AFRICA GLOBAL FUNDS S E P T E M B E R 2 016 / V O L . 2 / I S S U E 0 9 www.africaglobalfunds.com | T africaglobfunds
ANALYSIS:
SHARIA FINANCE Access to Islamic financial products in Africa has significantly lagged behind other regions, such as the Middle East and South East Asia. This is attributable to insufficient understanding, both legal and technical, by end-users and policymakers, writes Said DeSaque of Desaque Macro Research
M
ultilateral development agencies and banks are now playing a greater role in enhancing Africa’s understanding of Sharia-compliant finance. Furthermore, the Inter-
national Monetary Fund (IMF) has also committed itself to a better understanding of Islamic finance nuances.
Read on pp. 12-13
PROFILE:
MARKET:
AGF speaks with Nonnie Wanjihia, Executive Director at the
Since the Arab spring, the growth has been sub-
East Africa Venture Capital Association (EAVCA) about the pri-
dued in the country, writes Sébastien Hénin of
vate equity environment in East Africa and the role of EAVCA
The National Investor (TNI)
EAVCA
S
EGYPT
ince 2013, EAVCA has grown to 63 members across the investment ecosystem in the region from PE firms & DFIs, to local asset managers and professional service providers.
E
gypt and the IMF signed a preliminary agreement on a $12bn 3-year loan facility on August 11. If approved, the loan will support govern-
ment reforms, which are required to support the Egyptian economy.
Read on pp. 18-19
Read on pp. 16-17
We just see the world differently
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Foundation
EDITORIAL
SEPTEMBER 2016
Dear Reader, In this month’s issue of AGF we learn that while Islam is a major religion on the continent, its communities have historically been underserved by banking systems and capital markets. Access to Islamic financial products in Africa has significantly lagged behind other regions, such as the
AFRICA
Middle East and South East Asia. Said DeSaque of Desaque
GLOBAL FUNDS
Macro Research discusses Sharia-compliant financial activity in SSA, saying that Sharia-compliant products have
Web: www.africaglobalfunds.com Twitter: AfricaGlobFunds LinkedIn: Africa Global Funds
Editorial: Anna Lyudvig +1 (718) 787 6105 a.lyudvig@africaglobalfunds.com
Commercial: Roman Onosovski +1 (561) 866 0737 r.onosovski@africaglobalfunds.com
Support/Technical: support@africaglobalfunds.com
Contributors: Said DeSaque Sébastien Hénin Brooks Preston Hayden Reinders Helen Roberts
the potential to impart significant macroeconomic benefits for SSA countries (pp.12-13). This edition’s market feature focuses on Egypt. Sébastien Hénin of The National Investor looks at the preliminary loan agreement that was signed between the country and the IMF. He says that if the deal goes through foreign investors will probably allocate money to local financial markets (pp.16-17). Meanwhile, Hayden Reinders of Prescient Fund Services discuses hedge fund administration in South Africa. He says that previous more traditional based administrators, risk providers, compliance offers and legal advisors are expected to gain from the announcement of regulated hedge funds (p.14). On the private equity front, we speak with Nonnie Wanjihia, Executive Director at the East Africa Venture Capital Association about the private equity environment in East Africa and the role of EAVCA (pp.18-19). In addition, Brooks Preston of OPIC shares the US DFI’s investment experience in Kenya and key lessons about advancing economic development in emerging markets (p.20). Finally, Helen Roberts of BonelliErede, shares her thoughts on healthcare opportunities in Africa. She says that private equity plays a fundamental role in bridging a funding and access gap in healthcare (p.26). If you like what you are reading, spread the word. For more up-to-date news, analysis and insight form the industry visit africaglobalfunds.com and don’t forget to follow the magazine @AfricaGlobFunds on Twitter. If you would like to get in touch with any comments or suggestions for future issues, please e-mail myself at a.lyudvig@africaglobalfunds.com
Published by Africa Global Funds LLC © 2016 All Rights Reserved No parts of this publicataion may be reproduced without written permission
Best regards, Anna Lyudvig Managing Editor
www.africaglobalfunds.com | 3
NEWS
SEPTEMBER 2016
CAPE IV GETS $570M AT FINAL CLOSE
A
frican Capital Alliance (ACA) has raised a
CAPE IV intends to continue the successful strategy
total of approximately $570m of committed
of ACA's previous funds, focusing on an attractive and
capital for its fourth private equity fund,
diversified pipeline of deals across its target sectors
Capital Alliance Private Equity IV (CAPE IV).
including: business services,
As a result, ACA has become the first West Africa-fo-
energy, fast moving consumer
cused fund manager to raise over $1bn in aggregate
goods (FMCG), financial servic-
capital commitments, since its formation in 1997.
es, and telecommunications,
Over its 19-year history, ACA has built a strong and di-
media & technology (TMT).
verse network of investors across the world and CAPE
Among the Fund's initial
IV has attracted a broad mix by type and geography.
investments are Beloxxi indus-
The Fund has received support from leading in-
tries, a leading Nigerian biscuit
stitutions, including public and corporate pension
Cyril Odu
funds, sovereign wealth funds, funds of funds and
CEO ACA
development finance institutions, some of whom have supported ACA since its first fund, CAPE I.
manufacturing company, and Continental Reinsurance, the largest private Pan-African re-insurer outside of South
Cyril Odu, CEO of ACA, said: “The success of our
Africa.
fundraising is a strong endorsement, by both our exist-
“About a third of our fund is already committed and
ing and new investors, of ACA's position as a premier
we continue to find compelling opportunities to deploy
player in West Africa and of the long-term economic
capital in investments, which offer significant resil-
fundamentals of the region.”
ience and favorable growth prospects,” Odu said.
DEALS
ACTIS ACQUIRES MEDIS GROUP’S STAKE FROM AFIRCINVEST
In partnership with AfricInvest through
Looking ahead, Medis has ambitious plans
various funds since its inception, Medis’
to extend into complex 'biosimilar' medi-
has always based its strategy on innova-
cines that treat diseases such as infertility
tion.
and multiple sclerosis and to become one
It was the first pharma company to launch sterile products in North Africa, and has now built one of the first oncology
Actis has acquired a meaningful stake in
laboratories on the continent as well as a
Medis Group, a prominent branded generic
large control laboratory.
of the few producers of affordable cancer drugs in the region. It also intends to move into the production of asthma inhalers. Medis has a fast-growing joint venture in
Aziz Mebarek, Founding Partner at AfricIn-
Algeria and a promising exports business
Algeria, from AfricInvest and the founding
vest, said: “We are honored to have had the
across Francophone Africa and the Middle
Boujbel family.
opportunity to work with Dr Lassaad Bouj-
East.
pharmaceuticals business in Tunisia and
Actis will also inject further funds into
bel in growing Medis Group from inception.
Hichem Omezzine, Director at Actis, said:
the business to finance a buy-and-build
Medis has become one of the key players
“Medis is a remarkable business that has
strategy to create a leading pan-African /
in the branded generic pharma sector and
some of the best manufacturing standards
Middle-Eastern pharmaceutical business.
has improved affordability and accessibil-
and innovation capabilities we have seen
ity of numerous pharmaceutical products
in Africa.”
Founded by Dr Lassaad Boujbel, Tunisian-headquartered Medis has a broad portfolio of quality, affordable medicines
treating severe illnesses in Africa.” “AfricInvest has achieved financial returns
“We are thrilled to partner with Dr Lassaad Boujbel and the Medis management
with strong recognition and trust among
which have fully met the expectations of
team to accelerate the entry into complex
doctors and patients.
its shareholders. We are happy to see the
therapeutic areas like biosimilars and
Products range from oral solid pharma-
Medis journey continue with Actis, one of
oncology and enhance the company's foot-
ceuticals targeting chronic diseases such
the most respected private equity inves-
print across Africa and the Middle East.”
as diabetes and high blood pressure to
tors in Africa. We look forward to witness-
sterile injectable pharmaceuticals, as well
ing the continued growth of the company,
ticals sector has excellent growth pros-
as branded medicines in therapy areas
both in terms of products and markets,”
pects, driven by demographic and lifestyle
including pain, allergies and gastric reflux.
he said.
changes.
4 | www.africaglobalfunds.com
The African and Middle-East pharmaceu-
NEWS
SEPTEMBER 2016
& Overy, which has
regulatory burden on our clients by provid-
multinationals, but local players offering
The sector has been dominated by
been designed to
ing a single platform that can be used to
good quality care at affordable prices have
manage the intri-
comply with multiple regulations globally.”
started to emerge, creating greater access
cacy of the rules
to affordable medicines.
alongside varying
As such, the branded generic sector is
jurisdictions to
projected to grow at double digit and fast-
remain both com-
er than the overall market over the next
plaint and transpar-
decade. Boujbel said: “I am excited to have Actis as a new partner and would like to thank the AfricInvest team for their confidence during our journey together, which has
Gaurav Chandra Global Product Owner SD, AxiomSL EMEA
DEALS
ARC TAKES 27.5% STAKE IN COLOURFIELD
ent,” he told Africa Global Funds. The challenges
African Rainbow Capital (ARC) has bought a 27.5% stake in a specialist investment
facing market par-
manager Colourfield Liability Solutions for
ticipants are made
an undisclosed amount, marking its fifth
allowed Medis to emerge as one of the
more complicated by ongoing changes to
investment in the financial services sector.
leading pharma groups in the Maghreb
regulatory requirements.
The stake in Colourfield gives ARC exposure
region.” “With Actis’ help, we look forward to
This means that, firms must continually track changes to the shareholding disclo-
building Medis into a leading Middle East
sure requirements – as well as all other
and African business with a cutting edge
regulations.
portfolio of medicines that will help patients across our region,“ he said.
ASSET SERVICING
AXIOMSL COLLABORATES WITH AOSPHERE FOR GLOBAL SHAREHOLDING DISCLOSURE REPORTING
The AxiomSL platform will utilize
to asset management for defined benefit pension funds. It follows investments in private equity firm Squarestone, insurance broker Indwe Risk Services, listed investment holding
aoesphere’s Rulefinder, which will update
company Afrocentric and acquisition vehi-
the rules for shareholding disclosure re-
cle Capital Appreciation.
quirements in 87 jurisdictions. “Our solution encompasses the complex
Johan van Zyl, ARC joint-CEO, said: "ARC identified Colourfield as the dominant
capacities, exemptions and netting rules
player in the management of third-party
allowing market participants to identify
goal-based investment solutions in SA."
genuine disclosure obligations through
Colourfield was co-founded by Nick Sen-
the rule sets, calculations and reporting
nett, Costa Economou and Shaun Levitan
functionality, greatly reducing the cost
in 2010 and today is the largest investment
AxiomSL, a global provider of regulatory
and complexity of compliance involved in
manager of third-party goals-based invest-
reporting and risk management solutions,
managing disclosure related activities,”
ment solutions in South Africa.
has announced it would provide a new
Chandra said.
shareholding disclosure service using
The AxiomSL shareholding disclosure
Costa Economou, Colourfield CEO, said the company was appointed to manage assets
content from online legal services provider
solution aggregates a group’s total share-
aosphere, an affiliate of international legal
holdings for a particular issuer in individ-
He said goal-based investing, or liabili-
practice Allen & Overy.
ual entities and compares these amounts
ty-driven investing, focused on a client’s
with the total issued share capital or voting
goals or debts.
aosphere provides AxiomSL with detailed legal memoranda and alerts on changes to
rights for that issuer, depending on the
shareholder disclosures legislation, which
jurisdiction.
will form part of AxiomSL’s strengthened
The solution then monitors if the group
offering to financial firms worldwide, in-
has accumulated a substantial sharehold-
cluding Africa-based asset managers.
ing or if the percentage shareholding has
Gaurav Chandra, Global Product Own-
of approximately R50bn.
Defined benefit pension funds, which usually have large liabilities owing to the pensions they guarantee to members, are among Colourfield’s clients. "ARC approached Colourfield in March
breached any regulatory thresholds, and
and believed our technology and approach
er SD, AxiomSL EMEA, said: “Regulators
therefore may be obliged to report the
was a significant differentiator in SA (and
around the globe such as the Capital
disclosure event.
globally)," said Economou.
Markets Authority Kenya (CMA) and Take-
The solution covers monitoring and re-
"Colourfield believed the broad-based
over Regulator Panel (TRP) in South Africa
porting for substantial holding, short-sell-
nature of the ARC shareholding made ARC
require all market participants to make
ing, take-over and industry limits.
a compelling partner, which allowed us to
disclosures when they accumulate a sub-
The solution features a monthly release
stantial shareholding in an entity, invest in
cycle to proactively manage regulation and
a protected industry, become involved in a
reporting changes with full transparency.
takeover bid or engage in short selling.” “AxiomSL’s one platform solution lever-
Ed Royan, COO EMEA, AxiomSL, said:
maintain our independence," he added. “The involvement of ARC, an extremely strong BEE partner, will bring strategic focus, a strong leadership team, new and
“AxiomSL offers a single platform for all
exciting opportunities and the sharehold-
ages legal up-to-date regulatory content
regulatory reporting, not just shareholding
ing of a broad-based trust. Our agree-
provided by aosphere, an affiliate of Allen
disclosures. We are reducing the risk and
ment with ARC is the perfect way for us
www.africaglobalfunds.com | 5
NEWS
to achieve the growth we want without compromising our independence,” he said. ARC is wholly owned by Ubuntu-Botho
SEPTEMBER 2016
This was illustrated by Senegal's issu-
a seeming challenge to the independence
by technical support from the Islamic
of the National Treasury.
Investments, which is in turn owned by
Corporation for the Development of the
businessman Patrice Motsepe’s family
Private Sector.
trust along with a number of broad-based
machinations of patronage networks, and
ance of sukuk in 2014 and 2016, aided
According to S&P Global Ratings, South
“This follows many months of such information flow, and stories of evidently patronage-driven contracts/potential
empowerment groupings and the Sanlam
Africa and Côte d'Ivoire are serious
contracts by SOEs to what appear to be
Ubuntu-Botho Community Development
contenders to attract foreign investors
politically connected persons,“ he said.
Trust.
because of their large infrastructure pro-
Van Zyl said ARC had more investments planned in the financial services sector. "It is ARC’s vision to become a leading
jects, which need institutional funding. In addition, these two countries benefit
“As responsible investors – and signatories of the PRI and CRISA – we have a duty to ensure the entities in which we
from a well-developed financial infra-
invest have suitable governance and
provider of financial services in SA," he
structure that could help them become
decision-making structures. The asset
said.
financial hubs for such transactions.
management industry is the caretaker
"In our view, the increasing involvement
MARKETS AND INDUSTRY NEWS
AFRICAN SUKUK MARKET HAS GROWTH POTENTIAL
of, and gatekeeper to, peoples’ savings
of multilateral institutions is one of the
and it is entirely suitable for capital to be
keys to unlock the full potential of the
provided, or denied, to various compa-
continent's fledgling sukuk market,"
nies or sectors based on our considered
Mensah added.
assessments,” he added. Commenting on the announcement,
African sukuk can provide diversification benefits for Islamic investors as well as additional financing opportunities, Samira Mensah, S&P Global Ratings Credit Analyst, has said. “Moreover, we think sovereign sukuk issuance could, in the long term, facilitate
MARKETS AND INDUSTRY NEWS
FUTUREGROWTH SUSPENDS LOANS TO ESKOM, TRANSNET AND OTHERS
Ralph Mupita, CEO of Old Mutual Emerging Markets, said Futuregrowth is one of a number of asset management boutiques owned by Old Mutual, and has a mandate to make independent investment calls on behalf of its clients. “Old Mutual values the broad and deep
the development of Sharia-compliant pri-
Futuregrowth, Old Mutual’s Fixed Income
relationships it has developed with SOEs
vate-sector sukuk on the continent. Given
asset management boutique, has
over many years. These relationships
Africa's significant funding and infrastruc-
announced a decision to suspend any
have been key in building and increasing
ture needs, sovereigns there could benefit
additional loans to certain State-Owned
socio-economic development and driving
from an active sukuk market,” she added.
Enterprises (SOEs) in South Africa until
financial inclusion in South Africa,” he
Africa's extensive infrastructure devel-
they obtain further clarity and comfort
said.
opment needs create a fertile environ-
around the governance and oversight of
ment for the growth of sukuk issuance
these SOEs.
over the next decade, according to S&P Global Ratings. Yet so far the market comprises only $2bn of sukuk from a handful of issuers. By contrast, 17 sub-Saharan African gov-
Futuregrowth’s decision initially includes the suspension of new loans, and roll-
Old Mutual believes that public-private partnerships are critical for much-needed and shared growth in South Africa. Mupita said that comments by Future-
overs of existing debt to Eskom, Transnet,
growth do not represent the broader
Sanral, Landbank, IDC and DBSA.
views of Old Mutual.
Andrew Canter, CIO of Futuregrowth, said
“We respect the independence that fund
ernments issued $46bn of conventional
this decision is driven by growing con-
managers need to deliver investment per-
debt in 2015 alone.
cerns about the governance and decision
formance for clients, and believe that a
structures of the SOEs and will remain in
more constructive model of engagement
place pending a review thereof.
is needed and necessary to build and in-
“Despite sukuk's widespread appeal to investors, we expect that only a few African countries will tap the sukuk market over the next 12 months,” Mensah said. “We see a general lack of clear legal and tax regimes to support a thriving sukuk
“We have now suspended negotiations
crease socio-economic development and
on over R1.8bn of debt finance to three
drive financial inclusion in our country.
different SOEs,” he said.
We will engage the fund manager around
“While we have initially identified the
these issues,” he said.
market, and in many cases, the com-
six large SOEs (principally due to their
plexity of structuring sukuk could deter
capital/money market funding), we may
existing commercial relationships and
issuance,” she added.
expand that list as we consider appropri-
public-private partnerships with SOEs and
ate,” he added.
will continue playing a constructive and
Mensah said that multilateral institutions could become increasingly impor-
Canter said that recent reports strong-
“Old Mutual remains committed to our
value-adding role in capital markets, in
tant in enabling countries to enter the
ly hint of conflict between branches of
both listed and unlisted investments,” he
sukuk market.
South Africa’s government, the possible
added.
6 | www.africaglobalfunds.com
NEWS
SEPTEMBER 2016
INVESTORS
LIBERTY TO LIST REIT ON JSE
MOVERS & SHAKERS StanChart’s PE Head of Africa to leave
retaining client relationships. Makhubela will
Standard Chartered Private Equity’s Head of
furthermore be an executive member of Novare
Africa, Peter Baird is set to leave, as the bank
Holdings. Makhubela was previously CEO of All
Liberty Holdings has announced its
trims its private equity team on the continent.
Weather Capital.
intention to list a portion of its premium
Baird, who was appointed in 2011, is responsible
property portfolio on the main board of
for SCPE's Principal Finance business across
LIA hires new CEO
the JSE as a Real Estate Investment Trust
sub-Saharan Africa. He will be replaced by
The Libyan Investment Authority, the sovereign
(REIT) towards the end of 2016.
Ronald Tamale, a former Goldman Sachs analyst.
fund that manages assets and funds valued
The listed REIT, to be called Liberty Two
Tamale will report to Taimoor Labib, Head of Af-
at about $67bn, has appointed Ali Shamekh
Degrees, will have an anticipated net asset
rica & Middle East Private Equity. Tamale will be
as its new CEO. The Board of Directors of the
value of R10bn and will be managed by
leading a team of eight private equity special-
Libyan Investment Authority said Shamekh will
ists within the Bank’s Africa team, and will draw
be expected to help revive the fortunes of the
upon sector and other specialists from across
fund. Hassan Bouhadi, chairman of the Libyan
the SCPE platform..
Investment Authority (LIA) has resigned with
STANLIB. The listing is subject to all necessary regulatory approvals. Thabo Dloti,
Thabo Dlotie Group CEO of Liberty Holdings
immediate effect.
AVCA's Osibo gets promotion The African Private Equity and Venture Capital
Alexander Forbes names Darfoor
Group CEO of
Association (AVCA) has promoted Dr. Ponmile
Group CEO
Liberty Holdings,
Osibo to Manager, Research & Training. Osibo
Alexander Forbes, a global provider of
said: “The JSE
joined AVCA in early 2012 as a Research Analyst.
financial and risk services, has appointed
listing of our
He coordinates African private equity data col-
Andrew Darfoor as Group Chief Executive,
prestigious prop-
lection and analysis, and manages the produc-
effective September 1, 2016. Darfoor has over
erty portfolio
tion of AVCA’s research and market intelligence
20 years’ experience in the financial services
will enhance the
products. His role also involves developing and
sector gained in countries such as Bermuda,
value proposition
facilitating in-depth training programs for fund
Canada, Switzerland, the US and the UK. He
managers and African institutional investors.
joins Alexander Forbes from Sun Life Financial
to Liberty’s customers and further improve the returns profile of this premier portfolio of properties.” Liberty is looking to raise up to R4bn in new capital at listing. Liberty will also offer existing policyhold-
International, a division of Sun Life Assurance
Novare hires new CEO and board member
Company of Canada, where he was CEO, leading
Financial services group, Novare has appointed
a division providing life insurance, protection,
Romeo Makhubela as the new CEO of Novare
savings and wealth management solutions
Actuaries and Consultants. Makhubela's role
across 50 countries in Asia, Middle East, Africa,
ers an exclusive opportunity to switch up
will include generating growth, driving strat-
Europe and the Americas managing circa $15bn
to R3bn of their current direct property
egy and operations as well as managing and
in assets.
holding into a new property portfolio that will invest in the listed entity. The REIT will have the ability to borrow
On a successful listing of the REIT, Liberty
and raise equity to create further growth
expects the Liberty Property Portfolio to
opportunities and enhance returns for its
increase in value by between 3% and 5%.
African countries, predominantly with a retail bias. “We have the track record and expertise
The listing will also support expansion of
to do this. For us Liberty Two Degrees will
“The capital raise will enable Liberty to
and enhancements to the existing property
be a property fund that sees things differ-
expand and enhance its existing portfolio
assets, and broaden their accessibility to a
ently,” she said.
of quality property assets in South Africa
wider investment community.
shareholders.
and sub-Saharan Africa, gain access to a far
Liberty Two Degrees will be, managed by
The concept of a REIT is gaining momentum with some R400bn of equity in REIT’s
wider investor community, and significantly
the same team within STANLIB that has
add to the dynamics of the listed property
managed the Liberty Property Portfolio for
sector of the JSE,” said Dloti.
many years under the leadership of Amelia
parent and well regulated, and offers in-
Beattie as the CEO.
vestors exposure to real estate properties
“This initiative further enhances Liberty’s reputation in property investment and
According to Beattie, the REIT has a sub-
now listed on the JSE. A REIT is highly tax-efficient, price trans-
through a JSE-listed instrument.
demonstrates our ability to innovate and
stantial pipeline of investment opportu-
create an exciting investment opportunity
nities and new developments to grow the
been a leading South African asset class
Listed property has for the last 20 years
for our customers and investor community
portfolio within South Africa and invest in
performer, with average annual total re-
at large,” he added.
select properties in growing sub-Saharan
turns of 19%.
www.africaglobalfunds.com | 7
NEWS
SEPTEMBER 2016
TURN8 LAUNCHES VC FUND FOR TECHNOLOGY INNOVATION
T
TURN8, a Dubai based venture
"follow-on funding” to help them grow
capital firm, has launched $60m
and scale,” he said.
Venture Capital Fund that will
invest in technology startups in the MENA
seed capital in the MENA region catering
region.
to the global startup eco system.
Kamal Hassan, General Partner of TURN8,
Since the inception of TURN8 accelera-
said: “No allocation has been set for North
tor in 2013, 60 companies have received
Africa, however, our fund will invest in the
pre-seed funding and raised over $4m in
region as deal flow develops.”
co-investment from other VCs .
“We will mainly target Egypt, Morocco,
Kamal Hassan General Partner of TURN8
TURN8 is one of the largest providers of
TURN8 growth accelerator offers several
and Tunisia for investment opportunities,”
rounds per year focused on startups with
he told Africa Global Funds.
minimum viable product innovations
The fund will make investments between $100k and $500k. According to Hassan, the new fund will follow a dual investment strategy. The fund will provide seed funding for accelerator stage startups, early stage entrepreneurs with proven minimum valuable
fit in the MENA region. Hassan said that the new fund “complements our current accelerator offering and fills in the gap to help startups grow”. “We have invested in 60 startups through our accelerator program and
products. “Once the startup graduate from our accelerator, we could provide funding
For the same period local equities deliv-
(MVPs) and immediate product-to-market
now the fund will help them grow post acceleration,” he added.
This new portfolio, with returns driven
Capital, a JSE listed investment holding
ered annual returns of 16%; local bonds
by the Liberty REIT shares, enhances its
company with a reported net asset value
12%; and cash 9%.
customer value proposition.
of R1.42bn, is expected to complete by the
Although Liberty Two Degrees will issue
The existing Liberty Property Portfolio
end of this year.
shares only to institutional investors on
that has been core to Liberty’s proper-
listing, Liberty has crafted an exclusive
ty offering for many years will remain
regulatory approvals, which are expected
opportunity for its retail customers and
unchanged.
to be received by December 31, 2016.
financial advisers, by creating a new
Liberty has appointed Standard Bank
The transaction is subject to various
Following completion, Stellar Capital ex-
property portfolio – the Liberty Real Es-
of South Africa and Java Capital as joint
pects to hold a strategic interest of 40%
tate Portfolio – which will invest solely in
bookrunners and transaction advisers to
to 50% in Prescient’s financial services
shares of the listed Liberty Two Degrees.
the listing.
operations.
Dloti said: “Liberty's retail custom-
Liberty Holdings is a financial services
The final percentage is dependent on
ers have benefited over the years from
group with a representation in 16
various elections made by Prescient’s
our property investment expertise; we
countries across the African continent.
existing shareholders.
MARKETS AND INDUSTRY NEWS
the election made by Prescient’s existing
anticipate that they will similarly be very excited about our new related retail offering when it is formally launched in September.” Policyholders currently invested in the Liberty Property Portfolio can switch into
The cash consideration is dependent on
STELLAR-PRESCIENT DEAL TO CLOSE BY THE END OF THIS YEAR
the new portfolio on a limited basis, and
shareholders, however the maximum cash consideration is expected to amount to R860m. “The investment is an exciting transaction for both Prescient and Stellar Capital,
those that elect to do so before the REIT
The acquisition of Prescient’s financial
which is expected to result in significant
lists will get preferential terms.
services (PFH) operations by Stellar
benefits for Stellar Capital, PFH and
8 | www.africaglobalfunds.com
NEWS
Prescient shareholders and clients,” the companies told Africa Global Funds in a joint statement. Stellar Capital will acquire a strategic interest in a proven, scalable and diversified financial services business with exciting growth prospects. “Stellar Capital is acquiring its interest at a fair valuation and will be able to add long term value via its network of rela-
SEPTEMBER 2016
INVESTORS
MASTERCARD FOUNDATION & ROOT CAPITAL TO SUPPORT EARLY-STAGE AGRICULTURAL BUSINESSES IN WEST AFRICA
Diaka Sall, Root Capital’s General Manager for West Africa, said: “With the support of The MasterCard Foundation, Root Capital will be able to increasingly target earlier-stage businesses in West Africa that operate on the fringes of financial inclusion – businesses that demonstrate potential to grow and generate increased impact.” Root Capital will collaborate with The MasterCard Foundation to accelerate the bankability and growth of more than 100
tionships.” PFH management shareholders will rein-
The MasterCard Foundation has commit-
high-impact, early-stage agricultural busi-
vest in the business and new management
ted $5.2m to Root Capital over five years
nesses with capital needs under $150,000
retention arrangements will be agreed,
to support early-stage agricultural
and/or business revenues under $300,000.
ensuring the commitment of the team to
businesses that generate transformation-
the success of PFH in the long term.
al impact in rural communities in Côte
of advisory services, including leadership
d’Ivoire, Ghana, and Senegal.
development of agribusiness employees;
"New BEE ownership deals are expected to be completed at the level of PFH and
Ann Miles, Director of Financial Inclusion
In addition, it will pilot an expanded set
financial literacy training for smallholder
Prescient Investment Management Propri-
and Youth Livelihoods at The MasterCard
farmers; mobile technology and mobile
etary Limited, enhancing the competitive
Foundation, said: “With Root Capital we
money; and empowering local microfinance
position of PFH."
will help to bring much-needed financing
institutions to better serve the agricultural
and capacity building to businesses in West
sector; and contribute to sector learning
transactions in Prescient Securities and
Africa that work with farmers otherwise
by developing a framework for document-
African Collective Investments.
excluded from the formal economy.”
ing and analyzing the costs and impacts
Prescient have already complete BEE
For Prescient shareholders, the proposed
“We see this as a good avenue to help in-
associated with early business growth in the agricultural sector.
transaction, combined with the retention
crease incomes and opportunities for 4,000
of PBT Group shares (which will remain
employees of agricultural businesses,
listed on the JSE), is expected to result
300,000 smallholder farmers, and over two
need of early-stage West African agribusi-
in a value unlock as Prescient has traded
million farm family members,” she added.
nesses for capital and capacity building.
at a discount to the fair value of the two
Without access to predictable markets
With an estimated 48 million smallholder
This initiative will help address the urgent
for their crops, small-scale rural farmers
farmers in sub-Saharan Africa, however,
are often forced to accept lower prices for
who remain disconnected from such
vestment will be distributed as a cash
their crops and find themselves trapped in
businesses and the stable sources of
distribution to Prescient’s existing share-
a cycle of poverty.
income they offer, a great deal of work
component parts of its business. Proceeds from Stellar Capital’s in-
holders, who may elect to apply the cash
While the global credit supply for small-
distribution to either i) retain the cash
holders has grown in recent years, it is
received, ii) subscribe for Stellar Capital
geographically skewed with less than 10%
shares at R1.71 or iii) acquire shares in
of financial flows reaching sub-Saharan
Prescient’s unlisted financial services
Africa.
operations.
Root Capital is a US-based impact in-
This acquisition will be Stellar Capital’s
vesting firm that grows rural prosperity in
third deal in the financial services sector,
poor, environmentally vulnerable places in
after it bought Cadiz Asset Management
Africa, Asia, and Latin America.
and Praxis Financial Services. Stellar Capital said that whilst the
Over the seven years that Root Capital
remains to be done.
FUNDRAISING
ORIOS CAPITAL AIMS TO RAISE OVER $1M FOR AFRICAN STARTUPS
Orios Capital, a Ghanaian venture capital firm, has announced plans to raise more
has worked in West Africa, it has provided
than $1m to co-invest in scalable and
primary focus will be on completing the
loans of between $50,000 and $2m to 52
impact-based startups in Africa.
announced transaction, new BEE owner-
agricultural businesses that have raised
ship transactions are expected to be com-
incomes for nearly 12,000 employees and
said: “Our work is pivotal in redefining
pleted within Prescient’s financial services
over 190,000 smallholder farmers.
solutions to poverty reduction in Africa.
operations.
Root Capital has also scaled its advisory
Kweku Awotwi, Chairman of Orios Capital,
We want to be the Fund that provides the
“We do believe that the best form of
program in the region, offering agricul-
patient capital needed to transform such
growth is organic growth, but Prescient
tural business leaders a suite of training
businesses to achieve that mandate.”
will be looking for some acquisitions in
modules to develop the leadership and
jurisdictions where they believe they can
financial management skills they need to
ernance Structure and cumulative experi-
add value,” the company said.
grow and sustain their businesses.
ence will serve as a differentiating factor
“We strongly believe that our strong Gov-
www.africaglobalfunds.com | 9
NEWS
in disrupting the private equity market for Startups,” he said. Some of the key sectors that Orios is
SEPTEMBER 2016
It is sponsored by Industrial Promotion Services (Kenya) and SG Bujagali Holdings, an affiliate of Sithe Global Power (USA).
round of financing from the IFC – led investment consortium. The Series B round will help Zoona scale
targeting include healthcare, technology,
Jubilee Holdings, which owns Jubilee
services, agribusiness, clean water, formal
Insurance, is a joint shareholder in the
markets and 30 million active consumers
housing and quality education.
250-megawatt Bujagali Energy through its
across Africa by 2020.
up its operations as it aims to reach 10
Orios Capital said it is set to formally
subsidiary, Jubilee Investment Company.
“As the world economies transit from
launch its operations later this year as
Juma said Jubilee Holdings will acquire
cash-based to cashless, an entire infra-
it continues its own fundraising to seed
shares from Sithe Global Power, which is
structure is needed to make that transi-
Ghanaian startups when it announces its
selling its interest in the venture: “We are
tion possible and ensure equal availabili-
first call for proposals.
taking more equity from Sithe Global”.
ty of both ‘currencies’, said Andi Dervishi,
According to John Armah, Co-founder and
Over the past five years, Jubilee Holdings
CEO of Orios, the firm is expecting to raise
has implemented a strategy to diversify
its seed capital from institutional inves-
investments to reduce the risk of volatility
tors, donors and private equity firms.
from stock market movements.
Established in 2012 as the Ghana Centre
This strategy includes increasing govern-
Global Head of IFC’s Fintech Investment Group. “Zoona has made this possible in Zambia and Malawi and is planning to do the same in many other markets in Africa.
for Entrepreneurship, Employment and
ment bonds and diversifying into invest-
Whether in the form of a money transfer
Innovation (GCEEI), Orios Capital has devel-
ments in the energy sector, such as Tsavo
or a cash collection network, these retail
oped into one of Africa’s emerging venture
power and Bujagali and in other infrastruc-
footprints play an important role in ac-
capital funds for startups.
ture projects that are giving returns in
ceptance and adoption of the new form of
dollar terms.
money and will be critical for the financial
Over the past four years, the company has trained over 5,000 SMEs and been the
Jubilee Holdings also has major invest-
brain behind some of the most successful
ments in SEACOM, the first Fibre Optic
startups from Ghana, including Wear Pur-
submarine cable system covering over
ple, Oasis Websoft, CellAfrique.net, UTAMA
15,000kms from South Africa to France.
Africa Ltd, Chaste clothing, BKC Consulting and AgroSoft Ghana Ltd.
“Projects like Bujagali and SEACOM pro-
service industry as it transforms itself,” he said. First round investors Accion, whose investment is managed by Quona Capital, and Omidyar Network, an impact invest-
vides us with guaranteed income in USD
ment firm started by eBay founder Pierre
terms which gives Jubilee Insurance the fu-
Omidyar, have reaffirmed their commit-
office in Accra with intentions to extend its
ture stability it has planned for,” said Juma.
ment to Zoona by more than doubling
services into other African countries within
Apart from diversification plans, Jubilee
The company operates from its head
the next three years.
INVESTORS
JUBILEE HOLDINGS INCREASES STAKE IN BUJAGALI HYDROPOWER PROJECT
East Africa’s insurance and financial services group, Jubilee Holdings has
Holdings is also looking at regional expansion to other markets and has already
The Lundin Foundation, a foundation that provides capital to high potential
Republic of Congo (DRC) and is looking into
businesses to create wealth and alleviate
expanding into Ethiopia, subject to regula-
poverty, has also increased its stake in
tory approvals.
the company.
As at June 30, the Jubilee Holdings’ asset
The round also includes investment from
base was Ksh87.6bn, the highest in the
4Di Capital, a venture capital firm based
insurance sector that is a 6.3% growth
in South Africa, headed up by entrepre-
compared to the end of 2015.
neur, investor and Zoona non-executive
The insurer also increased its pre-tax profits by 10.2% to Ksh 1.972bn over last
investment in Uganda’s 250-megawatt
year.
The investment is an additional 8.8% in
Series B round.
started operations in the Democratic
announced an additional Ksh5.5bn Bujagali Hydropower Project.
their respective investments during the
Jubilee Holdings is cross listed on the Nairobi Securities Exchange (NSE), Dar es
director Justin Stanford. In addition, Patrick Pichette, former CFO at Google and long-time Zoona advisor, has also invested in the company. Zoona uses technology to provide finan-
the equity of the project, according to Nizar
Salaam Stock Exchange (DSE) and Uganda
cial services to underserved and finan-
Juma, Jubilee Holdings Chairman.
Securities Exchange.
cially excluded communities across Africa.
“We have a joint 30-year concession deal to operate the plant that provides 40% of Uganda’s power”, he said. The Bujagali Hydropower Project is a 250-megawatt power-generating facility
The company has over 1.5 million active
DEALS
ZOONA RAISES $15M IN SERIES B ROUND
being built on the Victoria Nile River near
users, and its system has processed over $1bn in mobile money transactions since its founding 2009. The company’s mobile money platform has already enabled more than 1,000
the Town of Jinja, in Uganda, by Bujagali
Zoona, an African financial technology
entrepreneurs to become Zoona Agents,
Energy.
company, has raised $15m in a second
creating over 2,500 jobs at 1,500 agent
10 | www.africaglobalfunds.com
NEWS
outlets in the process. Mike Quinn, Zoona CEO, said:“Technology
SEPTEMBER 2016
office, retail and industrial properties. This will transform Vukile into a special-
has the potential to bring about financial
ised retail property fund in South Africa
inclusion to underserved communities
with over 90% of its portfolio comprising
across Africa.”
high-quality retail assets.
“This investment round marks a key milestone in our journey to build a billion
Vukile will also benefit from its passive stake in the high-growth new GemGrow.
With Synergy’s A and B share structure, each share offers investors a different risk and reward profile. Synergy A shares offer more risk-averse investors preferential dividends capped at 5% growth per annum, representing secure, predictable earnings.
dollar business that helps communities
In the case of Arrowhead, its subsidiary,
Its B shares make it the ideal structure
thrive. We are thrilled that investors the
Cumulative, which holds 100 high-yielding
for investors looking for a higher-growth
caliber of IFC, Accion and Quona Capital,
office, retail and industrial properties val-
proposition.
Omidyar Network, Lundin Foundation and
ued at R1.9bn, will be acquired by Synergy
4Di Capital buy into and support Zoona’s
in return for the issue of Synergy B shares
ers, remaining distributable earnings
vision. Having Patrick Pichette invest, a
to Arrowhead.
accrue to B shareholders.
visionary and long-time supporter of Zoona, is also very exciting,” he added.
After paying dividends to A sharehold-
This will realise Arrowhead’s strategy of placing its high-yielding properties in a separate JSE-listed subsidiary.
LAUNCHES
VUKILE, ARROWHEAD AND SYNERGY TO LAUNCH GEMGROW PROPERTIES
Arrowhead property portfolio will consist of large quality properties. Mark Kaplan, COO of Arrowhead Properties, said: “Transferring our high-yielding properties into a separate listed subsidiary that is positioned for yield-enhancing
Vukile Property Fund, Arrowhead
growth is a strategic objective for us.
Properties and Synergy Income Fund have
We are thrilled to achieve it with this
concluded agreements to create a
transaction which creates an income-fo-
high-yield, high-growth fund within the
cused fund that invests in a niche space,
existing entity of Synergy, to be renamed
currently ignored by most listed property
GemGrow Properties.
funds, where its dedicated management
Gerald Leissner, Arrowhead Properties CEO, will become the CEO of GemGrow. “The transaction is a unique meeting of minds, addressing various strategic objectives of three separate entities, in turn creating a vehicle that offers sharehold-
can add real value. Arrowhead will benefit from a refined portfolio of bigger and better quality properties to focus on going forward.” Synergy’s asset and property management will be internalised.
ers exposure to a unique dual-class share
To achieve this, Synergy will acquire its
structure with a focus on acquiring assets
asset manager, Vukile Asset Management,
at attractive yields that will enhance
in return for the issue of Synergy B shares
earnings and growth prospects for the
to Vukile.
company,” said Leissner. The transaction is expected to increase
Laurence Rapp, Vukile CEO, said: “For some time now, our goal has been to craft
Synergy’s market capitalisation to R3,4bn,
Vukile’s direct South African assets into
with a property portfolio valued at
a specialist retail property fund. With
around R4,4bn.
this transaction, Vukile will achieve our
The GemGrow vehicle will re-energise
goal, placing over 90% of our assets in the
and differentiate Synergy and give it a
most defensive and preferred proper-
new platform for growth with yield-en-
ty sector. At the same time, it reduces
hancing acquisitions.
Vukile’s gearing and achieves our objec-
To establish GemGrow, Synergy’s portfolio will be reconstituted with properties from both Vukile and Arrowhead for its asset base. In the case of Vukile, a R2,45bn asset
tives for Synergy only 18 months after successfully acquiring it.” After the transaction’s implementation date, set for October 1, 2016, Arrowhead will hold around 62% of Synergy B shares
swap will see Synergy exchange its entire
(55.22% of Synergy’s share capital) while
portfolio of 14 retail shopping centres in
Vukile will hold just over 29% of Synergy B
return for 29 of Vukile’s higher-yielding
shares (26.38% of Synergy’s share capital).
Support our Publication: Purchase a Subscription Share our articles www.africaglobalfunds.com | 11
SEPTEMBER 2016
ANALYSIS
SHARIA FINANCE and Africa's Economic Development By Said DeSaque, CEO & Founder, Desaque Macro Research
H
itherto, the bulk of funding deployed to finance Africa’s
partial ownership of underlying assets where the rate of return is
economic development has not been Sharia-compliant
determined by the underlying performance of these assets. Thus,
due to the requirement to pay interest to lenders.
Sharia-compliant investment banking transactions, such as sukuk
Periodically, the inability of governments to repay interest has
issuance, are asset-backed. Meanwhile, the number of Islamic
eventually resulted in debt forgiveness by foreign banks. While
investment funds offered by asset managers has grown in recent
Islam is a major religion on the continent, its communities have
years, but their average size remains relatively small. These pre-
historically been underserved by banking systems and capital
dominantly invest in Sharia-compliant equities and money market
markets. Africa’s population is expected to double by 2050 to 1.9
instruments. Finally, insurance represents the smallest component
billion, particularly in those countries with sizeable Islamic
of Islamic finance and is based upon principles of joint guarantees,
communities. This demographic growth should imply, therefore, a
mutual assistance and burden-sharing. Typically, resources are
considerable increase in the demand for financial products
pooled with the agreement to only deploy if absolutely necessary.
satisfying Sharia principles. Access to Islamic financial products in Africa has, however, signif-
Sharia-compliant financial assets have grown significantly in recent years, particularly the since the global financial crisis.
icantly lagged behind other regions, such as the Middle East and
According to the Islamic Financial Standards Board, based in Kuala
South East Asia. This is attributable to insufficient understanding,
Lumpur and regarded as the body that sets the standards for
both legal and technical, by end-users and policymakers. Multi-
Islamic finance, total Sharia-compliant financial assets stood at
lateral development agencies and banks are now playing a greater
$1.9trn at the end of 2015. The overwhelming bulk ($1.5trn) was ac-
role in enhancing Africa’s understanding of Sharia-compliant
counted by banking systems, while the global outstanding amount
finance. Furthermore, the International Monetary Fund (IMF) has
of sukuk bonds stood at $290bn. Meanwhile, Islamic investment
also committed itself to a better understanding of Islamic finance
funds’ assets totalled $71bn and insurance assets were estimated
nuances. There has been a growing realisation by governments
at $23bn. These numbers are paltry compared to conventional,
that these mechanisms can play a significant role in providing
non-Islamic financial assets. The IMF estimates that Sharia-com-
alternative funding sources, particularly during a period when
pliant financial assets comprise just 1% of the world’s total. The
sovereign finances have been squeezed by the sharp drop in com-
contribution of Sub-Saharan Africa (SSA) countries to the global
modity prices.
growth in Sharia-compliant finance has hitherto been insignificant. Only $24bn of the $1.5trn in Islamic banking assets is located in
BASIC INSIGHTS INTO SHARIA FINANCE ACTIVITY
SSA, while the incidence of sukuk, investment funds and insurance
Sharia-compliant financial activity can be split into four catego-
is far lower.
ries: 1) commercial banking, 2) investment banking, 3) investment funds, and 4) insurance. Islamic banking is funded by non-interest
SHARIA BANKING: MASSIVE UPSIDE POTENTIAL
bearing accounts and profit-sharing investment accounts on the
Given the widespread distribution of the world’s Muslim popula-
liability side of the balance sheet, while non-loan fee-based ser-
tion, it is impossible to have a single global hub for Sharia-com-
vices, leases, and profit-and-loss-sharing financing dominate the
pliant banking. Kuala Lumpur was an early contender for the role,
asset side. Investment banking involves investors being offered
but it has been facing rising competition, particularly from Dubai,
12 | www.africaglobalfunds.com
SEPTEMBER 2016
ANALYSIS
in recent years. Meanwhile, Africa’s sheer size seemingly makes it
tial to impart significant macroeconomic benefits for SSA countries
impossible to have a single continental hub. Four countries have,
with the correct regulatory oversight. Firstly, there should be
however, had ambitions to play this role: 1) Nigeria, 2) South Africa,
reduced systemic risks, because financial speculation, including
3) Kenya, and 4) Mauritius. Although Nigeria has the largest Muslim
leverage, is strictly forbidden. Short selling is also prohibited. Fur-
population, its Islamic banking infrastructure remains relatively
thermore, the emphasis on asset-backed products and risk-shar-
underdeveloped. Despite its small Muslim population, South Africa
ing makes it an ideal mechanism to fund small-and-medium sized
has been exposed to Sharia-compliant banking since the late-
businesses, as well as large public infrastructure projects. Mean-
1980s. Meanwhile, although the presence of Islamic banking has
while, microfinance is another activity for consideration. For exam-
grown in Kenya since 2005, its share of total banking system assets
ple, Sudan’s central bank, whose banking system is completely run
remains very small. Finally, notwithstanding its small physical size
on Sharia principles, actively encourages microfinance lending.
and low Muslim population, Mauritius has attempted to promote itself as a banking hub. Other countries, notably Djibouti, are also looking to exploit the
Ultimately, Islamic finance should mitigate the risks associated with unsecured lending and consequently ought to result in greater economic and financial stability. The financial crisis in 2007-8
opportunities stemming from the anticipated growth of Islamic
caught many regulators off-guard. There has, therefore, been a
banking. There are 20 countries in SSA that offer some form of
knee-jerk reaction by supervisory bodies on a cross-border basis,
Sharia-compliant banking, albeit with varying degrees of intensity.
including the Bank for International Settlements, to make banking
The services offered do not reflect the size of their Muslim popu-
systems safer. Conventional banks in developed economies were
lations. Nigeria’s population is, for example, nearly 50% Muslim,
exposed as having deficient capital buffers during the financial cri-
but Islamic banking accounts for below 3% of the system’s total
sis, and the purpose of Basel 3 capital requirements is to address
assets.
the shortfall.
The under-representation of Sharia-compliant assets within the
Basel 3 does not, however, make any distinction between Islamic
banking systems of Muslim countries is, however, not unique to
and conventional banks, but the former tend to embrace far more
Africa. Even within the Gulf Cooperation Council countries, Islamic
conservative business models than the latter. Islamic banks will,
banking assets comprise below 40% of the total. Incidentally,
therefore, tend to have higher capital buffers than their conven-
only Iran and Sudan have banking systems exclusively based on
tional counterparts, although this does not absolve their manage-
Sharia-compliance. There is, therefore, great potential to grow
ment of the responsibility of exercising the highest standards of
the market share of Sharia-compliant banking assets in SSA. Much
corporate governance. A potential problem stemming from Basel
depends on the ability of governments and regulators to devise
3 is the requirement to hold more liquid assets, typically money
transparent legal frameworks to foster growth, including the
market instruments. The aim is to enhance the aggregate level of
inception of Sharia-compliant deposit insurance.
liquidity in banking systems, but the payment of interest on these instruments means liquidity management potentially becomes an
SUKUK BONDS: IDEAL FOR AFRICA’S INFRASTRUCTURE FUNDING? While boosting Islamic banking in Africa will bring benefits for the
issue for Islamic banks. Further evolution in the realm of developing new Sharia-com-
greater population, Sharia-compliant capital market activity is
pliant money market instruments is, therefore, required. Prod-
usually the domain of governments and, belatedly, corporations.
uct innovation and development will be important in promoting
Islamic or “sukuk” bonds must help to fund tangible and produc-
Islamic finance, particularly banking, in SSA. According to Pew, the
tive assets. They are seen, therefore, as a perfect instrument to
respected US think tank, the Muslim population of SSA is forecast
finance infrastructure projects. Furthermore, part of the increased
to rise to 386 million in 2030 from 243 million in 2010. The potential
interest in sukuk bonds is the opportunity to tap new sources of
demand for Sharia-complaint products is, therefore, considerable.
funding, notably Middle East investors who already understand
It is incumbent for SSA governments to unlock these opportuni-
the nuances of Sharia law.
ties, including, if necessary, strong regional cooperation.
Global issuance of sukuk bonds by SSA countries remains low as a percentage of global origination. Nigeria, Ivory Coast, South
Said DeSaque is Founder & CEO of DeSaque Macro Research, which
Africa, Sudan, Gambia and Senegal have hitherto tapped into this
was formed in 2012. He has over 30 years of experience working as
market. Cross-border bank lending has, in recent years, become
a professional economist in financial services, primarily based in
an increasingly capital-intensive activity. Eurozone banks have
London. Prior to establishing DeSaque Macro Research, Said held
consequently been shrinking risk-weighted assets. This backdrop should, therefore, create both an incentive and opportunity for SSA countries to switch from bank borrowing to further deepen
positions as Senior Economist and Investment Strategist at US banks Robert W Baird and William Blair. He began his career as a graduate at PaineWebber in 1986, where he eventually became Head of the London Economics Department in 1996. Said has a keen interest in interna-
their capital markets, including greater issuance of sukuk instru-
tional relations, along with their implications for economic develop-
ments.
ment and financial markets. His research interests include, amongst
SHARIA-COMPLIANT FINANCE IN SSA Notwithstanding the large Muslim population that is underserved by financial services, Sharia-compliant products have the poten-
many others, the economic transformation of emerging and frontier markets, particularly in Africa, and its implications on global capital markets. He is a member of Chatham House, a leading independent global think-tank on international affairs and economics in London.
www.africaglobalfunds.com | 13
ANALYSIS
SEPTEMBER 2016
HEDGE FUND
Administration in South Africa By Hayden Reinders, Head of Hedge Fund Administration, Prescient Fund Services
I
n April 2015, the South African Financial Services Board
monthly dealing hedge funds, were used to catching up trade and
(“FSB”) released Board Notice 52, declaring all hedge
profit and loss data towards the end of a given month as part of
funds to be regulated hedge funds, falling under the
their monthly hard NAV process and were not focussed on pure
Collective Investment Schemes Control Act (Act 45 of 2002)
daily soft pricing (reconciling cash, positions, trades on a daily
(“CISCA”). A collective investment scheme (“CIS”) can be described
basis with NAV based fee calculations). With the proliferation of
as an investment product that allows many different investors to
the new regulated hedge funds, even if that hedge fund structure
pool their money into a portfolio. Unit trusts were the first
consists of monthly dealing investor price points, under the CISCA
collective investment scheme to be offered to investors in South
environment various other stakeholders need daily up to date
Africa. Hedge Fund Managers, needing to comply with CISCA were
data, in terms of decision making (fund manager), compliance
now required to either register for their own Management
and risk management. This will lead to more accurate daily priced
Company (a registered Management Company as defined under
funds even if the fund does not deal daily.
CISCA, section 42) or to platform with an existing Management
2. To enhance hedge fund risk management and compliance
Company under a co-naming white label arrangement. All Hedge Funds needed to register as a regulated hedge fund
Under Board Notice 52, daily compliance checking needs to be performed for all regulated hedge funds, requiring daily rec-
by 30 September 2015, choosing to register as either a retail or
onciled data on positions, cash, exposures and counterparties.
qualified fund structure. From the end of 2015 to date, declared
In offering a regulated hedge fund, the Management Company
regulated hedge funds have begun transitioning to the new regu-
needs to ensure that they either provide daily compliance and risk
latory structures. South Africa’s hedge fund industry is currently
management functions (including the use of a suitable adminis-
in a state of transition. A significant amount of the existing hedge
trator capable of providing daily accounting data) or platform to
funds went the route of registering as a qualified hedge fund.
allow these functions to be suitably performed under a platform
However, there is newly sparked interest coming from Fund Managers coming into the retail space, which may increase the amount of retail hedge fund products open to the general public.
arrangement. 3. To known platforms The rise of regulated hedge fund platforms in South Africa has
Retail investors could now enter hedge fund structures, attracted
started from the announcement of regulated hedge funds. Plat-
to brand name hedge fund managers, known platforms and to new
forms need to offer smart outsourced arrangements in terms of
opportunities previously not made available. Retail investors, al-
administration, approved counterparties like prime brokers, trus-
though requiring smaller minimums than the required one million
tees and risk providers. Platforms also need to ensure a daily Net
rands (R1 million) investor requirement for qualified hedge fund
Asset Value processing model occurs with their outsourced admin-
investors, are now able to invest. This also encourages the more
istrators enabling daily reconciliations on the overall NAV, prime
traditional Fund Managers to register and offer more alternative
broker, counterparty, cash and positions in real time. Not only
products than the more traditional unit trusts. There are also op-
must the platform give the Hedge Fund up to date performance
portunities now for linked investment service providers (“LISPs”)
data who in turn can use this information for real-time decision
to also attract hedge funds onto their distribution lists to further
making, it needs to make this data available for stakeholders in
diversify investor choices. Previous more traditional based admin-
the value chain on a daily basis, notwithstanding ensuring regula-
istrators, risk providers, compliance offers and legal advisors are
tory compliance in terms of CISCA, at all times.
also expected to gain from the announcement of regulated hedge funds. ADAPTATION CHALLENGES 1. To provide daily up to date data The face of hedge fund administration needed to adapt the pending regulatory environment. Too often Administrators, in valuing
14 | www.africaglobalfunds.com
Hayden Reinders is the Head of the Alternative Administration for Prescient Fund Services, the administrator of choice to Prescient Management Company (RF) (Pty) Ltd, a registered Management Company under CISCA in South Africa.
AFRICA
GLOBAL FUNDS
AGF Africa Service Providers Awards 2016
JoinCel us forebrata niigonht of Finalists Announced: Awards Gala Dinner Event:
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MARKET
SEPTEMBER 2016
EGYPT: A new Investment era? By Sébastien Hénin, Head of Asset Management, The National Investor (TNI)
E
gypt and the International Monetary Fund (IMF) signed a
comeback on international markets to raise money. The reforms
preliminary agreement on a $12bn 3-year loan facility
package, which is still under negotiations, will include amongst
on August 11. If approved, the loan will support
other measures subsidy cuts and the introduction of the VAT to
government reforms, which are required to support the Egyptian
widen the tax base. The devaluation of the EGP and the introduc-
economy. The reduction of the public deficit that is above 12%,
tion of a floating rate are also part of the negotiations to defreeze
adjustment of the Egyptian market and foreign reserves’ increase,
the foreign exchange (FX) market.
which have reached a critical level - are short term milestones. Since the Arab spring, the growth has been subdued in the coun-
Implementation of these measures could support the revival of the local economy but it’s not without risks. Inflation is above 10%
try. The average yearly GDP growth has been slightly above 2%
and will probably accelerate with these measures. In a country
during the past five years and key macroeconomic and monetary
where 40% of the population lives below the poverty line, any
indicators have shown the vulnerability of the Egyptian economy.
sudden inflation spike might have some social repercussions.
Recent initiatives or events have not supported the recovery.
There is also a political risk. Egyptian people are probably the
The international conference, which took place in Sharm El Sheikh
most nationalists in the Arab world and these unpopular measures
in March 2015, was a great political and economic success - Egypt
could be seen as a foreign involvement in local affairs and might
secured $60bn in investments and grants. Unfortunately, the
weaken the local government.
implementation of these measures has not been successful - a common weakness across emerging countries - and the majority
FX MARKET - FIRST STEP FOR FOREIGN INVESTORS
of these investments have not seen the light. The enlargement
Foreign investors, which have avoided the country in the past
of the Suez Canal has so far a limited economic impact and the
quarters, might take these measures positively. A fluid FX mar-
money invested could have been deployed in other infrastruc-
ket will be the first step for foreign investors; they will come
ture projects. The terrorist attack against the Russian airplane in
back and invest massively in the country only if they don’t fear
Sinai last November hit the tourism sector - a key provider of hard
additional devaluation. The non-official FX market is pricing a
currencies and jobs.
40% devaluation; the EGP is trading at 12.5 against the dollar (see
The loan agreement, if approved by the IMF executive board,
corresponding graph). Even if this level doesn’t necessarily reflect
will not only allow Egypt to finance its budget deficit, but also to
the fair value of the EGP it gives a good indication of the poten-
access foreign currencies. It will also act as a catalyst to access
tial devaluation. Authorities should go for a strong movement
additional financing from international institutions such as the
and avoid gradual devaluation, otherwise foreign investors will
World Bank and the African development bank and to make a
anticipate further devaluation and they will postpone their invest-
16 | www.africaglobalfunds.com
MARKET
SEPTEMBER 2016
Inflation is expected to move higher and Egyptians would like
USD/EGP EXCHANGE RATES
to get a hedge against inflation.
13.0
Real estate will be in demand; developers will take advantage
12.0
of the situation. There are two large developers listed in the
11.0
country, Emaar Misr, the subsidiary of the Arab regional leader
10.0
Official
9.0
Parallel
8.0
Emaar and TMG, an indigenous player with a dominant position on the mass segment. Both companies have underperformed massively the market since the beginning of the year and valuations are pretty attractive. Local manufacturers, which
7.0
generate a decent chunk of their revenues from exports, might also be in favor. Companies such as Leicico, a ceramic maker
Jul-16
Apr-16
Jan-16
Jul-15
Oct-15
Apr-15
Jan-15
Oct-14
Jul-14
Apr-14
Jan-14
6.0
or Elsewedy cables, a cable maker will benefit from a cheaper Source: TNI
cost base. Entities with foreign assets will also benefit instantly from
ment decisions. The currency issue is not specific to Egypt; many
the devaluation. EFG Hermes, the leading MENA investment
emerging and African countries such as Nigeria have shared the
bank has sold recently its stake in a foreign bank and the
same challenge recently and had to let their currency depreciate.
proceeds have not been repatriated. Global Telecom, a mobile
Investors will also make sure that Egyptian authorities are com-
operator with presence in Africa and Asia, only has foreign
mitted to reforms and will not postpone the implementation of
assets. Importers will benefit from a better fluidity in the FX
these measures. At this stage it’s too early to assess properly the
market, they will not have to deal anymore with currencies
repercussions of the IMF agreement, there are too many assump-
shortage that has impacted negatively their business in the
tions regarding the magnitude of the reforms, the schedule of
past quarters.
their implementation and the repercussions on the local economy.
On the other hand, it will pressure their profit margins and
Foreign investors have recently avoided the country following the
the management will have to make some difficult arbitrages
EGP repatriation difficulties and the currency risk.
between passing the additional cost to the clients or accepting a margin squeeze. Consumer names such as GB Auto, an au-
FINANCIAL MARKETS
tomotive distributor and Juhayna, a food manufacturer, might
Since the rumors of a potential agreement with the IMF have
first feel the pain post devaluation. Some opportunities might
emerged, the Cairo stock exchange has reacted positively, local
also emerge from privatization, which will be back on the
investors took some exposure over the summer. The local index is
agenda. The government might push to make some companies
up 15 % year to date, one of the best continent’s performers.
public to make these reforms more popular and some good
If the deal goes through foreign investors will probably allocate money to local financial markets. The banking sector, the
investment opportunities might emerge. The fixed income market could get some traction; foreign
largest listed sector, is well regulated and offers a wide expo-
investors will contemplate the idea to invest in local T-bills, a
sure to the economy. They might also target companies that
popular trade few years ago. The 12 months T-bills yield 16%,
will benefit immediately from the new economic backdrop.
one of the highest rates across emerging markets.
EGYPTIAN FOREIGN RESERVES (USDbn) 21 20 19 18 17 16 15 14 13 12
Foreign Reserves (USDbn)
Source: TNI
www.africaglobalfunds.com | 17
PROFILE
SEPTEMBER 2016
Meeting with
EAVCA
AGF speaks with Nonnie Wanjihia, Executive Director at EAVCA (The East Africa Venture Capital Association) about the private equity environment in East Africa and the role of EAVCA By Anna Lyudvig
AFRICA GLOBAL FUNDS (AGF): PLEASE TELL US ABOUT EAVCA AND YOUR ROLE AT THE ORGANIZATION.
AGF: WHICH MARKETS IN EAST AFRICA ARE RIPE FOR PRIVATE EQUITY INVESTMENTS?
NONNIE WANJIHIA (NW): EAVCA was begun in 2013 by our seven
NW: Kenya has historically taken the lion’s share of deals in the re-
founding members, Actis, Abraaj, AfricInvest, Centum, Catalyst,
gion and has attracted the majority of PE transactions in East Af-
Fanisi Capital and TBL Mirror Fund. I was brought on as the found-
rica, both by number and value. However, several of our investors
ing Executive Director in February 2013 and see my role as leading
use Kenya as a hub and base themselves here in order to access
the Association in achieving its objectives in the four areas we
the rest of the region. Uganda, Tanzania, Rwanda and Ethiopia,
focus on, namely Advocacy, Intelligence, Networking and Training.
however, are all seeing increased interest from PE investors par-
Since 2013 we have grown to 63 members across the invest-
ticularly given the low penetration in the neighbouring countries.
ment ecosystem in the region from PE firms & DFIs (development
During our conference we created a specific panel to discuss Ethi-
finance institutions), to local asset managers and professional
opian deal activity given the level of interest in the country.
service providers. We have trained over 200 professionals in aspects of PE investing and will restart our training programme again this year. More recently though, we have been focusing efforts on Advocacy, primarily mobilizing local capital where we regularly engage
AGF: WHICH SECTORS ARE HOT AT THE MOMENT AND WHY? NW: Our research with KPMG on the PE landscape in Africa showed that financial services, energy and agribusiness were the top 3 sectors for investment. Given though the demographics in Africa
stakeholders including the pension funds, asset managers and
that are driving PE investment I would say consumer-backed sec-
administrators as well as the Capital Markets Authority and Re-
tors in general represent an attractive opportunity. We are seeing
tirement Benefits Authority. We also focus on Intelligence having
deals in healthcare and pharmaceuticals, education, TMT and of
recently concluded a number of pieces of research, with our latest
course FMCG.
being a case study compendium profiling seven investee companies, and their financial and non-financial impacts. Lastly we are proud to have successfully hosted two PE in East Africa confer-
AGF: WHAT’S YOUR VIEW ON THE EAST AFRICAN PE DEVELOPMENT IN COMPARISON TO OTHER REGIONS?
ences that brought delegates from across the region and as far as
NW: I believe East Africa provides an excellent PE opportunity.
the rest of Africa, which served as a platform to inform the local
Interest in East Africa is continuing to grow backed by certain
markets (entrepreneurs, local investors and regulators) about the
macro-economic fundamentals and economic growth, political
sector as well as other investors interested in regional market
stability and increasing infrastructure spending and of course the
opportunity.
possibility of high returns and favourable entry prices. Further-
18 | www.africaglobalfunds.com
PROFILE
SEPTEMBER 2016
more, the rising middle class, rapid urbanization and youthful population also support the steady and continually increasing FDI inflows as investors seek to take advantage of this growth. The impact of oil and commodities prices on the resource-based economies and slowed down growth in South Africa is encouraging investors towards East Africa. AGF: DO YOU SEE MANY EAST AFRICA-FOCUSED FUNDS IN THE MARKET? CAN YOU COMMENT ON THE FUNDRAISING ENVIRONMENT? NW: Yes, there are a growing number of country-focused funds, regional funds and pan-African funds with local presence. East Africa remains an attractive investment destination and private equity in the region continues to gain traction as an attractive source of risk capital amongst the local business community. From a fund raising perspective, international investors are more comfortable with the region given the economic growth and relative stability, and with added benefit of a track record of PE investments and exits. Pension funds are increasingly looking to add diversification in their portfolios in addition to traditional investments in stocks, fixed income securities and real estate. We
Kenya has historically taken the lion’s share of
have started to see some investment by pension funds into East
deals in the region
African focused PE firms and although the industry is still in its nascent stages, this sends a positive signal where these local institutions can form the basis of a sustainable local pool of capital and crucial drivers of private equity in Africa. AGF: NONNIE, COULD YOU TELL US ABOUT SOME KEY CHALLENGES EAVCA IS FACING? NW: Firstly, the availability of data continues to pose a challenge for members, however the Association continues to prioritise its research efforts in the medium to long term. Secondly the Association continues to advocate for key regulatory reforms to ensure doing business in the region remains attractive. AGF: WHAT ARE YOUR EXPECTATIONS FOR THE EAST AFRICAN PRIVATE EQUITY INDUSTRY GOING FORWARD? NW: I am keen to see more local institutional capital investing into private equity or alongside private equity. It’s important for the sustained growth of the industry that African capital is put to work in African companies.
EAVCA’s objectives Advocacy • To raise awareness of the industry and its impact on economic development in East Africa. • To bridge the knowledge gap between the public and private sectors on the impact of private equity on growing enterprises. • To give the industry a better voice in order to influence policy makers within the government and other institutions Intelligence • To help industry gain more clarity on challenges experienced within the region and how these can be improved. • To provide investors with much needed information such as research material and statistics in order to enable them to make more informed decisions on where to invest and why. • To provide more support to GPs when fundraising.
AGF: WHAT ARE EAVCA’S KEY PRIORITIES FOR THE NEXT 12 MONTHS?
Networking
NW: We will continue to prioritise our Advocacy efforts particular-
• To provide industry players with networking opportunities aimed at allowing them to discuss and debate the challenges and solutions to investing in the region. • To generate co-investment opportunities by bringing regional players together. • To promote East Africa as an attractive investment destination. • To provide rare networking opportunities for staff.
ly with regard to mobilizing local capital in order to further open up the fundraising environment for our GP members. Furthermore we are excited about the reintroduction of our training programme which will be launched later in the year. We have revised the modules and will include some new workshops such as Fundraising. Lastly research is important for the Association and we have received very positive feedback on our research efforts particularly the recent case study compendium. We are currently creating a video report from the interviews with investee companies which we are hoping to release in the coming days. Membership recruitment is always important as the more members we
Training • To develop the industry through trainings tailored specifically to the East African region allowing them to expand on their knowledge and creating skills transfer. • To provide local talent the opportunity to gain global technical expertise.
have the bigger our voice will be.
www.africaglobalfunds.com | 19
COMMENT
SEPTEMBER 2016
What a Kenyan coffee chain shows us about economic development in Africa By Brooks Preston, Vice President of Investment Funds, Overseas Private Investment Corporation
Q
uality Kenyan coffee is sold all around the world but it
Java House, providing the financing and the business know-how to
hasn’t always been easy to find in Kenya.
put the young chain on a growth path.
When California native Kevin Ashley came to Kenya as
“Java House is a great place to hold an informal business meet-
a relief worker in 1993, he quickly noticed that most of the locals
ing, work quietly on your own or celebrate a birthday. A Java House
drank tea.
shop forms an important part of the neighborhood soon after it
“I had wonderful Kenyan coffee in the U.S.,” recalls Ashley, who discovered his entrepreneurial spirit in Africa -- first starting an aviation business transporting relief cargo, and later founding the
opens,” says Mathew Thomas, OPIC’s transaction leader for the Emerging Capital Partners fund. The story of Java House from its founding 17 years ago, provides
Java House coffee chain. From a single café in 1999, Java House has
many key lessons about advancing economic development in
expanded into a 41-store chain in Kenya and Uganda, which today
emerging markets. Here are a few:
operates three different food and beverage franchises including
• Innovation is valuable. While many businesses are built to
Java House cafes, Planet Yogurt self-serve stores and the 360
address a specific, existing need, sometimes the most successful
Degrees pizza chain.
businesses create demand for a new product or service. Since
In addition to acquainting more Kenyans with their own world-fa-
Kenya is a primarily tea-drinking culture, Java House was initially
mous coffee, Java House has helped caffeinate the local economy.
most popular among expatriates. But over time that changed. Java
The business has created 1,800 local jobs and employs African na-
House made some adjustments to the standard American coffee
tionals in all its top management positions. Even its lowest paying
shop model, for example, deciding to serve coffee in ceramic
entry-level jobs are good jobs, paying at least twice the local mini-
mugs rather than paper cups, and started attracting more local
mum wage. All workers have health insurance and a month of paid
consumers.
leave, along with three months of maternity or paternity leave. Small businesses like Java House help illustrate how the Over-
• There is a pent up demand for opportunity. While Emerging Capital Partners helped Java House scale its business, Ashley said
seas Private Investment Corporation’s (OPIC) support for emerging
that from the start he found Kenya to be an essentially easy place
market private equity funds advances our mission of addressing
to do business. “There is a young, optimistic, hardworking and
major world development challenges. As the U.S. Government’s
educated workforce,” he says. “Everybody wants a job and wants
development finance institution, OPIC offers financing and polit-
to advance.”
ical risk insurance to help mobilize private capital in developing
• A single small business can have a big impact. Java House’s job
countries. We support projects that address a range of develop-
creation numbers are impressive but its actual impact extends
ment challenges, from food insecurity to energy poverty, often
beyond the 1,800 people it has employed. By paying wages well
through major infrastructure projects like power plants and water
above the national standard and by offering extensive benefits,
treatment facilities.
the business has helped raise standards across the board for food
We also know that one of the most consistent development
service workers in Kenya. It has also helped bring additional value
challenges worldwide is supporting young generations of workers
to Kenyan coffee. Unroasted coffee beans are a valuable export in
and entrepreneurs. In economies with limited opportunity, small
Kenya. But the coffee that remains in the country that is roasted,
businesses like Java House are a critical source of job creation,
ground, brewed, and served in local restaurants, generates far
helping to promote economic, as well as political, stability. OPIC
more revenue to the local economy.
was able to support Java House through our financing to Emerging
Java House is just one of many small African businesses that OPIC
Capital Partners (ECP), a pan-African investment firm whose staff
has supported through our Investment Funds Department, which
is based mostly in Africa and has a strong understanding of local
since 1991 has invested $5.6 billion across 82 funds operating in
business climates. In 2012, ECP purchased a controlling share of
emerging markets around the world.
20 | www.africaglobalfunds.com
REGIONAL PERFORMANCE
SEPTEMBER 2016
AFRICAN MARKETS PERFORMANCE AFRICA EQUITY INDICES (GROSS TOTAL RETURNS USD) Aug. 2016
3 Month
1 Year
Botswana
Country
-6.97%
-5.02%
-16.23%
Cote d'Ivoire
-0.06%
-1.42%
Egypt
+0.19%
AFRICA SOVEREIGN BOND INDICES (TOTAL RETURNS USD) Aug. 2016
3 Month
1 Year
Botswana
Country
+4.53%
+0.96%
+2.49%
+7.91%
Egypt
+0.03%
+0.20%
+0.62%
+8.97%
+2.10%
Ghana
+16.09%
+2.43%
+6.20%
Ghana
+4.74%
+7.93%
-2.04%
Kenya
+10.06%
+1.87%
+3.27%
Kenya
-8.86%
-11.87%
-5.17%
Mauritius
+5.43%
+1.36%
+2.25%
Mauritius
+1.52%
+5.12%
-1.09%
Morocco
+4.15%
-0.62%
-1.08%
Morocco
-0.05%
+4.10%
+11.21%
Namibia
+8.36%
+0.73%
+3.98%
Namibia
-4.77%
+10.37%
+11.49%
Nigeria
-7.80%
+1.98%
-3.44%
Nigeria
-0.51%
-36.30%
-39.59%
South Africa
+11.60%
-1.73%
+4.52%
South Africa
-7.30%
+9.26%
-0.81%
Tanzania
+10.68%
+1.04%
+5.40%
Tunisia
+3.41%
-2.61%
-11.46%
Tunisia
+4.33%
+0.05%
+1.72%
Zambia
+3.50%
-6.56%
-34.62%
Uganda
+18.75%
+2.94%
+4.42%
Zimbabwe
+0.41%
-4.63%
-26.98%
Zambia
+10.71%
+2.18%
+7.97%
Source: S&P Dow Jones Indices
Source: S&P Dow Jones Indices
AFRICA ECONOMIC INDICATORS (as of 06 Sep. 2016 ) Country
COUNTRY FOCUS: SOUTH AFRICA
Interest Rate (%)
Inflation Rate (%)
CPI
Unempl. Rate (%)
GDP Growth Rate (%)
Debt to GDP (%)
Algeria
4.00
7.43
197.00
11.20
3.90
8.76
Botswana
5.50
2.70
187.00
20.00
2.80
22.70
Cameroon
2.45
0.64
110.00
4.00
2.60
19.90
Cape Verde
7.50
-2.30
117.00
15.80
5.80
123.00
Côte d'Ivoire
3.50
0.40
-
5.30
9.40
36.41
Egypt
11.75
14.00
186.00
12.50
3.80
90.50
Ghana
26.00
16.70
180.00
5.20
4.90
67.60
Kenya
10.50
6.26
171.00
40.00
5.90
52.80
Malawi
27.00
23.50
221.00
6.60
2.90
18.00
inflation outlook from SARB Governor
Mauritius
4.00
1.00
109.00
7.61
3.70
61.60
Lesetja Kganyago. While the SARB may
Morocco
2.25
1.60
117.00
8.60
1.40
63.89
Mozambique
17.25
20.68
139.00
17.00
3.70
55.40
Namibia
7.00
7.00
121.00
28.10
3.50
24.60
Nigeria
14.00
17.10
204.00
13.30
-2.06
11.50
Rwanda
6.50
7.80
111.00
3.40
7.30
28.00
South Africa
7.00
6.00
123.00
26.60
0.60
50.10
Swaziland
7.00
7.50
-
28.50
1.70
9.90
Tanzania
12.00
5.10
104.00
10.30
5.50
39.90
Tunisia
4.25
3.80
131.00
15.40
1.40
47.50
South African assets – broadly – are
Uganda
14.00
4.80
159.00
3.80
-1.30
34.70
pressured. This will likely overshadow
Zambia
15.50
19.60
184.00
13.30
5.00
31.00
Zimbabwe
11.44
-1.60
96.40
11.30
1.50
77.00
In South Africa, CPI inflation slowed from 6.3% y-o-y in June to 6% y-o-y last month. Razia Khan, Chief Economist for Africa, Standard Chartered Bank, said SA July inflation came in much better than expected, despite an anticipated repricing of food imports at the mid-year. “Unsurprisingly given the inflation print, we’ve seen a largely dovish assessment of the
not be ready to cut interest rates any time soon, this will not be lost on markets. We still see future SARB decisions as very much FX-dependent however. Recent political developments in South Africa, with news that the Hawks may still be questioning Finance Minister Gordhan (investors will only see this through a political lens), has created much more uncertainty. The ZAR has given up its gains of recent weeks, and
any other news, despite the temporary relief granted by a better-than-expected July inflation print.”
Source: Trading economics, African Central Banks
www.africaglobalfunds.com | 21
PRIVATE EQUITY FUNDS & DEALS
SEPTEMBER 2016
PRIVATE EQUITY FUNDS & DEALS DEALS (as of 31st Aug. 2016 )
For more information on each transaction, visit Africa Global Funds's website
Company
Investment
Industry
Country
Deal Type
Zoona
Technology
Zambia
Series B round
4Di Capital // Accion // IFC // Omidyar Network // The Lundin Foundation 8 Miles // African Capital Alliance // DEG
Beloxxi Industries
Food
Nigeria
Growth Capital
Afinitas
Adventis Limited
Financial Services
Pan-African
Seed Capital
African Rainbow Capital
Colourfield Liability Solutions
Financial Services
South Africa
Buyout
African Rainbow Capital
CMB International
Financial Services
Mauritius
Buyout
Daikin Airconditioning Egypt
Manufacturing
Egypt
BPE Partners Emerging Africa Infrastructure Fund
Helios Towers Africa
Telecommunications
DRC
Loan
Dynamic Commodities
Food
South Africa
Venture Capital
Investisseurs & Partenaires
Africa Radio
Entertainment
Côte d’Ivoire
Growth Capital
Investisseurs & Partenaires
Barajii
Agribusiness
Burkina Faso
Growth Capital
Enko Education
Education
Pan-African
Growth Capital
Real Foods
Food
South Africa
Growth Capital
mSurvey
Technology
Kenya
Venture Capital
Dayntee Farms
Agriculture
Nigeria
Growth Capital
Invenfin
Investisseurs & Partenaires // Proparco Kleoss Capital Safaricom Spark Venture Fund Sahel Capital
DEALS BY SECTOR (as of 31st Aug. 2016)
DEALS BY COUNTRY (as of 31st Aug. 2016) 25.0%
25.0% 21.4% 21.4%
21.4%
20.0%
15.0%
20.0% 14.3%
10.0%
14.3% 14.3%
15.0%
7.1%
7.1%
7.1%
7.1%
7.1%
7.1%
10.0%
7.1%
7.1%
7.1%
7.1%
7.1%
7.1%
5.0% 5.0% 0.0% 0.0%
EXITS (as of 31st Aug.2016) Company
Divestment
Industry
Country
Buyer
Nature of exit
Aveng Capital Partners
Gouda wind farm
Energy
South Africa
Royal Bafokeng Holdings
Secondary buyout
Aveng Capital Partners
Imvelo Concession Company
Infrastructure
South Africa
Royal Bafokeng Holdings
Secondary buyout
Aveng Capital Partners
N3 Toll Concessions
Infrastructure
South Africa
Royal Bafokeng Holdings
Secondary buyout
Aveng Capital Partners
Sishen Solar Photovoltaic Plant
Energy
South Africa
Royal Bafokeng Holdings
Secondary buyout
Aveng Capital Partners
Steeledale
Steel
South Africa
Kutana Investment Group
Secondary buyout
Rockwood Private Equity // Thebe Investment Corporation
Safripol
Manufacturing
South Africa
KAP Industrial Holdings
Trade
Source: AGF, Preqin
22 | www.africaglobalfunds.com
7.1%
SEPTEMBER 2016
SPECIAL FOCUS
Natural Resources Fundraising The Africa-focused natural resources fund-
resources funds have closed in 2016 so
has been raised for funds that pursue a
raising market is relatively small; Preqin’s
far. However, there are 16 Africa-focused
broader natural resources strategy across
Natural Resources Online contains detailed
funds in market targeting $5.4bn in capital,
several sectors.
information on the 37 unlisted natural
and with time still to pass until the end
resources funds closed since 2008 that
of the year, fundraising for 2016 could yet
ca-focused opportunities has fluctuated
focus on the continent, securing $8.5bn in
improve.
annually, with international fund managers
institutional capital commitments (Fig. 1).
International participation in Afri-
The majority of Africa-focused funds
responsible for an average of 43% of all
Fundraising reached its peak in 2013 when
closed since 2008 target agriculture/ farm-
funds closed since 2008 (Fig. 3). From 2008
10 vehicles raised $5.7bn, far above the
land investments: 15 such funds
to 2010, Africa-based natural resources
average amount raised annually, although
have closed raising a combined $758mn
firms raised the majority of Africa-focused
the vast majority of this total was secured
(Fig. 2). However, due to China-Africa
capital. However, since 2010, internation-
by just one fund, China- Africa Develop-
Development Fund pursuing a diversified
al managers have accounted for the vast
ment Fund. No Africa-focused natural
investment remit, the majority of capital
majority of capital raised (Fig. 4).
*Funds with a primary geographic focus on or substantial investment in Africa (excl. geographically diversified funds with exposure to African natural resources
Fig. 1: Annual Africa-Focused* Unlisted Natural Resources Fundraising, 2008 - 2016 YTD (As at 13 July 2016)
Fig. 2: Africa-Focused* Unlisted Natural Resources Fundraising by Primary Strategy, 2008 - 2016 YTD (As at 13 July 2016) 16
12
12
8
7
4
4
4 3
Aggregate Capital Raised ($bn)
6
5.7 4
4 1.1
0.8
1
0.7
2009
0.1 2010
0.3 2011
0.6 2012
0.7
0.4 2013
2014
2015
0 0.0 2016 YTD
Year of Final Close
Timberland
0.7
Aggregate Capital Raised ($bn)
0.2
0 Metals & Mining
2008
6
Energy
0.04
No. of Funds Closed
8
Agriculture/ Farmland
1
11
2
2
2 0
10
6
5.7
6
No. of Funds Closed
Diversified Natural Resources
10
10
15
14
Primary Strategy
Source: Preqin Natural Resources Online
Fig. 3: Number of Africa-Focused* Unlisted Natural Resources Funds Closed, 2008 - 2016 YTD (As at 13 July
Source: Preqin Natural Resources Online
Fig. 4: Aggregate Capital Raised by Africa-Focused* Unlisted Natural Resources Funds, 2008 - 2016 YTD (As at 13 July 2016)
100%
0%
90%
25%
Proportion of Funds
80%
50%
70%
50%
33%
43% 60%
60% 50%
83% 100%
40%
75%
30%
50%
20%
50%
40%
10% 0%
Domestic Fund Managers
67%
57%
International Fund Managers
17% 2008
2009
2010
2011
2012
2013
2014
20152016 YTD
Year of Final Close Source: Preqin Natural Resources Online
Proportion of Aggregate Capital Raised
2016) 100%
0%
90%
11%
17%
80% 70%
69%
60% 50%
100%
40%
90% 89%
91%
78%
86%
Domestic Fund Managers
83%
30% 20%
31%
10% 0%
10% 2008
2009
2010
International Fund Managers
2011
9% 2012
2013
22% 2014
14% 20152016 YTD
Year of Final Close Source: Preqin Natural Resources Online
www.africaglobalfunds.com | 23
FUND PERFORMANCE (USD RE-
YTD
1 Month
1 Year
SEPTEMBER 2016
3 Year
5 Year
AUM ($m)
Strategy
Focus
Domicile
Type
Start
-
3.51 (07/16)
Equity
Sub-Saharan ex.SA
Cayman Isl.
Open-End
12/14
-5.40%
162.00 (08/16)
Equity
African region
Bermuda
Open-End
7/98
216.00 (08/16)
Fixed Income
Africa ex-SA
Bermuda
Open-End
3/13
-
220.00 (08/16)
Equity
Africa ex-SA
Bermuda
Open-End
1/12
-
40.00 (07/16)
Equity
African region Luxembourg
UCITS IV
8/10
Africa Merchant Sub-Sahara Fund (as-of 31/07/16) -7.29%
-3.59%
-
-
Allan Gray Africa Equity Fund (as-of 31/08/16) -4.70%
-
-17.80%
-12.30%
Allan Gray Africa ex-SA Bond Fund (as-of 31/08/16) +13.90%
-
+11.50%
+3.30%
-
Allan Gray Africa ex-SA Equity Fund (as-of 31/08/16) -8.60%
-
-19.50%
-13.60%
Alquity Africa Fund (A) (as-of 08/09/16) +2.53%
-
-2.81%
-
Altree Capital - Africa Opportunities Fund (as-of 31/08/16) -14.60%
+2.04%
-22.39%
-36.66%
-27.88%
-
Equity
African region
-
Open-End
6/06
-13.40%
258.20 (07/16)
Equity
African region
Mauritius
Open-End
1/07
UCITS IV
6/13
Arisaig Africa Consumer Fund (as-of 31/07/16) -9.50%
-2.30%
-18.00%
-41.90%
Ashburton Africa Equity Opportunities Fund (I) (as-of 08/09/16) -12.58%
-
-19.63%
-
-
19.87 (09/16)
Equity
African region Luxembourg
-
1.00 (08/16)
Equity
African region
Mauritius
Open-End
03/13
-
3.00 (08/16)
High Yield
African region
Mauritius
Open-End
05/14
SICAV
6/09
Open-End
11/11
UCITS III
11/08
Atria Africa Franchise Fund (as-of 31/08/16) -5.93%
+0.73%
-15.60%
-19.45%
Atria Africa Trade Finance Fund (as-of 31/08/16) +6.34%
+0.49%
+9.22%
-
Bellevue Funds Lux - BB African Opportunities (as-of 08/09/16) +2.96%
-
-2.46%
-
-
90.50 (07/16)
Equity
African region Luxembourg
-
2.35 (09/16)
Equity
African region
African region Luxembourg
Commonwealth Africa Fund (as-of 08/09/16) +17.07%
-
+3.77%
-
USA
Cornhill Management - WIOF African Performance Fund (A) (as-of 31/08/16) -
-1.52%
-18.41%
-34.75%
-
5.87 (08/16)
Mixed
-
485.04 (08/16)
Equity
Africa ex-SA
Ireland
Unit Trust
10/08
-
67.96 (08/16)
Equity
African region
Ireland
Unit Trust
8/08
-
-
Mixed
African region
Jersey
Open-End
4/09
-
-
14.61 (05/16)
Equity
African region Cayman Isl.
Open-End
9/09
-16.92%
-8.05%
0.72 (05/16)
Equity
Sub-Saharan
SICAV (AIF)
4/07
80.30 (07/16)
Equity
African region Luxembourg
SICAV
5/12
-1.90%
33.27 (08/16)
Equity
African region
BVI
Open-End
6/05
-28.10%
0.50 (08/16)
Resources
African region
BVI
Open-End
1/09
+3.10%
1.00 (08/16)
Equity
East Africa
BVI
Open-End
1/08
-11.20%
2.08 (08/16)
Equity
Nigeria
BVI
Open-End
3/07
-11.20%
5.73 (08/16)
Equity
Zimbabwe
BVI
Open-End
3/07
32.59 (08/16)
Equity
SICAV
3/12
Coronation Africa Frontiers Fund (as-of 31/08/16) -0.95%
-
-8.62%
-
Coronation All Africa Fund (as-of 29/08/16) +7.58%
-
-10.50%
-
Duet Africa Opportunities Fund (as-of 29/07/16) -13.06%
-
-25.00%
-
Enko Opportunity Growth Fund (as-of 31/07/16) -9.33%
-1.97%
-
FMG Africa Fund (B) (as-of 29/07/16) -14.02%
-
-
Malta
Franklin Templeton IF - Templeton Africa Fund (as-of 31/07/16) -2.45%
+2.18%
-18.86%
-12.54%
-
Imara African Opportunities Fund (as-of 31/08/16) -11.40%
+0.90%
-17.50%
-9.70%
Imara African Resources Fund (as-of 31/08/16) +21.90%
-0.50%
-6.70%
-27.40%
Imara East Africa Fund (as-of 31/08/16) -10.90%
-7.20%
-11.90%
-5.90%
Imara Nigeria Fund (as-of 31/08/16) -36.50%
+3.10%
-38.60%
-27.20%
Imara Zimbabwe Fund (as-of 31/08/16) -20.70%
+0.40%
-29.30%
-18.20%
Invest AD - Emerging Africa Fund (A) (as-of 11/08/16) -4.60%
-
-16.70%
-4.21%
-
African region Luxembourg
DISCLAIMER: All data is provided “as is” for your information and personal use only, and is not intended for trading purposes or advice.
24 | www.africaglobalfunds.com
FUND PERFORMANCE (USD RETURNS)
YTD
1 Month
1 Year
3 Year
SEPTEMBER 2016
5 Year
AUM ($m)
Strategy
Focus
Domicile
Type
Start
Investec Africa Fixed Income Opportunities (as-of 08/09/16) +0.65%
-
-0.33%
-5.24%
-
10.06 (09/16)
Fixed Income
African region
Guernsey
Open-End
8/13
-
42.74 (06/16)
Equity
African region
Guernsey
Open-End
10/07
5.86 (08/16)
Equity
African region
Mauritius
Open-End
7/08
203.90 (09/16)
Equity
African region Luxembourg
SICAV
5/08
17.93 (09/16)
Equity
African region Luxembourg
SICAV
9/09
Investec Pan Africa Fund (A) (as-of 14/07/16) -22.24%
-
-38.28%
-
IPRO African Market Leaders Fund (as-of 31/08/16) -4.53%
-3.53%
-13.02%
-8.65%
-0.63%
JPMorgan Funds - Africa Equity Fund (A) (as-of 31/08/16) +3.73%
-6.15%
-12.13%
-7.83%
-3.49%
Julius Baer Multistock - Africa Focus Fund (A) (as-of 08/09/16) +12.31%
-
+3.48%
-
-
Magna Umbrella Fund - Africa Fund (as-of 08/09/16) +7.20%
-
-0.66%
-
-
15.86 (09/16)
Equity
African region
Ireland
OEIC
12/12
-
-
16.98 (07/16)
Fixed Income
African region
Mauritius
Open-End
2/14
-
18.76 (09/16)
Equity
African region
USA
Open-End
11/10
+4.24%
44.46 (09/16)
Equity
African region
Ireland
ICVC
11/14
-18.64%
29.83 (08/16)
Equity
African region
BVI
Open-End
8/09
-
-
21.98 (09/16)
Equity
Africa ex-SA
Dublin
UCITS IV
6/14
-
-
6.26 (09/16)
Equity
African region
France
FCP
8/13
-6.56%
-1.23%
43.50 (08/16)
Equity
African region Netherlands
Open-End
6/08
Equity
African region
Ireland
Open-End
5/10
Index
African region
Ireland
SICAV
9/11
66.84 (08/16)
Equity
African region
Ireland
Open-End
1/09
-
4.38 (07/16)
Equity
African region Luxembourg
FCP
12/11
-
1.20 (07/16)
Fixed Income
African region Luxembourg
SICAV
3/14
-7.26%
34.60 (07/16)
Equity
African region Luxembourg
SICAV
3/12
-2.88%
8.50 (07/16)
Equity
MENA & SSA
Luxembourg
SICAV
10/10
82.65 (07/16)
Equity
Africa ex-SA
Mauritius
Open-End
1/12
Equity
Africa ex-SA
Mauritius
Open-End
3/13
16.28 (07/16)
Equity
Africa ex-SA
Mauritius
Open-End
11/09
8.13 (07/16)
Equity
Nigeria
Mauritius
Open-End
5/12
13.42 (09/16)
Equity
SICAV
8/14
123.60 (08/16)
Equity
SICAV
09/07
MCB Africa Bond Fund (as-of 31/07/16) +8.98%
+1.68%
+4.24%
Nile Africa Frontier and Emerging Fund (as-of 08/09/16) +3.09%
-
-6.07%
-
Old Mutual Pan African Fund (A) (as-of 08/09/16) +12.54%
-
+2.15%
+1.67%
Optis African Frontier Fund (as-of 31/08/16) -8.08%
-1.76%
-15.03%
-38.80%
RenAsset Africa ex S.A. Fund (as-of 08/09/16) -16.93%
-
-11.39%
RMA Africa (as-of 08/09/16) -15.61%
-
-20.81%
Robeco Africa (as-of 31/08/16) +2.64%
-3.85%
-10.24%
Russell Old Mutual African Frontiers Fund (as-of 08/09/16) -7.56%
-
-12.55%
-17.04%
+2.79%
90.97 (09/16)
Russell Old Mutual MSCI Africa ex-South Africa Index Fund (as-of 08/09/16) -8.16%
-
-13.38%
-
-
82.72 (09/16)
Sanlam African Frontier Markets Fund (A) (as-of 02/08/16) -6.62%
-
-17.82%
-
-
SGKB LUX Fund - African Dawn Fund I (as-of 08/07/16) -16.91%
-
-30.28%
-46.52%
Silk African Bond Fund (I) (as-of 29/07/16) -7.14%
+0.41%
-9.38%
-
Silk African Lions Fund (I) (as-of 29/07/16) -5.78%
+1.98%
-20.19%
-11.07%
Silk Road Frontiers Fund (I) (as-of 29/07/16) -1.15%
+0.86%
-12.92%
-4.81%
Sustainable Capital Africa Alpha Fund (as-of 31/07/16) +32.40%
+3.60%
+7.40%
-5.30%
-
Sustainable Capital Africa Consumer Fund (as-of 31/07/16) -6.50%
-4.10%
-12.20%
-3.60%
-
8.76 (07/16)
Sustainable Capital Africa Sustainability Fund (as-of 31/07/16) +9.80%
+1.10%
-3.00%
-2.90%
-1.90%
Sustainable Capital Nigeria Fund (as-of 31/07/16) -27.30%
-12.30%
-33.30%
-24.60%
-
Threadneedle Lux - Stanlib Africa Equity (as-of 08/09/16) -13.10%
-
-18.44%
-
-
African region Luxembourg
T. Rowe Price Africa & Middle East Fund (as-of 31/08/16) +0.40%
-4.51%
-20.35%
+1.01%
+3.60%
MENA & SSA
Luxembourg
Source: Company Data, Morningstar
www.africaglobalfunds.com | 25
COMMENT
SEPTEMBER 2016
HEALTHCARE & AFRICA:
Rewarding Opportunities
By Helen Roberts, Member of the Healthcare and Life Sciences Focus Team, BonelliErede
A
frica remains an active region with significant potential; a recent report has revealed that healthcare continues to match financial services for growth & reward
opportunities. According to the African Venture Capital Association (AVCA), firms
•Healthcare Market potential remains strong Although Africa consists of 54 distinct countries, in the last decade have delivered over two-thirds of Africa’s GDP and growth: Algeria, Egypt, Ivory Coast, Kenya, Libya, Morocco, Nigeria, South Africa, Sudan, and Tunisia, which will remain major markets for
investing in Africa across all sectors achieved returns of 0.7 times
healthcare and medicines. Pharmaceutical spending in Africa is
more than the MSCI Emerging Markets Index over an eight year
expected to grow from $30bn to $45bn by 2020.
period. Private equity also plays a fundamental role in bridging a funding & access gap in healthcare. Despite fast population growth and
By 2020, prescription drugs are estimated to grow at a compound annual growth rate of 6%, generics at 9%, over-the-counter medicines at 6%, and medical devices at 11%.
increased wealth last year, Africa spent about 5% of its GDP on
Factors to consider when investing include price controls and
healthcare, compared to 16.6% for North America and 10.5% for
import restrictions introduced to encourage domestic drug man-
Western Europe.
ufacture; labeling to reduce counterfeiting and parallel imports;
What should investors take into account for these key future
stricter laws on importation and wholesale activities, and the
investments?
regulation of retail margins.
• Funded Commitments to achieve minimum Healthcare standards by 2020 In July 2016, senior leaders with UN support signed the Nairobi Statement on Investment in Access to Medicines, to support African domestic policies on health, investment, trade, technology and intellectual property. Last month in the Ethiopian capital, the 47 members of the World Health Organisation African Region adopted important measures:
Public-private partnerships will continue to be important - Johnson & Johnson implemented an education program for maternal, newborn, and child health using mobile-phone messaging in collaboration with the South African Government. SMEs provide opportunities for innovation - Dr LinkUp, is a start-up helping doctors around Africa to support one another and new health and other app centres are being developed in South Africa.
- fighting substandard and counterfeit medical products (particularly APIs) - eliminating malaria and viral hepatitis
•Fast-growing young, wealthier & mobile consumer base According to the African Development Bank, 123 million people
- setting action plans on ageing & health, including on non-com-
are currently considered stable middle class. By 2060, this num-
municable diseases
ber will rise to 1.1 billion. The UN has just released its own esti-
- $106.8m strategy for WHO to tackle disease outbreaks and other
mate that Africa’s population will double to 2.5 billion by 2050.
health emergencies By 2020, at least 80% of these 47 members must introduce public health emergency operation centre and national laboratory networks that meet minimum standards. Over 80% should have
By 2025, 40% of economic growth will come from 30 cities with over 2 million people; 22 of these cities will have GDP in excess of $20bn. Better logistics, modern infrastructure and urban households
adequate health workforces to respond to health emergencies:
with greater incomes will continue to drive demand for diagnostic
at least 90% should be implementing Integrated Disease Surveil-
tools and medicines, particularly for chronic conditions, car-
lance and Response.
dio-vascular disease and female healthcare.
Other measures include the African Vaccine Regulatory Forum,
The new ‘African Passport’ introduced in 2016 will also encour-
the African Medicines Regulatory Harmonization initiative, and a
age labor mobility across the region and access to specialist and
new African Medicines Agency which will be launched by 2018 as
general healthcare. Funding by private equity will be essential
an agency of the African Union.
in delivering between the anticipated future requirements of
Importantly, these measures create binding commitments for
between half to one million hospital beds, to recruit and train
public health that will lead to the creation of further private
100,000 physicians, 500,000 nurses, and 300,000 community
sector and public-private partnerships. Parallel investments in
health workers.
financial services, infrastructure and telecoms will enable further growth of healthcare and telemedicine.
To capture some of this potential, KKR & Co has allocated $100m for their investments in Africa, whereas he Abraaj Group has allo-
Investors should check how these developments can support
cated $1.4bn. Investors should conduct appropriate due diligence
their plans and how new authorities may regulate their choice of
and check the impact of new developments across the continent
investments.
and in the domestic market.
26 | www.africaglobalfunds.com
AFRICA GLOBAL FUNDS
ADVERTISING
targeted exposure to industry professionals Roman Onosovski 1-561-866-0737 r.onosovski@africaglobalfunds.com
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#GTRLON
Trade & Infrastructure Finance Conference 2016 London, UK | Park Plaza Hotel London October 5-6, 2016
Following the highly successful inaugural event which welcomed over 300 delegates in 2015, the GTR Africa Trade & Infrastructure Finance Conference will return to London on October 5-6, 2016. Providing unrivalled coverage of the African trade and export finance market, as well as examining infrastructure projects across the continent, the two-day event will bring the corporate and financial communities together to discuss timely updates from a number of exciting and dynamic markets across Africa. As always, audience interaction will be a key feature, with live polling allowing delegates to shape on-stage discussions.
Sectors attended in 2015
**To register and to view the brochure including 2015’s attendees, simply visit the event website.
15% discount code: AGFLON15
“A great opportunity to meet people interested in building new ways to serve and develop Africa’s needs.” I Alatillah, DEM Group
“A very interesting and seamlessly run event with many networking opportunities.” E Walton, Drum Commodities
33 %
CORPORATES & TRADERS
19 %
BANKS & FINANCIERS
10 %
INSURERS & RISK MANAGERS BANKS & FINANCIERS
8%
CONSULTANTS
8%
NON-BANK FINANCIERS
Percentage of attendees by region in 2015
6%
LAWYERS
6%
GOVT ORGS & PUBLIC BODIES
5%
ECAS & MULTILATERALS
4%
MEDIA SOLUTION PROVIDERS
309
Delegates Attended
155
Companies Represented
23
Countries Represented
1%
For more information please contact Elisabeth Spry at espry@gtreview.com or visit www.gtreview.com