Archive for the 'Other news' Category

LEI global identity to boost trade for African SMEs

Photo: by Copperwares Zimbabwe

The global initiative to give business entities worldwide a Legal Entity Identifier (LEI) is to roll out for African small and medium enterprises through innovative collaboration including the London Stock Exchange and a Zimbabwean bank.

The LEI provides globally recognized business identities to SMEs. In innovative partnership Zimbabwe’s NMB Bank will act as the first Validation Agent in Africa, using the bank’s usual onboarding process for business clients, including  “know your client” (KYC) and “anti money laundering” (AML) checks, to very businesses identities and ownership information. This should help SMEs access more favourable trade terms on international transactions and improve their access to finance.

Second Muguyo, Finance and Admin Manager at Copperwares, a Zimbabwean copper and silver giftware manufacturer is quoted in a story on Mondovisione website: “We face trade financing challenges not only because we are a small company, but because we are unknown from Zimbabwe. While we are not directly excluded from trade finance, we often receive unfavourable repayment terms which result in indirect exclusion. The LEI, as a globally recognized form of business ID, will give us greater credibility when we apply for finance, engage in international trade and establish new supplier relationships for our manufacturing process.”

Partners in the LEI initiative are:

The aim of supplying LEIs to African SMEs is to boost financial inclusion by helping them apply for trade finance and establish contractual, regulated agreements with banks, payment networks and trading partners. This should mean broader access to financial services and greater participation in both domestic and international markets as well as increasing the flow of inbound capital to fuel Africa’s economic development.

Stephan Wolf, CEO of GLEIF is quoted: “The LEI has the potential to create a more transparent, efficient cross-border exchange of goods and data under the African Continental Free Trade Area. This is the first step toward greater financial inclusion and overcoming the challenges associated with access to trade finance in Africa. Considering the high pace of digitization and regulatory development across the African continent, the LEI is a great natural fit. It is a compelling, ready-to-go cross-border solution for entity identification that is open, reliable and easily integrated into regulatory frameworks.”

GLEIF is keen to hear from governments, non-governmental organizations, banks and other stakeholders interested in expanding the LEI initiative in Africa or replicating the model in other developing economies. Email info@gleif.org for more information.

Alberta Abbey, LEI Analyst, Data & Analytics, LSEG: “LSEG joined this initiative to facilitate wider LEI adoption across Africa. By demonstrating the uses and benefits of Legal Entity Identifiers, our aim is that this project will encourage more entities across Africa to obtain LEIs. We started the project with a partnership approach, which we intend to continue beyond the pilot.”

Barry Cooper, Technical Director, Cenfri: “The LEI is one of the few initiatives with real potential to meaningfully address the challenges of de-risking in developing markets. The high costs of institutional due diligence and information asymmetries is a core element of the exclusion of small and medium enterprises, and even some corporates, from regional and international markets. A robust global enterprise identity opens up an under-represented large base of SMEs and women-owned businesses to trade across Africa as well as across the global markets. Cenfri looks forward to the deepening of LEI usage across Africa and the inclusion of SME and women-owned enterprises in the global economy.”

Photo: by Copperwares Zimbabwe

Read more:

  1. Making Finance Work for Africa: “Promoting the Legal Entity Identifier to foster transparency and trade in African markets” (article by Hugues Kamewe Tsafack and Sarah Weiss, 17 Jan 2021)
  2. Validation Agent Framework – a new operational model in the Global LEI System, which allows financial institutions to obtain and maintain LEIs for their clients in cooperation with accredited LEI issuer organizations.

RisCura’s Bright Africa 2020 – private equity in tough times

Deal activity in African private equity is growing, although fundraising has been erratic, according to Bright Africa 2020, a research initiative by global investment firm, RisCura. The private equity section of their report can be found here.

Gilbert Anyetei, principal researcher and senior associate for alternative investment services at RisCura, says the report “highlights the current state of the private equity market in Africa and trends in prices paid for private equity assets over time,”

Fund-raising

Private equity fundraising activity across Africa had been showing strong growth. The total value of 2019 private equity fundraising reached $3.8bn, up from $2.7bn in 2018, and the second-highest year of fundraising since 2010. Then came the significant contraction of 2020.

Deal activity

Anyetei says that total private equity deal activity has steadily increased over the last 2 years as fund managers continued to deploy the significant amount of capital raised in the market during earlier fundraising years. Historically South Africa has made up a large proportion of private equity transaction activity, but its contribution was 26% as at June 2020, after being fairly constant at around 27% over the last 3 years (despite South Africa’s limited growth prospects and increasing risk profile) but down significantly from 49% as at June 2010. 

Deal activity in Nigeria, Africa’s largest economy in Africa, increased moderately by 13% for the period ended June 2020, compared to the 50% increase experienced for the period ended June 2019. Kenya dominates East Africa’s private equity investment landscape because of its large and diversified economy, pro-business government policies, and relatively low dependence on extractive commodities.

Pricing

For the last 2 years, private equity median EV/EBITDA multiples have exceeded those of listed companies. Anyetei comments: “Although this appears counter-intuitive because of the liquidity discount that should apply to prices in the private markets, the lack of liquidity in many African listed markets, the high cost of compliance, and the resultant lack of capital available to these markets complicate a direct comparison.”

Median private equity EV/EBITDA multiples across Africa (excluding South Africa) have steadily increased since June 2012. Meanwhile the multiples of listed equity across Africa (excluding SA) have trended downwards since the end of 2014. Anyetei says it is hard to understand the increasing multiples: “Growth prospects are currently muted when compared to earlier in the decade, and although there has been some decrease in risk in specific countries over this period, it does not appear to have driven the price increase.

“It appears that the significant amount of committed capital has had a stabilising effect on pricing, which is likely to survive short-term changes in funding levels and risk profile. However, the committed capital model can only delay the efficiency of markets, and prolonged decreases in fundraising and risk outlook are likely to filter through to pricing eventually.”

The sharp decrease in the fundraising experienced because of the pandemic and resultant economic slowdown is expected to continue for at least 18 months. If these trends do continue, prices may prove to be less buoyant going forward, warns RisCura. The Bright Africa 2020 report is on this website.

CIMERWA cement is Rwanda’s 10th listing

CIMERWA, the only integrated cement producer in Rwanda, is also helping build the capital market by providing the tenth listing on the Rwanda Stock Exchange. It listed by introduction on 3 August, without a public share offer, however, the shareholders of 49% of its 703.2m shares will make them available for buying by the public to form a “free float”.

The shares are offered at RWF120 (12.67 US cents) each, according to an article on Rwanda’s KT Press website, giving a total value (market capitalization) of RWF84.4bn ($87.3m). The shares offered for buyers and traders are owned by:

  • AGDF Corporate Trust on behalf of the Government of Rwanda (16% of the total)
  • Rwanda Social Security Board (RSSB – 20%)
  • Rwanda Investment Group (RIG – 11%)
  • Sonarwa Holdings Ltd.

CIMERWA is also creating an employee stock ownership plan (ESOP).

CIMERWA is 51% owned by South Africa’s Pretoria Portland Cement. It has a production plant in Bugarama, in south-western Rwanda, with capacity to produce 600,000 tonnes per year but currently producing at up to 80% of capacity (480,000 tonnes). Prospects are good as Government of Rwanda steps up construction, including plans by the Ministry of Education to build 22,500 school classrooms by September, in a programme partly financed by the World Bank.

in the year to September 2019 it had revenues of $64.4m and net income of $3.5m, according to the prospectus. It has enjoyed revenue growth of 40% a year and has been profitable since 2016 with 31% EBITDA margin (a measure of cash generated by operations compared to turnover) and 64% gross profit growth.

Albert Sigei, CIMERWA CEO  since May, said: “We have been part and parcel of Rwanda’s growth story with contribution to the society on many fronts. This will be an opportunity for investors to gain exposure into the attractive cement industry with solid growth potential.”

CIMERWA was established in 1984 as Ciments dur Rwanda as a government parastatal in a cooperation project with China. It was privatized in 2007 with RSSB taking 37%, Government 30% and RIG 21% and other investors the rest. In April 2020 it became a private company and PPC International Holdings had 51%.

CIMERWA chairman Regis Rugemanshuro added: “This transaction will create opportunities for the private investors, and the government will become a neutral player in a sector whose potential is yet to be fully exploited. There could not be a better avenue of achieving this objective than listing at the RSE. With Rwanda having about 57kg per capita cement consumption annually, we have just but only scratched the surface on the huge long-term potential in the cement industry.”

Clare Akamanzi, chief executive of Rwanda Development Board, said: “If you look at Rwanda’s economic recovery plan, we expect CIMERWA to play a big role both in terms of building the economy through the indirect contribution but also directly contributing to the rebuilding and reconstruction of our economy post Covid-19.”

Demand for cement is estimated at 700,000 tonnes a year and there is considerable urbanisation as well as other big government projects such as Bugesera International Airport, model villages and transport projects. Although Rwanda’s economy is only expected to grow by 2% in 2020, due to the health pandemic, stronger growth of 6.3% is forecast for 2021 and 8% for 2022.

It is the fifth local company on the Rwanda bourse. South African health investor RH Bophelo was the ninth listing on 1 June.

However, trading in shares on the exchange for the first six months of 2020 was just under $400,000, down 85% compared to $2.6m in the six months to June 2019, according to an article in Rwanda’s New Times, particularly as trading slowed dramatically once the health crisis hit in March. Trading in bonds more than doubled, from $6.2m to $12.7m.

Top banks and bankers – African Banker Awards winners 2020

It is an honour to be a judge for this competition and tough to choose among so many excellent entries!

London, 26th August 2020: Winners of the 2020 edition of the African Banker Awards were announced today at a virtual Awards ceremony. The awards were pushed back to August to coincide with the African Development Annual Meetings which are taking place this week, with the election of the new President of the bank expected tomorrow 27 August.

The Awards are considered the Oscars of the African banking community and given the impartial selection and judging process are the most respected in the field.

The big winners this year were Nigerian-based group Access Bank and also women in the banking and finance sector. Following on from what was seen as a lack of inclusion last year, the organisers put an emphasis to reward institutions that ensured that women and financial inclusion at the forefront of their agenda.

Access Bank’s Group CEO, Herbert Wigwe, won this year’s African Banker of the Year. Access ranks as one of Africa’s top-tier banks and Wigwe has been at the helm of the bank’s growth and expansion, including the oversight of the takeover of Diamond Bank, a bank that was much bigger than Access Bank less than 15 years ago. Access Bank also won Agriculture deal of the year, in their role to help Olam develop their rice operations in Nigeria.

Women were also the big winners at this year’s awards. The Central Bank Governor of the Year went to Caroline Abel, from the Seychelles and the Finance Minister of the Year went to Nigeria’s Zainab Ahmed. The organisers had noted that despite difficult circumstances Ms Ahmed had managed to push through a set of difficult reforms as well as successfully engaging international partners to help the country navigate an extremely challenging economic environment.

African Banker Icon was given to Vivien Shobo, who was the CEO of ratings and advisory firm, Agusto & Co up until last December. She was recognised for playing an instrumental role in developing Nigeria’s credit markets and also for helping grow a truly world class organisation that is competing against much better resourced international players.

Tunisian pioneer Ahmed Abdelkefi won the Lifetime Achievement Award. This businessman and financier was the founder of numerous businesses operating in leasing, brokerage and investment banking. He also founded private equity group Tuninvest, and then launching Africinvest, without doubt one of Africa’s most successful Africa-owned PE firms.

The split of the other winners was quite even. TDB won Bank of the Year. Incidentally, its CEO, Admassu Tadesse, won Banker of the Year at last year’s ceremony. The organisers added a number of awards this year to reflect the AfDB’s High Fives Agenda. The energy deal of the year went to a renewable energy bond structured by Nedbank, and infrastructure deal of the year went to the Port of Maputo in a transaction led by Standard Bank. The SME bank of the year went to Nigeria’s Bank of Industry.

Commenting on this year’s awards, Omar Ben Yedder, Publisher of African Banker said: “It’s been a momentous year in every sense. Banks will have to play a lead role in kick-starting post-Covid growth and sustaining the real economy. Governments and regulators have done an excellent job with limited means and both our winners Caroline Abel and Zainab Ahmed have demonstrated strong leadership there. Banks will need to work with institutions and partners to ensure liquidity doesn’t dry up. To quote our Lifetime Achievement Winner: Keep moving forward: adapt, innovate, take risks. That’s your job. Today’s crisis is neither the first and it will not be the last.”

The Awards took virtually on the sidelines of the African Development Bank Annual Meetings which are now officially open.

The awards, which are held under the high patronage of the African Development Bank, are sponsored by the African Guarantee Fund as Platinum Sponsor, the Bank of Industry as Gold Sponsor and Moza Banco as Associate Sponsor.

THE 2020 AFRICAN BANKER AWARD WINNERS

African Banker of the Year
Herbert Wigwe, Access Bank

Lifetime Achievement Award
Ahmed Abdelkefi, Founder Tunisie Leasing; Tuninvest; Tunisie Valeurs

African Banker Icon
Vivien Shobo, Former CEO Agusto & Co.

African Bank of the Year
Trade and Development Bank (TDB)

Minister of Finance of the Year 
Ms Zainab Ahmed, Minister of Finance of Nigeria

Central Bank Governor of the Year 
Caroline Abel, Central Bank Governor of Seychelles 

Investment Bank of the Year
Citi

Award for Financial Inclusion 
Kenya Women Microfinance

SME Bank of the Year
Bank of Industry, Nigeria

Socially Responsible Bank of the Year
Equity Bank, Kenya

Innovation in Banking
Ecobank

Deal of the Year – Equity
MTN Nigeria IPO – Chapel Hill Denham

Deal of the Year – Debt
Bank of Industry €1bn syndicated senior loan facility – Bank of Industry / Afreximbank / Credit Suisse

Infrastructure Deal of the Year 
Port of Maputo – Standard Bank

Energy Project of the Year
Renewable Energy Bond – Nedbank

Agri Deal of the Year
Olam Rice Farm – Access Bank

Regional Bank of the Year
East Africa – Equity Bank
West Africa – Coris
North Africa – CIB, Egypt
Southern Africa – Moza Banco
Central Africa – BGFI, Gabon

For more on the African Banker Awards, please visit: www.africanbankerawards.com .

Fund managers seek good governance

Governance, good regulation and availability of market data and prices help African fund managers decide on investing into other African markets, according to a survey of 50 African asset-managers for the African Exchanges Linkage Project (AELP) project. Key factors when they choose new markets are: market regulation (91% of replies), followed by investor regulation and availability of market data and prices (90% each).

Other top criteria that help fund managers choose where to invest are: levels of dealing price, efficiency of execution and commission (86%), the quality of companies and investment opportunities (also 86%), corporate, social and governance criteria (84%) and availability of research (80%). Three quarters of investors said they were reluctant to invest in small and illiquid markets or where valuations are excessive. Only half decide to invest in a company based on its dividend policy, while valuation and governance are the top factors.

Comments from asset managers interviewed for AELP Buy-Side survey

Asset managers in Nigeria and the francophone West African countries are the most optimistic about prospects for Africa’s economies. In the AELP poll, some 97% of the surveyed Nigerian asset managers are optimistic about the continent, with average assets of $364 million under management, followed by 85% of surveyed francophone asset managers, who averaged $416 million of assets managed. Average across all the survey respondents, including a couple of South African managers, was $4.1 billion in assets under management.

Optimism is also strong among asset managers surveyed in Mauritius (80% optimistic), Morocco (73%), Nairobi and Egypt (each with 65% of responses optimistic). Nearly half (46%) of respondents manage assets with investment horizons over five years, another 23% for three to five years.

“The results of this survey confirm the high level of professionalism of African fund managers using world-class standards and criteria in their decision-making. This is really reassuring for the success of the AELP initiative,” says Dr. Edoh Kossi Amenounvé, President of ASEA.

The poll evaluates the appeal of different investment markets in the AELP, which brings together seven leading African securities exchanges to boost trading, investment and information links. AELP is procuring a technology platform to link stockbrokers, so that a broker on one exchange can send investors’ orders to an executing  broker on another exchange for execution.

The AELP is a joint initiative by the African Securities Exchanges Association (ASEA) and the African Development Bank to unlock pan-African investment flows, promote innovations that support diversification for investors, and address depth and liquidity in the markets. It is funded by the Korea-Africa Economic Cooperation (KOAFEC) Trust Fund through the African Development Bank.

The AELP exchanges are: Bourse Régionale des Valeurs Mobilières (BRVM, integrating eight West African countries), Casablanca Stock Exchange, The Egyptian Exchange, Johannesburg Stock Exchange, Nairobi Securities Exchange, The Nigerian Stock Exchange and Stock Exchange of Mauritius.

Cross-border trading between the seven markets totalled $1.1 billion in 2019, and was at over $500 million in the first quarter of 2020, according to the participating markets. The “African Listed Securities” assets across these exchanges offers equities investments in more than 1,050 companies, including Africa’s most promising, profitable companies and global leaders. Investors will also buy or sell bonds, exchange-traded funds (ETFs) and derivatives if they are listed on the participating Exchanges.

ASEA supports African economic integration and the African Continental Free Trade Area. The AELP will promote free movement of capital and investment.

About ASEA

The African Securities Exchanges Association is the premier association of the 25 securities exchanges in Africa who have come together with the aim of developing Member Exchanges and providing a platform for networking. ASEA was established in 1993 and works closely with its members to unlock the potential of the African capital markets.

Vision

To enable African Securities Exchanges to be key significant drivers of the economic and societal transformation of the year 2025.

Mission

To provide a forum for mutual communication, exchange of information, co-operation and technical assistance among its members, to facilitate the process of financial integration within the region for the effective mobilization of capital to accelerate economic development of Africa.

Zambia Forest lists on Lusaka Securities Exchange

Zambia Forestry and Forest Industries Corporation PLC today (12 February) brought welcome relief to the Lusaka Securities Exchange when it broke a 6-year listing drought. The listing was for the full 400 million shares, after an offer of 160m shares (40%) at ZMW2.06 each to raise ZMW330m ($22.5m). The forestry firm will use the proceeds from selling 70m of these shares for working capital, expenses and capital spending.

Zaffico is the biggest company in establishing, managing and selling exotic roundwood in Zambia and manages 51,659 hectares in pine and eucalyptus plantations plus some 50,000 hectares of unplanted land. It sells mature trees harvested as well as poles for transmission, fencing and construction.

According to the prospectus, dated 6 December, the total share offer included a sale of 90m shares from Zambia’s state-owned Industrial Development Corporation (IDC). The offer opened on 11 December. The sponsoring broker is Pangaea Securities. It was the LuSE’s first public offer and listing in 6 years since Madison Financial Services in mid-2014. The share offer was extended by 8 days but closed on 29 January.

In the financial year 2018, Zaffico’s revenue was ZMW244.7m (up from ZMW208.2m in 2017), earnings before interest, tax, depreciation and amortization (EBITDA) was ZMW163.5m (ZMW148.2m) and net profit was ZMW119.6m (ZMW114.5m). Zaffico has also been authorized to sell confiscated rosewood mukula logs and logs harvested before harvesting mukula was banned. In August 2019 it was reported that the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) had decided to include mukula trees in its Annex II listing. Rosewood has a high value in China for making furniture and is being widely harvested across Africa while Zambia has imposed bans and lifted them from time to time (Lusaka Times estimates that some $2bn of mukula revenue was stolen by a cartel).

Seychelles MERJ Exchange IPO closes 28 Feb

The MERJ Exchange, the national securities exchange of Seychelles, has extended its $4 million initial public offer (IPO) to 28 February in the form of tokenized shares. The exchange already listed the tokens on itself by introduction on 7 August 2019 and opened the IPO on 10 September.

The exchange, previously known as Trop-X, says it is the world’s first fully regulated exchange that can handle both securities and digital assets, has a fully regulated post-trade processing infrastructure and works with a central clearing model. It operates a stock exchange for equities, debt and derivatives and says it will be first global market to offer the full cycle in primary and secondary markets in digital assets.

At the time of issuing the prospectus (27 August 2019) the bourse had 31 listed equities and 2 debt issues with market capitalization of $382.7 million. There were 3 members and 5 listing sponsors.

The MERJ Exchange shares are tokenized into digital assets. The offer is for tokens representing 1,652,893 securities at $2.42 per share, to be traded in USD. This will be 16% of the total shares if issued in full giving a valuation of $25m for the exchange. The minimum raise for the IPO to go ahead will be $500,000, the minimum subscription per investor is $2,000 (826 shares) and $10,000 (4,132 shares) from within the USA.

MERJ Exchanges plans to spend the offer proceeds on IT advisors and consultants, increasing its staff and marketing.

The total share capital is 15 million ordinary shares with a par value of $0.03 each. This has been tokenized to 8,684,207 tokenized shares which are currently listed.

It is starting to attract international partners including Jumpstart Securities in the US and Globacap in UK for the offer. The sponsor advisor for the offer is PKF Capital Markets (Seychelles) Ltd.

According to the investment deck (available here), it has big plans to increase the number of issuers from the current 33 to 111 by the end of year 2, boost the total market capitalization (already $1 billion according to a January 2020 newsletter) and increase the number of sponsors and brokers, as well as liquidity. It will cut trading fees from current 0.5% to 0.15% and have a capital raise fee of 0.3%.

MERJ aims to position itself as a key regulated system as blockchain technology transforms the way the world delivers value, including tokenization of illiquid assets including real estate, shares in small and medium enterprises (SMEs), copyrights and collectables such as art. It hopes to take on global incumbent exchanges which have legacy structures and stakeholders that are not yet ready to tackle the change.

From MERJ Exchange investment deck

The exchange was incorporated in 2011 as Trop-X (Seychelles) Ltd, received its licence to operate the Seychelles Securities Exchange in June 2012 and went live in August 2013 with the first equity listing. It became the national numbering agency and launching debt and derivatives exchanges in 2014. It listed its first Eurobond in 2016 and started working on the digital asset project with the Ethereum Alliance. It changed name in December 2018 and did its first tokenized listing, of its own shares, on 7 August 2019. Operational partners include Euroclear and Strate in its partners.

Ed Tuohy, CEO of MERJ Exchange, says in the investment deck: “MERJ has spent years establishing the infrastructure, the regulatory licences and the technology. We can now move decisively.”

According to the deck: “MERJ enjoys a number of key structural and organisational advantages which put us firmly ahead of the competition. These are: vertical integration, regulatory approval, agile organization, respected jurisdiction, live and operational, direct access platform.” The structure is MERJ Exchange Ltd and 2 wholly owned subsidiaries, MERJ Clearing and Settlement Ltd and MERJ Depositary and Registry Ltd.

The regulator Financial Services Authority Seychelles is an associate member of the International Organisation of Securities Commissions (IOSCO) and meets similar regulatory standards as all global regulators. MERJ is an affiliate member of the World Federation of Exchanges (WFE).

Seychelles is not listed on tax avoidance blacklists but is on the grey list of the European Union (with 31 countries including Namibia and Botswana) and Oxfam. By comparison Mauritius was removed from all EU lists in October 2019 but remains on the Oxfam grey list.

The Seychelles regulatory structure allows MERJ to integrate overseas organizations that are licensed and regulated in a recognized jurisdiction and there is no requirement that members have a presence in Seychelles.
It aims to provide seamless direct access for individual users using mobile and web apps.

For more information and to apply for the offer look at the MERJ Exchange website or the offer page on Globacap and US investors should speak to their broker.

NOTE: This article does not constitute investment advice, the purpose is news information. The writer is not affiliated to MERJ Exchange. Read the full prospectus, available here.

Helios Towers raised $364m in London IPO

Mobile telephone infrastructure company Helios Towers raised $364 million and listed on the London Stock Exchange yesterday 15 October. The stock HTWS launched at the bottom of the target price range at 115p and traded in a range of 115.00 – 126.98 over the day. Excluding the “greenshoe” extension the offer raised $318m, according to the London Stock Exchange (LSE).

Gokul Mani, Head of Primary Markets – Middle East, Africa & India, LSE, said in an email: “London Stock Exchange continues to be a strong partner to companies across the Middle East and Africa. Four of the five largest IPOs from the region this year have listed on our market. London’s capital markets offer deep liquid pools of capital, connecting issuers from the Middle East and Africa with long-term international investors, supporting dynamic companies, infrastructure development, and economic growth in the region. ”

In total, 124 companies from the Middle East and Africa (MEA) region are listed in London and have raised over $35 billion in equity issues. There are also 242 active MEA bond issuers who raised nearly $143bn. Of the top 10 initial public offers (IPOs) on the LSE in 2019, 4 are from MEA region. According to a Bloomberg report; “The London market is particularly quiet and Helios is one of several African and Middle Eastern companies that are helping to keep it alive.”

The share offer allowed shareholders including Millicom International Cellular SA and Bharti Airtel Ltd. to sell down their stakes. It was founded in 2009 with $350m backing by London-founded private equity firm Helios Investments alongside investors including George Soros and Madeline Albright, according to this report on Quartz .

Helios has more than 6,800 mobile telecommunications towers spread across five African countries (South Africa, Democratic Republic of Congo, Ghana, Republic of Congo and Tanzania) which it rents to mobile phone providers such as Vodacom, MTN and Airtel. It plans to use some of the IPO proceeds to keep pace with fast-growing consumption of mobile data in Africa, expand into new markets, build more towers and roll out fourth-generation (4G) mobile services. We wrote about the IPO here.

Another major mobile operator IHS Towers is raising $1.3bn via debt markets with 2 issues closing next week, according to Bloomberg, while American Tower Corp is buying a third provider, Eaton Towers Ltd. for $1.85bn.

Quartz cites Matthew Edwards, head of research for the region at research firm TowerXchange, there are 158,000 towers in Africa and “towercos” own 39.3%. There are expected to be more than 600m subscribers to mobile phones by 2025.

Towers can bring revenues to rural communities and land-owners. According to Quartz “As part of efforts to cut down costs, towercos are increasingly investing in hybrid power solutions like lithum-ion batteries and solar power. There’s a net upside for local communities housing towers given the possibility of reduced diesel consumption for generators and an accompanying reduction in emissions and pollution.”

This distinguishes Helios Towers, according to this LSEG backgrounder: “One thing that differentiates Helios Towers Africa from some of its competitors is that every site it operates also contains a mini power station. ‘This provides our customers with the uninterrupted power needed for mobile networks,’ explains Kash (CEO Kash Pandya), who is optimistic about the company’s prospects for the future. ‘It’s an exciting time to be in telecoms in Africa and a very exciting time to be in towers too.’”

Naspers gives Europe its biggest consumer tech listing

Naspers has pulled off a dramatic restructuring of its holdings to unlock value after the successful listing of Prosus on Euronext Amsterdam stock exchange and simultaneously on the Johannesburg Stock Exchange (JSE). Prosus Group is valued at EUR120 billion ($134bn) and is Europe’s biggest consumer Internet firm and the third in value on the Amsterdam bourse after Royal Dutch Shell and Unilever.

South Africa’s Naspers is Africa’s most valuable company and still owns some 73% of Prosus. It has spun off its global Internet investments into Prosus including the largest stake (31%) of China’s Tencent and the largest stake (28%) stake in Mail.Ru, a giant Russian internet company, reported to be worth $1.4bn.

According to an announcement in Amsterdam: “The Prosus Group’s businesses and investments serve more than 1.5 billion people in 89 markets, and are the market leaders in 77 of those markets. The Prosus Group’s consumer internet services span the core focus segments of classifieds, payments and fintech as well as food delivery, plus other online businesses including e-tail and travel. The Prosus Group aims to build leading companies that create value by empowering people and enriching communities.”

Other investments include Russia’s Digital Sky Technologies (which invests in Facebook, Groupon and Zygna), Indian e-commerce start-up Swiggy, Takeaway.com, Germany’s Delivery Hero, investment in Brazil and e-commerce in the Middle East through Souq.com as well as financial services firms PayU and Wibmo.

In May 2018 Naspers sold its 11% shareholding in India’s Flipkart for $1.6 billion after buying it for $616m (Walmart bought 77% of Flipkart for $16bn in its biggest acquisition as it sought to square up to Amazon and local competitors for domination of the growing Indian market.

Although Euronext Amsterdam bourse set a guide price of €58.70 per share, investor enthusiasm was high as the shares opened trading at €76 and reached a high of €77.40, up 32%, on the first day before closing the week at €73.90. News reports say the market valuation of Prosus is based mostly on the Tencent holding and does not count many of the other investments.

Unlocking value in Naspers

Naspers had made what has been described as “the best venture capital investment ever” when in 2001 it bought 46.5% of Chinese Internet tech company Tencent with an initial investment of $32 million, which had grown to $175bn in value by March 2018, according to Bloomberg. It has also made huge profits by selling some of its Tencent holdings but remained with 31.1%.

Naspers has been listed on the JSE since 1994, and its investors are predominantly South Africans including the Government Employees Pension Fund (GEPF), managed by the Public Investment Commissioners (PIC). Before the spinoff it made up 25% of the JSE’s total market capitalization, and investors had to scale back their holdings to avoid over-concentration, so that the total value of Naspers was less than that of its shares in Tencent, ignoring the other companies.

After the spinoff, Naspers share price fell nearly 30% and it became only 15% of the JSE market capitalization.

The Amsterdam listing opens the global holdings to a wider pool of investors and should permit reassessment of both the value of both Prosus shares- Naspers still owns some 73% of Prosus which has also – and allow for future capital raising. One of the biggest investors in Naspers is the South African Government Employees Pension Fund, managed by the Public Investment Commissioners.

$314m for African tech start-ups

Naspers is seeking to find similar media, e-commerce, consumer, fintech and other successes in Africa. It has appointed 48-year-old Phuthi Mahanyele-Dabengwa as CEO, its first black and first woman chief executive, according to Quartz. She was previously chief executive of Shanduka Group, an investment company founded by South Africa’s President, Cyril Ramaphosa. In October 2018 Naspers announced a $314m fund to invest into promising African tech start-ups.

History of Naspers

Naspers was set up in 1915 as De Nasionale Pers Beperkt (National Press Ltd) to promote Afrikaner nationalism and it continued to support the National Party over the decades until 1989, throughout apartheid.

The first newspaper was Die Burger in 1915 and magazine Die Huisgenoot in 1916 (both originally name De.. ). Naspers started publishing books in 1918. In 1985 it set up M-Net, the first pay-TV in southern Africa.

(Disclosure: the writer owns Naspers and Prosus shares)

Executive pleads guilty as collapse of $14bn Abraaj hits PE flows into Africa

The ongoing collapse of the giant Abraaj platform in the world’s biggest private-equity insolvency has hit flows into Africa-focused private-equity funds. Former Abraaj managing partner Mustafa Abdel-Wadood is cooperating with New York prosecutors after pleading guilty in a Manhattan court 2 weeks ago. He could face up to 125 years in prison.

Abraaj was founded in 2002 and based in Dubai. It was one of the world’s most influential emerging-market investors and acquired the Aureos private equity funds in 2012 (as reported in this blog) with the support of key Aureos investor CDC. At the time of the collapse Abraaj managed almost $14 billion on its platforms with 30 funds and holdings in health-care, energy, lending and real estate in Africa, Asia, Latin America and Turkey.

Abdel-Wadood, age 49 years and a citizen of Egypt and Malta, was arrested in April in New York while taking his wife and son to look at universities, according to this 28 June report on Bloomberg news. In a prepared statement in a Manhattan Court on 28 June he choked back tears as he said: “I knew at the time that I was participating in conduct that was wrong.. I ended up drifting from who I really am. For that, I am ashamed.” He is under house arrest subject to $10m bond.

He is one of six former Abraaj executives facing racketeering and securities-fraud charges. Founder and chief executive Arif Naqvi, from Pakistan but a UK resident and regular participant at Davos conferences, was arrested in London in April and detained at Wandsworth Prison. In May he was released on conditional bail of £15m ($19m) in May while fighting extradition to the US (see this report in the Financial Times . Other former executives charged were Chief Financial Officer Ashish Dave and managing directors Sivendran Vettivetpillai, Rafique Lakhani and Waqar Siddique.

Anonymous warnings had been sent to potential investors in September 2017, according to a 5 May  Bloomberg report . The email, entitled “Abraaj Fund 6 Warning” stated: “The governance is not what it appears but employees are afraid to speak or partners entrenched so don’t speak,” the email read. “There is no smoke without fire. Be the hero in your firm and uncover the truth by asking simple questions.”

However, Abraaj answered queries to investors’ satisfaction although the $6bn fund eventually did not go ahead.

According to press reviews of the governance lapses that had led to the collapse, expenses at Abraaj had been running higher than income from management and performance fees on the funds leading to multimillion dollar operating losses. The group borrowed, and in the 9 months to March 2018 financing costs came to $41m. It hoped to sell assets to avoid a cash crunch but the deals were repeatedly delayed, according to The Economist.

Money had been moved out of funds to cover losses, according to the US Securities and Exchange Commission (SEC). It says that Naqvi and Abraaj Investment Management Limited (AIML) misappropriating $230m from the Abraaj Growth Markets Health Fund (AGHF), which closed at $1 billion in 2016, between Sept 2016 and June 2018. The funds were supposedly for acquisitions but the SEC says Naqvi commingled the assets with corporate funds of AIML and its parent company, Abraaj Holdings – essentially moving them into the company’s bank accounts.

Four limited partner (LP) investors in the Abraaj Healthcare fund, including Bill & Melinda Gates Foundation and the International Finance Corporation, raised concerns, hired investigators and commissioned an audit. The news broke in February 2018 and Abraaj went for liquidation in the Cayman Islands and the United Arab Emirates in April 2018. It decided to restructure, so AIML was set up to manage the funds in 2018 and Naqvi was moved from being CEO of the funds, according to Private Equity Africa news website, which has been covering this story extensively.

According to the 28 June Bloomberg report Abdel-Wadood described the alleged conspiracy, which related to hiding Abraaj’s poor financial condition and convincing new investors to put up more cash, including lying to U.S.-based investors during meetings in Manhattan in 2016 as they sought to raise $3 billion for a new fund. The money they raised wasn’t spent the way investors were told, he said: “Put simply, money was co-mingled that should have been separated, and investors were not told the truth.”

Liquidators have been seeking other fund managers to take over the funds but in each case a share of LPs must approve the change of manager and Abraaj works with 500 LPs.

At the end of 2018, private equity house Actis was cleared to acquire 16 Abraaj funds covering Africa and Asia, including sub vehicles and legacy funds taken over from Aureos, and according to The Economist talks continue on the African funds, while Franklin Templeton is talking about taking over the Turkish fund. In May, US-based TPG said it would become custodian for the healthcare AGHF fund and in 2018 Abraaj returned the money it owed, plus interest.

The Economist quotes Linda Mateza of South Africa’s Government Employees Pension Fund, an Abraaj investor, saying: “We cannot afford not to invest in private equity because of the potentially higher returns.”

According to the 5 May Bloomberg report the audit into AGHF “had a ripple effect on private equity activity in emerging markets, and local buyout activity in the Middle East came to a near standstill”. The Economist magazine commented in May “Many large institutions have stopped investing in Africa and the Middle East, its home turf. In the year after its troubles became public, buy-out funds focused on the region raised just $1bn, a third of their annual average in the previous five years” citing figures from Private Equity International.

 “The firm’s problems were real. Its collapse last year consumed millions of dollars of investors’ money, the reputation of Dubai’s financial regulator and Abraaj itself. Even as rivals divide up the firm’s former empire, it threatens to cause yet more damage.” The article says Abraaj still owes over $1.2bn to investors. A letter by lawyers for investors in the $1.6bn Abraaj Fund IV is reported to claim that at least $300m went towards “wrongful transactions” and other funds could be owed tens of millions.

Do auditors help investors?

The Financial Times suggests that Abraaj’s auditor KPMG, which “exonerated the firm just a few weeks after the scandal broke” may have had a conflict of interest: “It transpired that KPMG had close ties to senior people in the business: the chief executive of KPMG’s Dubai arm had a son who worked at Abraaj, and one executive, Ashish Dave, had spent time at both Abraaj and KPMG”. KPMG also worked for companies that Abraaj invested into.

PwC, which became the liquidator for Abraaj, found a large funding gap and that the firm spent beyond its means and used other people’s money to fund the gap. The article interviews various experts.  Eamon Devlin, partner at MJ Hudson, an asset management consultancy that advises private equity investors, suggests changing auditor every 3 years, much like a listed fund has to, so that a 10-year fund gets through up to 3 different audit firms. He also says that investors should get “more investigative powers and responsibilities to look into these potential conflicts”.

One private equity executive says the industry should introduce requirements already used in US, UK and other places that an auditor working on one part of the business is not allowed to provide services to another part. Ludovic Phalippou, a finance professor at the University of Oxford’s Saïd Business School who authored the textbook Private Equity Laid Bare said; “[The Abraaj case] shows how much freedom there is for investors to be proactive. If they had been more proactive, [the alleged mishandling of funds] would not have gone unnoticed.”

Affiliate link: Phalippou writes on Amazon “The intention is to have a book that can be read more like a novel than like a regular textbook. In order to have long-lasting impact on readers, I believe in making things as simple as possible, boiling everything down to the essence, going straight to the point, and, most importantly, writing in an informal and hopefully entertaining way. The objective is for the reader to open this book with anticipation of having a good educational time. “