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Africa’s eurobond outlook 2019

A good overview of Africa’s  $92bn eurobond market, with a summary of 2018 and 5 key themes for 2019, written by Gregory Smith, Director and Fixed Income Strategist for Emerging Markets at Renaissance Capital, is available on LinkedIn.

Overall there are 20 African eurobond issuers with the largest issuers South Africa, Egypt and Nigeria, also Africa’s 3 largest economies.

About 2018, he wrote: “Despite the tough markets 2018 was a record year for African sovereign issuance and saw a growing preference for euro-denominated eurobonds, and longer maturity eurobonds. The $25.8 billion issued by African countries in 2018 makes up 28% of the current stock of African eurobonds. Angola, Egypt, Ghana, Ivory Coast, Kenya, Nigeria, Senegal and South Africa each issued 30-year paper.”

Source: Renaissance Capital

As highlighted previously, there were 2 upgrades in credit ratings for Eurobond issuers during 2018. S&P upgraded Ghana and Republic of Congo. However, Moody’s downgraded 5 countries: Angola, Kenya, Gabon, Tunisia and S&P and Fitch joined in downgrading Zambia.

Key trends Smith focuses on for 2019:

  1. International market turbulence is the top trend. It will be good news for many African countries if the US dollar gets weaker internationally and the US Federal Reserve holds back from raising US interest rates as much as previously anticipated. But there are global downside risks to issuers, including lower global growth impacted by strained US-China relations.
  2. Will key issuers make enough progress with economic reforms? Reforms such as lower deficits and adequate foreign exchange reserves are needed to support economic growth and make the debt sustainable. If markets get tough in 2019 (see previous), reforming economies do best. Check Smith’s list of 10 African Eurobond issuers busy with reform programmes under guidance of the International Monetary Fund (IMF) and the 2 issuers, Zambia and Republic of Congo, still talking but not ready to start IMF programmes.
  3. Policymakers’ skills at managing their debt, particularly as a period of heavy bond repayments begins in 2022 and remains high until 2025. Strong debt management skills include “economic policy coordination, an understanding of debt risks, a debt strategy, good data management, regular public reporting, good investor communication, a skilled team that can negotiate good terms with potential global lenders” as well as redeeming some debt ahead of maturity by longer term issues
  4. Elections in eurobond issuers this year (in approximate date order): Nigeria, Senegal, South Africa, Mozambique, Tunisia and Namibia.
  5. This year is unlikely to see as many eurobonds issued as last year. “Those most likely to issue in 2019 include Egypt, Angola, Ghana, and Kenya”.

For deeper analysis and more details and charts, see the original posting on LinkedIn here.

 NB Gregory Smith points out his views are for information, they do not constitute investment advice.

IPO report – Airtel Africa looking for $1.25bn in 2019

++ STORY UPDATED AFTER ARTICLE IN SUNDAY TELEGRAPH IN UK ON 3 FEB 2019 ++

Airtel Africa, a UK-based company, is on track for an initial public share offer (IPO) on an international stock exchange in 2019 expected to raise $1.25 billion. Last November 2018 the board announced it had appointed 8 global banks JP Morgan, Citigroup, BofA Merrill Lynch, Absa Group Limited, Barclays Bank PLC, BNP Paribas, Goldman Sachs International and Standard Bank Group for the IPO. It aims to value the African business at some $8bn.

The company has denied a report on Bloomberg that the IPO could be delayed from March 2019 for 6 months due to emerging markets turmoil.
By that date parent Bharti Airtel had raised $1.25 bn in pre-IPO placements to 6 global investors, according to a regulatory filing on the Bombay Stock Exchange (reported in Economic Times of India).

On 3 Feb, an article in the Sunday Telegraph newspaper suggested the IPO would come to the London Stock Exchange later in the year, after delaying the float because of volatility. At $8bn it would be the LSE’s biggest listing since 2017. It adds that Airtel Africa in January secured a further $200m investment from Qatar’s sovereign wealth fund to reduce cash borrowings ahead of the listing.

According to journalist Christopher Williams: “Airtel Africa has turned around in ¬recent years, after making heavy losses in competition with financially stronger players in Africa, including Vodafone-controlled Vodacom. In its most recent quarter profits doubled as mobile data consumption increased across its territories, building on its first full year of profit.”

For various reports, the IPO is expected to raise another $1.25bn. After the IPO Bharti Airtel will only hold some 65%, down from around 92%-93% at present. The pre-IPO investors include Warburg Pincus, Temasek, Singtel and Softbank Group International, according to the report. The money will be used to cut back debt and free up cash to combat rival Reliance Jio Infocomm in India.

Airtel Africa is the holding company for Bharti Airtel’s operations in 14 countries, including Kenya, Tanzania, Nigeria and Ghana. It is Africa’s second largest telco with over 94 million customers, and ranked in the top 2 carriers in most of the countries where it operates, offering 2G, 3G and 4G services, plus mobile commerce through Airtel Money.

In December, the tax authority in Niger had ordered the closure of Airtel Niger which has 4.4m customers, over a tax dispute. French-owned Orange said it had also been threatened with closure in Niger over a tax demand, according to this report.

Airtel also announced a new board from the parent company and the investors: Sunil Bharti Mittal, Raghunath Mandava, Akhil Gupta, Vishal Mahadevia, Alok Sama, Arthur Lang, Shravin Bharti Mittal and Richard Gubbins. In a press release it said the board: “brings extensive experience across industry verticals including – telecom & ICT, financial markets as well as in technology, software development and consultancy”.

African revenues rose nearly 13% for the quarter to September, and net income compared to a loss a year earlier.

Africans inspiring London Stock Exchange

Opening bell ceremony at London Stock Exchange for Companies to Inspire Africa 2019, credit LSEG

The London Stock Exchange Group launched the 2nd edition of its Companies to Inspire Africa Report, on Wed 16 Jan, identifying dynamic growth businesses in Africa to build an information database and showcase them to a global audience. Many speakers expressed sympathies after a terror attack in Nairobi on 15 Jan.

International Development Secretary, Penny Mordaunt MP, said the positive African launch was uplifting after the previous night’s “depressing” vote in Parliament: “Five of the world’s fastest-growing economies are African and by 2050 a quarter of the world’s population will live there. This growth presents unique opportunities for us all (see speech here)

“The Companies to Inspire Africa report highlights the leading private companies operating in Africa, which have the most inspiring stories and the strongest growth potential. By combining African-led ambition with British expertise we can unlock investment and create more jobs for Africa and the UK. This is a win for Africa and a win for the UK.”

David Schwimmer, CEO of LSEG, said: “These high-growth companies have the potential to transform the African economy and become tomorrow’s job creators. At LSEG, we are committed to helping companies realise that potential and we are pleased to highlight and celebrate the company success stories behind one of the world’s fastest growing markets.”

He highlighted LSE’s role as a huge centre for African businesses and governments to raise capital. Successes include hosting bond issuances for Nigeria, Egypt, Angola and Ghana, and in November 2018 Quantum Terminals (liquid gas storage, cleaner fuel for households) from Ghana succeeded in the first local-currency bond to list in London.

He also mentioned the ELITE programme, an international network for growth and funding options,   which has enrolled over 90 companies with 20,000 employees in 8 African countries. The programme was launched in 2016 with the Casablanca Stock Exchange and has expanded across West Africa with support from CSE and the Bourse Régionale des Valeurs Mobilières (BRVM).

About the report

The report is a 144-page book with great infographics and photos, put together by LSEG and Wardour.

It includes inputs by President Uhuru Kenyatta of Kenya and Prime Minister Theresa May of UK, plus many other key leaders working in Africa. It highlights a good number of exciting companies across Africa including innovative farming and even drones for agriculture, top consumer goods services and the size of the growing consumer goods market, many dynamic companies with women leaders, fintech, better banking and other financial services, healthcare, education, industry, renewable energy and technology and telecoms.

Partners to the report who helped with the selection and research are Asoko Insight and PwC. It was sponsored by African Development Bank, CDC Group, Instinctif Partners and Stephenson Harwood.

The 360 companies were selected from 4,000 nominations by LSEG’s partners, development finance institutions, venture capitalists, private equity firms, impact investors. Research partner Asoko Insight nominated some and helped with data collection and company information, according to CEO Rob Withagen. To be included a company had to be active and privately owned, with headquarters and primary operations in Africa. It must have demonstrated growth over last 3 years measured in: revenues, number of employees, operational output or geographical expansion. It needed to be audited by a recognized auditor and individual company or consolidated group annual revenue must not exceed $1bn for the years 2015-2017. It includes 97 Nigerian companies, 66 from Kenya, 31 Ugandan and 23 South African

The report is also launching in Lagos.

A comprehensive searchable database of the report, along with a downloadable PDF of the publication is available at www.lseg.com/inspireafrica.

London Stock Exchange Group has a long history of supporting the development of African capital markets and investment in African companies. To learn more, click here.

Companies to Inspire Africa 2019 report in numbers:

The report identifies 360 companies from 32 countries representing 7 major sectors. It highlights the entrepreneurial and dynamic landscape of the African private sector. Companies featured include small entrepreneurial businesses through to well-established corporations. A searchable database of the report and a downloadable PDF of the publication are available at www.lseg.com/inspireafrica. The first edition of the report was published in 2017.

•             Average revenue Compound Annual Growth Rate (CAGR) is 46% (up from 16% in 2017 report) and average employee CAGR at 25%, over three years, in 2019 report

•             23% of the companies are led by women, almost double the proportion in the 2017 report: Standout sectors where senior female executives are having a big impact are: healthcare & education, and financial services. Ten out of the 20 Ghanaian companies featured are led by women.

•             The fastest growing sectors are financial services (revenue growth rate 70%) and renewable energy (revenue growth rate 66%)

•             Consumer services is the most represented sector with 79 companies from 20 countries this year, reflecting the growth of sub-sectors such as consumer goods, food & beverages, leisure & tourism, media and retail, and the growing middle class in Africa

•             Agriculture remains an important sector for the continent with 53 companies, almost 15% of companies in report

•             Most companies per country are: #1Nigeria (97 companies) and #2 Kenya (66). Nigeria was already most companies in 2017, but strong representation from the industry and technology & telecom sectors

•             The companies in this year’s report are creating significant employment opportunities across Africa with each company employing an average of 363 people.

UK and Africa in 2019 – Penny Mordaunt speech

International Development Secretary launches London Stock Exchange report – Hon Penny Mordaunt MP speech highlights

  • Nearly a quarter of the companies led by women, almost double that of the 2017 report. Globally companies with greater gender equality also do better in income, growth and competitiveness.
  • Africa is alive with opportunity – 5 of the world’s fastest-growing economies are African and by 2050, a quarter of the world’s consumers will live there.
  • UK to host UK-Africa Investment Summit in 2019, leverage UK’s reach and unique value of the City of London to make the UK Africa’s finance partner of choice.
  • Developing Africa’s capital markets is essential for unlocking finance for infrastructure and investment that will support job creation and economic growth in the long term… but need to be supported by a well-regulated financial sector.
  • UK aid is mobilising private investment to deliver the Global Goals. CDC has committed up to £3.5bn of new African investments and Private Infrastructure Development Group (PIDG), backed by DFID, up to £300m.
  • UK ambition to help African countries raise debt in local currencies. Nov 2018 first Ghanaian Cedi-denominated bond listed to London, supported by PIDG.
  • Investments by DFID-backed Financial Sector Deepening Africa (FSDA) supported 38 local currency bond issues by private companies and financial institutions in 16 African countries, in agriculture, energy, housing, microfinance and infrastructure.
  • Remittances – estimate $66bn in remittances into Africa annually, approximately 10% from UK. We are investing £2m for MFS Africa, mobile money company that makes it easier and cheaper to send remittances to and across Africa.
  • CDC-backed Blue Skies is a leading producer of fresh cut fruits and juices and largest private-sector company in Ghana. It sells across Africa and trades with UK supermarkets. Investing in African companies is good for Africa and it is good for Britain too.
  • Developing investment products for public to support Global Goals.

Speech in full

From HM Government website
“After the events of last night in the House of Commons, which were rather depressing, I felt it was very important that I did something this morning that was uplifting, constructive with inspirational people and of which we could be very proud, and represented absolutely Global Britain. So, thank you David and the London Stock Exchange Group for inviting me to launch the Companies to Inspire Africa 2019 report.
“I would like to start by congratulating all the companies featured. From 32 countries, with 7 major sectors represented, you have been nominated as Africa’s most inspiring small and medium-sized enterprises. It is you and your successes that will demonstrate globally the opportunities that are increasingly present in Africa.
“I am particularly pleased that nearly a quarter of the companies in this year’s report are led by women, almost double that of the report published in 2017.
“And we know that globally companies with greater levels of gender equality also do better in terms of income, growth and competitiveness. And today I have had the pleasure of meeting many of the inspirational female business leaders named in the report. Companies like Lioness of Africa, which aims to support 1 million African women entrepreneurs to achieve success. As female leaders you are role models that can make change happen. I applaud and admire you all.
“All of us in this room know Africa is a continent alive with opportunity. Five of the world’s fastest-growing economies are African and by 2050, a quarter of the world’s consumers will live there. This opportunity is why we saw Ghana hosting an Investment Summit last year, attended by over 50 British companies. It is why the London Stock Exchange has partnered with African Securities Exchanges like Casablanca and Nairobi. And it is why the Prime Minister recently visited the continent spending her time with business and political leaders, entrepreneurs and young people as well as throwing a few shapes – there’s still time David, there’s still time.
“They told her that they wanted a modern partnership with the UK that delivers mutual benefit. By combining African-led ambition with British expertise we can do just that – unlocking high-quality investment that delivers more opportunities, exports and jobs for both Africa and the UK.
“Global Britain is committed to this new partnership with Africa. The Prime Minister announced a radical expansion of the UK government’s presence, bringing in trade experts and investment specialists to deliver on our shared interests and find solutions to the world’s biggest challenges.
“And later this year the UK will host the UK-Africa Investment Summit, which will bring together key government and business people from the UK and Africa to strengthen our links and make the most of the fantastic opportunities that are there. We want companies like you to play your part in the Summit to make it a game-changer for investment in Africa.
“We want to leverage the UK’s reach and unique value of the City of London to make the UK Africa’s finance partner of choice.
“The London Stock Exchange Group has shown strong partnership and leadership in this area, helping to build Global Britain. Through its Africa Advisory Group, the London Stock Exchange has brought together key business leaders, policymakers and investors from across Africa to take the steps needed to develop Africa’s capital markets. We look forward to working closely with the Group this year.
“Developing Africa’s capital markets is essential for unlocking finance for infrastructure and investment that will support job creation and economic growth in the long term. But these capital markets need to be supported by a well-regulated financial sector.
“When I was at the London Stock Exchange during the Commonwealth Summit last April I announced a new DFID partnership with the Bank of England and the central banks of Ghana, South Africa and Sierra Leone to share regulatory expertise and enhance financial stability, helping promote economic growth through increased investor confidence. We will continue to scale up our work with the Bank of England throughout the course of this year.
“UK aid is mobilising the private investment needed to deliver the ]Global Goals](https://www.globalgoals.org/) and that is why CDC, the UK’s Development Finance Institution, has committed up to £3.5 billion of new African investments, and why up to £300 million has been committed from the Private Infrastructure Development Group. These partnerships will lay the foundations for new trading and business opportunities.
“And when I was last here I announced the UK’s ambition to help African countries raise debt in their local currencies. In November we celebrated the first ever Ghanaian Cedi-denominated bond to list to London, made possible through the DFID-backed Private Infrastructure Development Group.
“Investments by the DFID-backed Financial Sector Deepening Africa has supported 38 local currency bond issues by private companies and financial institutions in 16 African countries, in a range of sectors such as agriculture, energy, housing, microfinance and infrastructure. Local currency finance listings such as these are contributing to increased financial stability by ensuring that growth is fuelled by lower-risk finance over the long-term.
“And we are committed to supporting innovative African companies to make it easier for finance to flow into and across the continent. It is estimated that US$66 billion in remittances flow into Africa annually, with approximately 10% originating in the UK. The transfer of money by foreign workers to their families in their home countries is a lifeline to many in Africa. But many are losing their hard-earned money to too high remittance fees.
“That is why we are announcing £2 million investment for MFS Africa, an innovative mobile money company that makes it easier and cheaper to send remittances to and across Africa. This is a clear example of the UK honouring its commitments to the G20 and Global Goals targets of reducing those costs.
“Our investments and partnerships are already bringing benefits for both Africa and the UK. The CDC-backed company, Blue Skies, features in the report and is a leading producer of fresh cut fruits and juices and is the largest private sector company in Ghana. It sells its produce across Africa, and also trades with UK supermarkets. You can find Blue Skies products in Sainsburys, Waitrose and on Amazon Fresh – a clear demonstration that investing in African companies is good for Africa and it is good for Britain too.
“The UK values such partnerships. We bring the technical knowledge of our professionals, and we bring the values of a compassionate global nation. Our values sit at the heart of our aid spending.
“In October I announced a new campaign to find out the appetite of British people who might want their savings or their pension to be used to support the Global Goals and to potentially deliver better returns for them. Over the coming months we will be speaking to financial institutions, savers, pension holders and the wider British public to help shape new investment products to deliver the Global Goals.
“This report demonstrates that great partnerships can lead to great things. Working together, the UK and Africa can generate private sector investment, which in turn is creating business and investment opportunities for both Africa and the UK.
“2019 is the year of significant opportunities to take those partnerships further – and I very much look forward to seeing the results. Thank you all very much.
Published 16 January 2019

Performance on African stock exchanges in 2018

We don’t need to tell you 2018 was rough for equity investors, particularly the last four months. Only 2 African exchanges managed to buck the global trend, as judged by this table of performance of main indices for investors looking for USD returns, although four had a positive return for local currency investors.

Source: www.investinginafrica.net, www.african-markets.com, own adjustments and stock ex websites. FIGURES ARE INDICATIVE ONLY, not exact.


In some of the exchanges, overall market performance was better for local investors, since the strong US dollar over the year as the Federal Reserve hiked rates helped depress returns of the stock exchange indices when rebased into US dollars in addition to pushing down prices as global investors turned away from frontier markets.


The soaraway success indices were the Zimbabwe Stock Exchange, where the index soared by 50.4% in US$ over the year, and nearby Malawi Stock Exchange, where it climbed 22.2%. The ZSE local index shows a US$ return but currency is not liquid and its value questionable, price rises on the ZSE have been inflated as many domestic investors feel the bourse provides part protection against inflation or currency decline.


Stock Exchange of Mauritius was close to breakeven, with a US based decline of 0.30%.


This was better than a drop of 6.20% in the S&P 500 index over the year, including more than 19% from its high in September 2018 and the worst December since 1931 when it fell 14.5% during the Great Depression.
Markets have trended more positive since the start of 2019, with world eyes on the Fed and how fast it raises a key interest rate, with a meeting of the Federal Open Market Committee due 29-30 January, global trade as the US-China trade war discussions continue, and economic data from Europe and China.


Close to the bottom of the chart is the JSE FTSE All Share Index, with a fall of 27.9% to US dollar investors, compared to a fall of 11.4% to investors focused on ZAR returns.

London Stock Exchange issues reports on African bonds, SME finance, passive flows and corporate information

London Stock Exchange Group (LSEG) has launched 5 reports on African capital markets, developed as part of its London Africa Advisory Group (LAAG) at last week’s African Investment Forum in Johannesburg. The five reports put forward recommendations on how African capital markets could be further developed to increase global investment flows. Access all the reports here on the London Stock Exchange website.

The reports were commissioned by LAAG following over 2 years of meetings with its members, Africa’s business leaders, policymakers and investors. They were produced in conjunction with stakeholders in London and across Africa.

    1. Developing the green bond market for infrastructure products
    2. Attracting passive investment flows
    3. Developing offshore local currency bond markets
    4. Capital raising challenges for SMEs
    5. Corporate information dissemination.
    6. Suneel Bakhshi, Chairman of International Advisory Groups, LSEG, said in a press release: “These reports are the result of work carried out over 2 years to deliver empirically grounded, actionable and Africa-specific policy recommendations. LSEG’s London Africa Advisory Group is designed to provide a platform for regular and collective dialogue through which to develop stronger relations with senior decision makers, regulators and business leaders across the continent. It is our intention that these recommendations offer practical advice and constructive solutions for supporting the development of Africa’s capital markets.”

    Summary of key findings:

  • Developing the green bond market in Africa: Studies suggest Africa will be more severely affected by climate change than any other continent, which will require the continent to take advantage of green capital raising tools and sources of funding.
  • Attracting passive investment flows to African markets: Passive investment flows are key to supporting depth of African capital markets; a key factor for this is country classification (Developed, Emerging or Frontier Markets) and flows could be enhanced through country classification upgrades.
  • Developing offshore local currency bond markets in Africa: To sustain the continent’s strong GDP growth of the past two decades, substantial investment, particularly in infrastructure, is required; raising debt finance from larger offshore capital pools in local currencies is an attractive solution which mitigates an issuer’s currency risks associated with borrowing in hard currencies.
  • The challenges and opportunities of SME financing in Africa: Small and medium-sized enterprises (SMEs) account for around 90% of Africa’s businesses, but experience a shortage of financing at all levels; these companies, which provide nearly 80% of the continent’s employment, can benefit from increased training and capacity building, a public register of companies, and supportive government policy.
  • Trends in corporate information dissemination in Africa: Company news plays a central role in the efficient functioning of financial markets improving depth in securities trading; centralised regulatory information services and their distribution are therefore key in disseminating company news to the relevant stakeholders in a timely manner.

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

New South African stock exchange ZAR X to start 3 October

Trading is to start on South Africa’s new ZAR X securities exchange on 3 October. It gained a licence on 2 September and the first listings will be Senwes and  Senwes Beleggings, with up to 5 listings planned for first week October.

Another exchange is also being readied, 4AX also called 4 Africa Exchange (see story below).

South Africa’s regulator, the Financial Services Board, announced on 2 September that it had granted licences to ZAR X and 4 Africa Exchange Licences. It said: “The Registrar of Securities Services.. received and considered applications for exchange licences from ZARX (Pty) Ltd (“ZAR X”) and 4 Africa Exchange (Pty) Ltd (“4AX”) and has, in terms of section 9(1) of the Act, granted ZAR X and 4AX exchange licences with conditions after careful consideration of objections received as a result of a notice referred to in section 7(4).”

Initially FSB gave ZARX a conditional licence but in August a court ruled in favour of an application by the JSE, which had argued there was no provision for conditional licensing. JSE CEO Nicky Newton-King said at the time there were concerns about the complexity and the potential for systemic risk that multiple exchanges could bring.

ZAR X has a different level of risk as it requires to be pre-funded, which means that participants must lodge scrip and cash before they trade and settlement is then the same day (T+0). In July the JSE and other market participants moved their market from T+5 settlement to T+3 without any problems. Most institutional investors prefer transferring stocks or money after they have traded, when they know the exact amounts to transfer.

Etienne Nel, CEO of ZAR X, said: “We need to create a level of co-operation within the market space to make it as simple as possible for all participants to coexist”.

Speaking to Business Day TV, he said: “..we are very happy, obviously, delighted since it’s been a long time coming. To give you some context around the conditions, it’s obviously what we applied for. We initially said we were not going to be offering derivatives to the market and obviously as a result one of the conditions is we may not offer derivative trades on our market. Similarly, we cannot offer shares already listed on another exchange, but that was never in our application so we are obviously delighted with the licence that we finally got.”

Nel said in September they were busy getting brokers on board and putting investors through necessary screening and checks of the Financial Intelligence Centre Act (38 of 2001 “FICA”)

Nel says ZAR X has less onerous rules on admitting companies for trading (listing requirements): “In our approach to listings.. we will have a conversation with the issuer and we are taking what is called a principles-based approach to listing rather than rules-based. Now what that achieves is if we get the slightest inclination that something is awry within a company we would actually rather walk away rather than doing the listing.. A rules-based environment .. becomes a tick-box exercise and in that environment you would end up with a situation where people end up finding loopholes, which a principles-based approach does not allow for”.

It breaks over 100 years of monopoly Africa by the Johannesburg Stock Exchange, as the JSE was founded in 1887 but there were several stock exchanges around during the first South African gold rush. Speaking after the licence was issued, 4AX CEO Fay Mukaddam said in a press release: “We are delighted to have secured our licence. South Africa is a vibrant, growing market with enormous potential and we are confident that there’s a strong appetite for an additional licensed exchange to further develop and deepen the capital markets in the country.. 4AX can stand as a vehicle for diversity, which in turn, will drive real economic inclusion”. It will be an “empowered exchange” and will aim at retail investors but also attract institutional trading.

Both ZARX and 4AX will use Strate as their central securities depository (CSD).

 

Etienne Nel, CEO of ZAR X (credit timeslive.co.za)

Etienne Nel, CEO of ZAR X (credit timeslive.co.za)

Private Equity Africa award winners 2016

What a night – the gala dinner of the Private Equity Africa 2016 awards. It is the 5th year of these awards and all the “great and good” of Africa’s private equity fund managers (general partners/GPs), investors (limited partners/LPs) and service providers gathered at The Langham hotel in London to celebrate how their industry is growing in size and sophistication. A full day conference (I was honoured to be MC) charted the changes with sessions on new structures for private equity funds, the rise of stock exchange IPOs as exits, specialized agriculture, healthcare and other funds, the changing valuation premium on Africa’s businesses post the currency crises.. and many more topics for 2016.

Congratulations to the winners of the 2016 Private Equity Africa Awards. The final award winners were selected by an independent panel of judges and recommendations from the London Business School Institute of Private Equity nomination team.

OUTSTANDING LEADERSHIP AWARD
Honourable Okey Enelamah, founder of African Capital Alliance and now Minister for Industry, Trade & Investment, Government of Nigeria. The award was presented by Right Honourable Baroness Lynda Chalker of Wallasey who also made a speech. It is awarded based on voting by leading industry investors.

Okechukwu Enelamah, Minister of Trade & Investment (photo: Guardian Nigeria)

Okechukwu Enelamah, Minister of Trade & Investment (photo: Guardian Nigeria)

HOUSE AWARDS
HOUSE OF THE YEAR
Sub-Saharan Africa House of the Year: Helios Investment Partners
North Africa House of the Year: Abraaj
Francophone Africa House of the Year: Adenia
West Africa House of the Year: Synergy Capital Managers

SPECIAL RECOGNITION: HOUSES
The event also recognised investors that had delivered exceptional transactions during 2014 that do not fall into the main award categories.
Credit Investor: Investec Asset Management
Mid Cap Investor: Development Partners International (DPI)
SSA Fund of the Year, awarded in partnership with Financial Services Promotion Agency (FSPA): Helios Investment Partners for Helios III
Pan-Africa Exits: Actis
Outstanding First-Time GP: Verod Capital

DEAL AWARDS
EXIT OF THE YEAR
Large Cap Exit of the Year: Helios Investment Partners for Equity Bank
Mid Cap Exit of the Year: AfricInvest for UAP Holdings
Small Cap Exit of the Year: Adenia for Newpack

DEAL OF THE YEAR
Mid Cap Deal of the Year: Amethis for Novamed
Small Cap Deal of the Year: Databank for Norish

SPECIAL RECOGNITION: DEALS
The event also recognised deals that had delivered exceptional transactions during 2015 that do not fall into the main award categories, are had not comparable contenders.

Debt Deal: XSML for Médecins de nuit
Infrastructure Deal: African Infrastructure Investment Managers (AIIM) for Azura Power
Large Cap Deal: Abraaj for North Africa Hospital Holdings Group
Frontier Deal – Morocco: TPG-Satya for Ecoles Yassamine
Frontier Deal – Côte d’Ivoire: Duet for SAPLED
Frontier Deal – Uganda: 8 Miles for Orient Bank

PORTFOLIO AWARDS
PORTFOLIO COMPANY OF THE YEAR
Development Impact: Emerging Capital Partners for CIPREL
Social Impact: Fanisi for Haltons
Innovation: Adenia for Syrse
Improvement: Mediterrania Capital Partners for CashPlus

ADVISOR AWARDS
ADVISORS OF THE YEAR
Overall Legal Advisor (Deals & Funds): Clifford Chance
Funds Legal Advisor: King & Wood Mallesons
Deals Legal Advisor: Webber Wentzel
Single Deal Advisor of the Year: Linklaters for NSIA
Single Fund Advisor of the Year: O’Melveny & Myers for Helios III

SPECIAL RECOGNITION: ADVISORS
Advisor of the Year – Fund Administration: Trident Fund Services

SPECIAL RECOGNITIONS: ADVISORS
The event also recognised advisors that had delivered exceptional transactions during 2015 that do not fall into the main award categories.
Mid-Cap Advisor: Dentons
Local Legal Advisor: Anjarwalla & Khanna
Regional Legal Advisor: Freshfields Bruckhaus Deringer
Corporate Finance Advisor: Intercontinental Trust

The hard-working awards judges were:
Vivina Berla, Co-Managing Partner, Sarona Asset Management
Daniel Broby, Director CeFRI, University of Strathclyde
Matthew Craig-Greene, Founder, Craig-Greene & Co
Arnaud de Cremiers, Partner, Adams Street Partners
Mark Flanagan, Assoc. Partner, Aon Hewitt
Mark Florman, ex-CEO, British Private Equity & Venture Capital Association
Jean-Luc Koffi Vovor, Founder, Kusuntu
Peter Maila, Investment Director, CDC
Tom Minney, CEO, African Growth
Rory Ord, Executive, RisCura
Charles Rose, Chairman, Hainsford Renewable Energy
Daniel Schoneveld, Principal, Hamilton Lane
Hervé Schricke, President, AFIC Africa
Dushy Sivanithy, Portfolio Director, CDC
Arjette van den Berg, Independent Private Equity Advisor
Erika van der Merwe, CEO, SAVCA
Gail Mwamba, Editor, Private Equity Africa (Awards Chair)

The advisors were Adeola Dosunmu, Head of Research, Private Equity Africa (Awards Director); Mark Artivor, Independent Private Equity Advisor; Alfonso Campo, Reporter, Private Equity Africa and Joe Walsh, Reporter, Private Equity Africa.

Kenya pledges lower domestic rates after $8.8bn bids for its $2bn Eurobonds

Nairobi National Park (credit: Kenya Tourism Board, www.magicalkenya.com)

Nairobi National Park (credit: Kenya Tourism Board, www.magicalkenya.com)

Global investors offered a record $8.8 billion in bids for Kenya’s 5- and 10-year Eurobonds this month. The country issued $0.5bn in the 5-year bond at 5.875% and $1.5bn in the 10-year at 6.875%. The resounding success is likely to encourage more African governments to speed up plans to come to international markets for credit while cheap global rates continue and appetite is high for frontier markets debt.

This is Africa’s biggest Eurobond issue to date. According to the BBC, investors from the US took about 67% of the issue and UK investors about 25%. Bond rates on Kenya’s 10-year debt in issue came down since the new issue was first announced on 16 June to 6.41% which is 381 basis points over the similarly dated US treasuries, according to Bloomberg.

President Uhuru Kenyatta was reported on Reuters telling a news conference: “By accessing these external funds, we will reduce government borrowing from the domestic markets, thereby helping drive down interest rates which should boost investment, spur economic growth, provide more employment opportunities to our people.” He described the sale as “a vote of confidence”. At a state of the economy address on 25 June he said the funds would be used prudently to fund infrastructure including transport and energy and to fund agriculture.

Cabinet secretary for the National Treasury (equivalent to Finance Minister) Henry Rotich said: “Investors were impressed with the management of our economy and perceived it to be very strong.” He said it would diversify government’s financing for development programmes. He also said the Government would come back to the markets in the next fiscal year (starting 1 July) but may consider a sukuk bond (see here for UK’s £200 million sukuk bond success) or a diaspora bond. The sovereign is also set to be a benchmark for Kenyan firms issuing corporate bonds on international markets, similar to the success of Nigeria’s sovereign issue.

Rotich said that from 8 July the Central Bank of Kenya would start setting a new reference rate for banks, the Kenya Banks Reference Rate. Banks would have to use this, although they would still be able to add risk premiums according to the creditworthiness of borrowers. This is also expected to lower interest costs and the rate would be set according to the average of the CBK’s main lending rate and the average yield on benchmark 91-day Treasury Bills every 6 months.

The Government announced its 2014/15 budget this month and forecast a budget deficit of 7.4% of gross domestic product (GDP) and local borrowing of KES190.8bn ($2.18bn) or 4.1% of GDP, according to Reuters. Macro-economist Rotich was a colleague when Kenyatta was Finance Minister and the two are working together to speed up Kenya’s economic growth to over 10%. According to a story in the Financial Times blog Beyond Brics, Rotich says Kenya will grow at 5.8% this year and 6.4% next year, however the World Bank has just cut its forecast from an earlier 5.3% forecast for this year and forecasts 4.7% for both years.

The blog cites the World Bank report: “The new projections reflect the effects of the drought, the deteriorating security situation, the low level of budget execution, and tighter global credit as the US Federal Reserve winds down its expansive monetary policy.”

The World Bank says drought has cost Kenya $12bn over the last 10 years and that foreign direct investment (FDI) is only 1% of GDP. The blog reports: “The World Bank is also increasingly preoccupied by the impact of inequality on growth and stability.” The World Bank is optimistic and is backing Kenya with a $4bn programme, double the Eurobond.

Kenya plans $43bn of infrastructure by 2017, but there are questions as to whether they get value for money in a $3.7bn deal with Chinese for new rail and rolling stock. Kenya is likely to become a middle-income country by September after re-basing because of statistical revisions.