Archive for the 'Angola' Category

Investors back $ billions of African bonds

Interest in African sovereign debt has been climbing again in recent months. Angola has stil not issued a $1 billion – $2 billion benchmark bond due in May. However, Kenya, Nigeria and Mauritius and many other countries have flourishing debt markets and international interest is good in high-yielding hard-currency bonds such as those issued by the Republic of Congo and Cote d’Ivoire.
In April top bond broker Exotix (www.exotix.co.uk) gave a “buy” recommendation on the REPCON 2.5% bond, redeemable in 2029. Then it was trading at 57.0 and offered a yield of 10.8% and was the highest-performing African sovereign bond.
Trading in $2.4 billion of Cote d’Ivoire debt in US dollars trading under New York law (2.5%, redeemable in 2032) began in mid-April, after the country exchanged it for Brady bonds it had defaulted on nearly a decade ago. Exotix only rates it a “hold” at 64.2 in mid-April, when it yielded 9.6%. The bond was expected to make up 0.75% of the $400bn Emerging Market Bond Index (EMBI), according to a recent article in The Banker, and many were expected to buy it for this reason. Exotix commentary on the bond included detailed assessment of politics and economic developments including current account surpluses and International Monetary Fund assessments.
Governments in some countries are seeking to create longer-term yield curves for domestic investors, in order to provide a framework for longer-term finance and investment. For instance Barclays Kenya is offering 20-year mortgages, compared to a few years ago when the limit was 5 years. Bonds are also being moved into electronic trading and being handled by central depositories.
According to a report on 19 May on Bloomberg, Angola was awarded credit ratings of B+ by Standard &Poors and Fitch, 4 levels below investment grade, and Moody’s assigned an equivalent ranking of B1, putting Angola on par with Nigeria, Lebanon, Belarus and Ghana. The country plans to issue $1billion – $2 billion in bonds this year.
Other high-yield bonds, including in local currencies, can be found in Tanzania, Zambia, Ghana and Kenya. Economic commentators are encouraged, as debt can be a more cost effective way to fuel long-term economic growth than equity.
Better economic management and good investor interest in government debt has paved the way for more corporate bonds, including for power and telecommunications infrastructure. This site has already reported how Kengen and Nampower have issued bonds to fund urgently needed power expansion. Telecommunications giant Safaricom has also been successful.
The successes are tribute to the increasing quality of economic and fiscal management by African governments.

Angola cuts back on May $4 bln bond

Angola has cut back its plans to raise as much as $4 billion in a sale of bonds without credit ratings, according to a report on Bloomberg. It cites Finance Minister Carlos Lopes speaking to reporters in Luanda and says it aims instead to issue $1 billion to $2 billion in May, after finalizing the amount by the end of April.
The country competes with Nigeria as Africa’s biggest oil producer. The bonds are aimed to help pay for government expenditure after oil’s decline from record prices of July 2008 andt is reduced Government incomes, of which 80% comes from crude exports. According to a previous report, JP Morgan Chase and Co. is handling the placement.
David Aserkoff, a strategist at Exotix Holdings Ltd, was quoted as saying: “It’s good that the Finance Ministry is talking about a more sensible issue size, given current market conditions and the fact that Angola has no rating from any of the major agencies… Given the increase in oil prices, it’s likely that Angola’s funding needs aren’t as high as they originally anticipated.”

Angola’s first private equity fund raises $28 mln

Angola’s first private equity fund has raised US$28 million in capital in its first closing, in an important step forward for the country’s capital markets. The Fundo de Investimento Privado Angola (FIPA) aims to link local capital markets with international sources of finance and to small and medium-sized privately owned businesses.
The fund was initiated by Norfund, in association with local partner Banco Africano de Investimentos (BAI). According to a press release from the European Investment Bank, Kjell Roland, CEO of Norfund, emphasizes how having a local partner is key to success: “We believe this is the time for private and institutional investors to start looking beyond traditional markets… There are many good entrepreneurs in Angola. They are in need of strong financial partners that, in addition to financial capital, can provide long term partnership and support. We find similar demand across the continent and hope the story of FIPA can spark the interest of other investors in the African markets.”
The investors in FIPA are:
• The European Investment Bank (www.eib.org), the long-term lending institution of the European Union, whose shareholders are the 27 European Union member states. EIB has been active across Africa for over 40 years and its loans in Africa concentrate on fostering private sector-led initiatives, including SME and microfinance investments that promote sustainable economic growth and help to reduce poverty. The Bank also supports public sector projects that are critical for private sector development and the creation of a competitive business environment.
• Danish International Investment Funds (www.ifu.dk), founded by law in 1967. The objective of IFU is to promote economic activity in developing countries in collaboration with Danish trade and industry. IFU works to achieve it’s objective by investing in companies in such countries in collaboration with Danish strategic partners.
Banco Privado Atlântico (www.bpa.ao), aims to be a model financial company in Angola.
• Banco Africano de Investimentos (www.bancobai.ao), founded in 1996, claims to be the largest Angolan bank, with over 70 branches in Angola, BAI is also present in Portugal (BAI Europa), Cabo Verde, Sao Tomé e Príncipe and Brazil.
• Norfund (www.norfund.no). The Norwegian Investment Fund for Developing Countries was created by Parliament in 1997 and is a hybrid state-owned company established by law with limited liability, owned on behalf of the state by the Ministry of Foreign Affairs. The vision is to combat poverty through investments in profitable and sustainable businesses in developing countries and it works in accordance with the fundamental principles for Norwegian development cooperation.
Tiago Laranjeiro, Managing Director of Angola Capital Partners LLC, says he is optimistic about the prospects of investing in SMEs in Angola, one of the world’s fastest-growing economies. “We see plenty of potential within our pipeline companies and the economy in general. Sectors outside the dominant petroleum sector are in special need for growth and expansion capital” says Laranjeiro. “Our second closing, to be completed by year-end 2010, will aim to raise FIPA’s capital up to $100 million, so that we can fully capture the good investment opportunities we have at hand.”
Kim Gredsted, Head of the Johannesburg regional office for Denmark’s IFU says it is important to have a team on the ground in Angola since private equity financing has been mostly missing: “By filling in this gap, FIPA can be seen as a step in the right direction of making the financial system of Angola more complete… Our investment in FIPA has enhanced IFU’s presence in one of the more challenging but also very promising markets in Africa. We can now pursue investment opportunities with Danish strategic partners and in many cases bring FIPA as a local financial partner and thereby have a permanent team on the ground that will help manage the investment and mitigate the various risks that are associated with private equity investments in Angola.”

Angolan Stock Exchange “in next 12 months”

FROM SECURITIES AFRICA/CITIGROUP 5TH ANNUAL AFRICAN INVESTMENT CONFERENCE, LONDON
All the frameworks are in place for an Angolan stock exchange, and a first listing and official launch could be expected in the current year, 2010, says former Finance Minister José Pedro de Morais, Jr, who is closely involved In the board of the future bourse. He was a speaker on 15 March at the 5th Annual African Investment Conference in London, organized by stockbrokers Securities Africa and Citigroup Emerging Markets.
“We are waiting for the Government to take the necessary steps” says Sr de Morais. “All the legal and regulatory framework is already in place, it was approved in recent years. We have shared the experience of some neighbouring countries, which have well developed stock exchanges. We have the basis and foundations to start with this market.”
Sr de Morais was finance minister from 2002-8, and helped drive the stock exchange initiative. He says that the preliminary studies suggest that the authorities have the intention to allow large state-owned companies to allocate a small part of their capital to be listed on the stock exchange to help the beginning of its operations, but the main trading products are likely to be treasury bonds, which the Government uses to finance national reconstruction. Mechanisms are being created so that foreign investors can move in and out.
According to Sr de Morais, Angola’s strength lies in the way it is managing its political, economic and social transitions, creating an extended period of rapid expansion and massive infrastructure investment, which in turn is allowing the country to lay the foundation for more competitive economy, despite the global economic crisis. Angola’s medium-term outlook remains favourable and very promising.
In recent years, Angola was the second fastest growing economy in world (2005-7), oil accounted for large majority but the non-oil sector has also shown strong growth. After a slowdown in 2009, the longer term growth trend is expected to resume from this year. Net international reserves have been growing for last 5 or 6 years, and this is reflected in the official exchange rate.
He says major challenges include:
• Economic diversification and competitiveness – agriculture and other sectors
• Job creation – reduction of unemployment, people have high expectations. The economy is still recovering from a destructive and long war, at the same time it is moving from central planning to a more market-oriented system and making the transition from single party to multi party system. So far it has been hard to establish the right institutions to create a more competitive environment.
• Improving income distribution, for which the only route is increasing employment, but prospects are good.
• Improving social indicators.
• Gradual fiscal decentralization.
• Improving regulation and supervision of the credit system, institutional capacity to deal with large, more diversified and sophisticated economy.
• Inflation trend.
• Price of real estate is increasing extremely fast.
Investment opportunities
Real estate – where the sources of growth can come in next couple of years. There is a huge deficit in terms of real estate products, be it residential, commercial, services and parking, etc. The emphasis is on superior quality products, the capacity to pay is there because of the oil industry with its skilled expatriates who need housing. The Government has many incentives to private investors in this area and has promised to build 1 mln houses during their mandate.
Infrastructure – the Government has been very active and visible, with more than 5,000 km paved roads been rehabilitated, also airports, ports, recently in Luanda organized the African Cup of Nations and did a lot of infrastructure improvement, this area will continue to be one of the largest for government capital spending.
Telecommunications – Angola is late but rushing to make progress after the 2001 telecommunciations law which established the basis for liberalization, competition in both mobile and fixedline, including privatization of the national telecom operator. Another innovation of national fibre background network, involving 6 meshed rings with more than 6,000km and microwave onward connection to rural areas. Internet usage is up from 1,500 in 1997 to 500,000, mobile from 2,000 to 7.3 million with a penetration rate of 43%.
Agriculture – 70% of food comes from imports in a country that used to be a major producer. Now Government plans to rehabilitate rural support infrastrucute for agricultural such s irrigation systems, tertiary roads, rural electricity, and has invested in large agricultural projects such as maize, soya beans, rice, sugar cane. Farm productivity and production costs remain main obstacles to increase agricultural production, but not many expert companies are yet involved, Angola is using less than 10% of its total agricultural land.
Speaking later in the day, Eduardo Vieira, President of Angolan stockbroker Novacao Corretora de Valores, who is working with a number of investment and financing projects, also believes the scope for Angolan private equity is also very strong.

Angolan stock market within 12 months

Eduardo Vieira, President of Angolan stockbroker Novacao Corretora de Valores
As the former minister has said, we strongly anticipate that there will be a stock exchange up and running in the next 12 months. The Government has set new goals and targets for the economy and the stock exchange is part of their strategy. Our economy looks set to grow by a good 9%, it is sustainable growth and fuelled by our rich natural resources.
We need the capital market because companies fully rely on the banking system, finance is very expensive, and there is not enough for the current demand. A capital market would promote a culture of savings and investment. Angola has only 2 pension funds, one for mining firms, one for some oil companies, with 25% invested into Angolan government bonds and the rest into international money markets.
According to the official planning, the stock market will be driven initially by privatizations of some of our big companies, possibly including Sonangol. Suitable Angolan companies would be ready for dual-listings, both within SADC and internationally.
There is also very good scope for private equity investments in Angola.

Geoff Musikiwa – JSE Africa Board: contributions will be covered in separate story.

JSE’s Africa Board: more travels and consultations

The Johannesburg Stock Exchange reports that it is satisfied with progress on its Africa Board, which aims to attract leading African companies to dual list their securities. The team has three more countries in its first year programme, building links with leading issuers, regulators, brokers and African exchanges.

The Board was launched on 19 February 2009 with its first listing, Trustco Group Holdings, a Namibian microfinance and insurance company also listed on the Namibian Stock Exchange.

In a recent email, the Africa Board management told www.africancapitalmarketsnews.com that the aim of the first year was to continue consultations with key market players. Since February, the team has visited Zimbabwe, Zambia, Kenya, Tanzania and Ivory Coast. On the future itinerary are Ghana, Nigeria and Angola. The team are establishing relationships with stock exchanges, regulators, stockbrokers and targeted issuers.

The team says their aim is “to establish how the Africa Board can work for the benefit of all parties involved”. According to the email: “In the next six months these trips will continue, with much the same agenda, and we are hopeful that in the course of next year, there will be further listings on the Africa Board.”