer products as Internet shopping starts to take Africa by storm. Rocket Internet has previously backed Groupon, eBay, Facebook, LinkedIn and Zynga. Watch this space.

10. Carlyle Diamond Bank – $147m
Carlyle’s fourth deal was into Nigeria-based financial services company Diamond Bank, which is a Tier II bank, covering corporate, retail and public sector banking with subsidiaries offering custodian, mortgage, securities and insurance products and services. Kunoch Holdings, the Africa-focused investment platform of entrepreneur and investor Pascal Dozie, raised its holding in the bank from 5.86% to 20.65% in August, buying the additional stake from Actis and CDC Group.

*Rankings based on Preqin data and Private Equity Africa research.

$1.4bn petroleum pipeline proposed for Ethiopia

Private companies have proposed to the Ethiopian and Djibouti governments a $1.4 billion pipeline to bring petroleum to a distribution centre in Awash, Ethiopia. It would take two years to complete.
The companies which made the proposal 6 months ago are Black Rhino Group, owned by private equity firm Blackstone, and MOGS (Mining, Oil & Gas Services), owned by Royal Bafokeng Holdings, a South African investment group, according to this report in Addis Fortune newspaper.
Ethiopian Petroleum Supply Enterprise (EPSE) plans to import 2.9 million tonnes of fuel this year and last year this was 2.6m tonnes. Some of the fuel comes from Sudan.
They are proposing to build 550 kilometres of pipeline, carrying oil directly from the vessels at the port to a storage facility in Awash, from where it would be distributed by trucks from Awash to the rest of the country, including Addis Abeba. According to the report, the Djibouti government has told Black Rhino and MOGS that the current port infrastructure is not big enough to meet Ethiopia’s long-term needs with Ethiopia’s demand for refined fuels growing 10% a year.
The pipeline would bypass the congested port and road. The report quotes Demelash Alamaw, assistant to chief executive at EPSE, that it is inefficient to use fuel trucking fuel up from the coast. The project is expected to reduce the supply problem caused by truck shortages, as well as reduce the cost of transport.
Brian Herlihy, CEO and founder of Black Rhino, presented the proposal on 21 Nov at a meeting on “Powering Africa: Ethiopia Meeting,” at Radisson Blu Hotel, Addis Abeba, organized by UK-based company Energy Net Ltd.
He said the Ethiopian Government is studying the proposal and Djibouti is happy. If the Ethiopian Government gives a green light to the project the company will proceed to study the environmental and engineering condition of the construction,
Fortune reports that officials at the Ministry of Water, Irrigation & Energy (MoWIE), confirmed that the proposal had been submitted and they would look at it before deciding to discuss it further with other stakeholders, such as the Ministry of Finance & Economic Development (MoFED), the Ministry of Foreign Affairs (MoFA), and Ministry of Transport (MoT).

Nigerian Stock Exchange signs links to London SE Group

Paternoster Square with London Stock Exchange at right (credit: Wikipedia)

Paternoster Square with London Stock Exchange at right (credit: Wikipedia)

The Nigerian Stock Exchange (NSE) this week (18 Nov) signed a capital markets agreement with the London Stock Exchange Group (LSEG) to support African companies seeking dual listings in London and Lagos. It follows implementation earlier in 2014 of a new settlement process between the UK and Nigeria which significantly boosts the efficiency of listing and trading of ordinary shares of Nigerian companies listed in London and those of UK companies on the Nigerian market.
A top LSEG executive said it shows the global investment community is rushing to be part of the Nigerian story.
The agreement was signed by Oscar Onyema, CEO of the NSE, and Nikhil Rathi, Head of International Development, LSEG. Also present was Sir Roger Gifford, Country Head for the European Bank SEB, former Lord Mayor of London, and Co-Chairman of the UK Government’s Nigeria Emerging Capital Markets Task Force and Nigerian co-chair Aigboje Aig-Imoukhede, President of NSE.
Gifford said, according to the press release: “This is exactly the sort of ambitious project the ECMT Nigeria was launched to support. Nigeria is without doubt one of the most promising opportunities for capital markets development worldwide.
“An effective, transparent and well-governed capital market – across all asset classes – has the capacity to catalyse a nation’s quest for growth and development. In particular, functioning markets for corporate equity and debt reduce the dependence on bank capital and make investment securities available to a broader range of investors: institutional, private and international. This agreement will build on existing strong commercial and economic ties between the UK and Nigeria to our mutual benefit. ”
Mot of the previous dual-listings have listed on London’s AIM market although the milestone April dual-listing of Seplat (see below) saw Seplat head for the main market.
Onyema said: “Today’s agreement is another major step towards our goal of ensuring that all companies that have substantial operations in Nigeria are accessible to both Nigerian and international investors. In addition, we will be ensuring that our leading companies achieve the global profile and international institutional investment they deserve.”
The 9 Nigerian or Nigeria-focussed companies quoted on LSE have a collective market capitalisation of $14.2bn and include 6 oil & gas explorers and 3 major Nigerian banks.
The press release also quoted Rathi: “The agreement signed today is a reflection of the global investment community’s strong desire to be a part of the Nigeria story. As the world’s most international exchange, LSEG looks forward to building on the success of existing dual listings in Nigeria and London and partnering with the NSE to showcase the rapid developments in Nigerian capital markets and the Nigerian economy.”

Seplat dual-listing helping Nigeria bourse towards N1 trillion

Indigenous oil company Seplat was the first to make use of the linkages in April, when it raised $500 million in an Initial Public Offer (IPO) on both exchanges. Euromoney reported it was the first dual-listing and largest IPO from southern Africa since Dangote Cement in 2010. The London end was advised by BNP Paribas, Standard Bank, Citi and RBC Capital Markets, the Nigerian listing by Renaissance Securities and Stanbic IBTC.

The IPO added N28 billion ($161m) to the NSE market capitalization. The bourse aims to reach N1 trillion ($5.7 billion) by 2016 with oil and gas firms a key target.

Euromoney quoted Dolapo Oni, energy research analyst at Ecobank: “To list on the main board in London, Seplat required international accounting standards and the highest levels of corporate governance and transparency, which it has aimed for from its inception in 2009. Many other Nigerian companies are still not comfortable with disclosing this much information to the public and thus are not good enough to list on the main board.”

Miguel Azevedo, head of investment banking Africa at Citi, added: “It also represents the return of the sector to the London market, which hasn’t had a significant oil and gas listing since the financial crisis. Seplat really creates a new benchmark for international companies coming to the market.”

UK pushes emerging capital markets

UK Chancellor George Osborne announced the Emerging Capital Markets Taskforce on 9 April. It aims to unlock new opportunities for the UK financial services sector by helping to open and deepen capital markets in emerging economies through innovative collaboration between Government and private sector. This is part of the strategic public-private sector Financial Services Trade and Investment Board (FSTIB) launched in 2013 and chaired by HM Treasury. More details can be found via the FTSIB website.

Top legal conference focuses on Africa infrastructure and natural resources deals

[Sponsored] Benefit from a high-level focus on innovative project financing, private equity financing and M&A structuring for resource investment at the IFLR Africa Forum. It will focus on the laws, regulations and transactions surrounding Africa’s natural resources and provide strategies for managing governmental nationalism, raising finance for projects, infrastructure opportunities and M&A/PE transactions. It will also cover legal issues from discovery of the resources and extraction to transport and corporate acquisitions.

The International Financial Law Review conference is on 20 May at The Waldorf in central London. The 2012 and 2013 events each attracted over 250 participants and very positive feedback. Meet senior in-house counsel, heads of emerging markets and senior partners to maintain a strategic focus on African deals and new financial regulations. Attendees will include top banks, regulators and corporates from UK, Europe and Africa.

Benefits of attending:
• Learn how to structure international debt for African borrowers and make African project finance bankable
• Stabilize agreements with governments for the length of a concession and protect from renegotiation and new laws
• Compliance with international anti-corruption regimes
• Practical tips for mitigating risks in African infrastructure (includes rail, road and airports)
• Focus on oil and gas, including contracts, balancing government interests and profits, and update on the Nigerian Petroleum Industry Bill
• Debate private equity and M&A opportunities in Africa
• Hear about local capital markets providing domestic options
• Learn the importance of negotiating well on free carry, royalties and taxes
• 6 CPD/CLE points.

Confirmed speakers include Tim Odell (Citigroup), David Turley (Bank of New York Mellon), Ian Cogswell (Natixis), Daniel Whitehead (Citigroup), Amol Prabhu (Barclays), Brian Marcus (Standard Chartered Bank), Barthelemy Faye (Cleary Gottlieb Steen & Hamilton), Calvin Walker (Baker & McKenzie), Gavin Davies (Herbert Smith Freehills), Mouhamed Kebe (Geni & Khebe), Faizal Jusob (Couto, Graca & Associados), and David Ofosu-Dorte (AB & David).

International Financial Legal Review is the market-leading financial law publication for lawyers specializing in international finance and was first published in 1982.

In-house counsel, bank counsel, fund managers and academics attend for FREE. Private practice, consultants and service providers who are readers of AfricanCapitalMarketsNews save £200 for a special rate of £795 + VAT – QUOTE ACM20. To register your interest, contact Alicia Sprott on alicia.sprott@legalmediagroup.com or call +44 20 7779 8334.

The Africa Report food for thought on the “great game” in East Africa

“East Africa is the most promising regional bloc. [It] has registered between 5 and 6% growth annually for the past decade. We estimate that regional gross domestic product will expand 18-fold by the middle of the century, from $185bn in 2010 to $3.5trn by 2050. This era is comparable to the period immediately after independence.” This is an intriguing article just published by The Africa Report, quoting Gabriel Negatu, regional director of the African Development Bank.
The article, by Parselelo Kantai in Nairobi and Juba, additional reporting by Patrick Smith in Addis Ababa, talks of the four leaders that dominate the East African “chessboard”. Here are a few sample quotes: “At international gatherings such as the African Union summit in Addis Ababa, the four gravitate towards each other: Ethiopia’s Hailemariam Desalegn, Kenya’s Uhuru Kenyatta, Rwanda’s Paul Kagame and Uganda’s Yoweri Museveni.
“Differing in age and political experience, they argue about many details but there is a critical point of consensus. If East Africa is to grasp the economic opportunities now available, there must be a determined effort to integrate its markets and economies, even if that means making concessions and compromises in the short term.
“All four run interventionist foreign policies – Ethiopia, Kenya and Uganda sent troops into Somalia, while Rwandan and Ugandan troops have been both invited to and expelled from the Democratic Republic of Congo.
“They all favour a statist hand on the economic tiller, but they are all building up business classes on whose political loyalty they can rely. All have supported Kenyatta in his attempts to avoid prosecution at the International Criminal Court.
“Economic growth and breaking away from dependence on Western markets are common imperatives. None of them enthuse about democracy, particularly in its Western, liberal variants.”
The article also gives insights on Uganda’s $8bn oil infrastructure deal of 5 February that will help reshape the region and its economies and 2 giant railway projects due for completion by 2020. It highlights the need for jobs and services to keep up with growth, and China’s giant role in reshaping the region.
It highlights regional diplomatic tensions too. The writers also point to joint pressure on Tanzania, sometimes seen as the laggard in the regionalization project, and give insightful perspective on the lessons from the South Sudan crisis, as well as letting key South Sudanese voices be heard. They write:
“For governments tempted to ignore the new underclass, South Sudan serves as a cautionary tale. An abiding weakness of governments in East Africa is their ethnocentrism: their tendency to favour crassly their ethnic support bases in the allocation of public sector jobs, appointments, commercial opportunities and government tenders.
“South Sudan’s crisis may have been exacerbated by its weak institutions, but the best illustration of this was the government’s failure to rein in cronyism, corruption and ethnic rivalries in the state sector.
“In South Sudan, these weaknesses caused a war. In other countries in the region, they produce bad elections and policy-making, and hold back burgeoning economies.”
The article speaks of the determination not to be proxies for foreign powers in any conflict and says the South Sudan crisis could give an opportunity to rebuild a state more suited to local realities.
For more, we recommend that you read the article in full here.

Tanzania plans debut Eurobond of $500m-$1bn

Tanzania is planning to issue a Eurobond of up to $1 billion, but the issue could be delayed until after June, according to a report on Reuters. The newsagency quotes Benno Ndulu Governor of the Bank of Tanzania, saying the size has not yet been decided but could be between $500m and $1bn: “Anything up to a billion should make sense.”
The money raised could be used to build new roads, railways and ports and to help use the giant reserves of natural gas and coal to end chronic energy shortages. Infrastructure is a key challenge and Government is increasing borrowing. Tanzania’s gross domestic product is forecast to grow at about 7% in the medium-term, according to the African Development Bank, which says the main drivers of growth are telecommunications, transport, financial intermediation, manufacturing, construction and trade.
Ndulu also told Reuters that Tanzania is on course to rein in its large current account deficit. The Government’s target is 5% or below but the International Monetary Fund (IMF) estimated it at 13.5% in the fiscal year 2012/2013. Reuters quotes Ndulu: “We are working hard to bring it down back to 5% this year and I think we may be able to do that.”
According to a report last year on Making Finance Work for Africa, the Financial Times quoted former Minister of Finance William Mgimwa as saying Tanzania planned to ask the IMF to raise its debt ceiling by about $300 million for the 2013-2014 fiscal year, in a bid to issue the Eurobond, which he said would mature in 5-10 years and would be used on power generation and transport infrastructure. Although the economy is still dependent on foreign aid, an article in Jeune Afrique points out that investors are attracted by recent discovery of large reserves of natural gas off the coast. Tanzania offered $600m of 7-year securities in March 2013 which was 4x oversubscribed, reflecting its attractiveness to markets.
Bloomberg reported in November that Tanzania was busy with a credit rating and Finance Ministry Permanent Secretary Servacius Likwelile said they planned to raise $750m: “We plan to invest heavily in energy, road construction, water-supply development and airport construction.”
Bloomberg said it was in the final stages of a risk assessment by Citigroup Inc.and would then approach Standard & Poor’s, Moody’s Investors Service or Fitch Ratings for an assessment of the country’s creditworthiness, Tanzania had been discussing plans to obtain a credit rating and tap the Eurobond market since at least 2008.
It says Tanzania is Africa’s 4th biggest gold producer and together with bordering Mozambique has natural-gas reserves that could supply the global market for a decade. The country is selling sovereign debt to help finance infrastructure projects, including a gas pipeline from the southern Mtwara region to Dar es Salaam.
The credit rating is not yet finalized, according to a 31 Jan local news report in The Guardian/IPP Media, citing Finance Minister Saada Mkuya.

New laws pave route to Angolan securities exchange

Laws have been approved in Angola to regulate the future securities exchange for equity and debt. The Capital Markets Commission or Commissao do Mercado de Capitais (CMC) says that it plans to open a secondary debt market next year and this will pave the way for a securities exchange in 2016.
The regulator announced the new laws on 18 October. According to news story by Reuters, Archer Mangueira, head of the CMC, said the laws were published by presidential decree: “With these laws, Angola creates the conditions for the securities markets to be able to operate. The first securities market operations in Angola will be done with public debt paper, an instrument which help satisfy the State’s financing needs and also remunerates people and companies that invest in it.”
The securities exchange has been in the pipeline for more than a decade and most recently Bloomberg news reported after an interview on 28 June with Mangueira that the launch which in April had been had been announced as 2015, would now be only in 2016. The regulator is also working on plans for trading futures and commodities, including standardized contracts for certain financial products.
Treasury bills already bought and sold among financial institutions. Mangueira said in June that a public market for trading Angolan fixed-income notes had been planned to start by the end of September, using electronic trading. The aim is to help develop a yield curve. However, the secondary market for bonds was delayed to the first quarter of 2014, and Mangueira cautioned: “We might make some adjustments based on whether the legal instruments are fully developed and implemented, technological infrastructure is in place, and employees are trained.”
The CMC has signed an agreement with the London Stock Exchange to train staff.
In August 2012 Angola sold $1 billion of USD-denominated Eurobonds to selected investors maturing in 2019 at a yield of 7%, according to Bloomberg. Earlier this year ACMN reported that it would issue another $1bn-$bn but in October the Africa Report said the issue was postponed until 2014.

Fast-growing economy fuelled by oil
Angola is a major African economy, the second-largest oil producer after Nigeria and endowed with massive agricultural and mineral wealth, including diamonds that fuelled civil war which lasted from 1975-2002. Since peace in 2002 it has moved rapidly to rebuild but still has a poor record on transparency and this has held back some investment and business growth. Reuters describes it as “one of Africa’s fastest-growing, but most impenetrable economies”. Growth was forecast at 7.1% in 2013, down from 7.4% in 2012 with three quarters of budget revenue coming from crude oil.
Suitable listings have been identified including banks, telecoms and retail businesses in private ownership. Bloomberg said that in April Mangueira had expected that the stock exchange would have a market value of 10% of gross domestic product within 18 months of its start up. Expected listings would include the largest banks including Banco Angolano de Investimentos SA and Banco de Poupanca e Credito SA, as well as mobile-phone companies Unitel SA and Movicel Telecomunicacoes Lda.
Leading Angolan companies dominate many key sectors, often linked to senior political and other leaders, and Reuters says “investors and analysts have questioned whether the Angolan companies that dominate their sectors are in a position to fulfil international standard criteria on ownership disclosure, auditing and reporting of accounts, and corporate governance”. According to Bloomberg Angola is ranked 157th out of 176 countries on Transparency International’s 2012 Corruption Perceptions Index.