PEDESTAL
AFRICA
PEDESTAL AFRICA LIMITED
AFRICA INVESTMENT NOTES
®
INVESTMENT TRENDS | CAPITAL FLOWS | SECTOR INSIGHTS | ENTERPRISE | M&A
A MONTHLY PUBLICATION OF PEDESTAL AFRICA LTD. | SEPTEMBER, 2018
PRIVATE EQUITY ON THE RISE IN AFRICA Regional distribution of African private equity deals over 5 years (2012 - 2017) 14% 13%
27% 26% 18% 9% 5%
4%
% share of PE deals by volume, 2012-2017
36%
% share of PE deals by value, 2012-2017 7%
9%
PE details in Multi-regions Number & Value of African PE deals, by year 175
185
2012
142
150 3.9
149
2016
2017
3.6
2.4
2013
2014
9%
South Africa
154
2.3
20%
Value ofPE deals (US$bn) Number of PE deals
7.9
4.0
3%
2015
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IN THIS ISSUE Private Equity On The Rise In Africa PAGE 03
Investment Trends Around Africa
Country of Focus: Zimbabwe
PAGE 06
PAGE 09 INFLOWS
Other illicit outflowa $25bn
OU TF LO
WS
Governance & Policy African Governments commit to combating Illicit Financial Flows from Africa PAGE 11
Trade mispricing $38.4bn
Investment Deal Focus
RESOURCES:
CONTACT US AT PEDESTAL AFRICA LTD. Email: info@pedestalafrica.com Web: www.pedestalafrica.com Phone: +2348084941390 LinkedIn: Pedestal Africa Ltd.
Infographics: AidData; OECD; Centre for Global Development BCG Analysis Emerging Markets Private Equity Association (EMPEA) AVCA 2017 Annual African Private Equity Data Tracker: Feb 2018
Country of focus: Martin Ganda; The case for investment in Zimbabwe's economic rebirth. Https://mg.co.za/article/2018-01-25-the-case-forinvestment-in-zimbabwes-economic-rebirth www.forbesafrica.com/brand-voice/2018/07/29/thejewel-of-africa/
Cover Story: https://www.ey.com/Publication/vwLUAssets/EYprivate-equity-roundup-africa-2014/$File/EYprivate-equity-roundup-africa-2014.pdf http://www.avanzcapital.com/resources/Whitepap ers/pe_africa_aug_2012.pdf https://brage.bibsys.no/xmlui/bitstream/handle/11 250/2453048/Serwaah%2C%20Priscilla%20og% 20Baah-Peprah%2C%20Prince.pdf?sequence=1 https://www.empea.org/app/uploads/2018/05/EM PEA-Briefs_Africa_FINAL_WEB.pdf http://www.africanreview.com/finance/economy/th e-seeds-of-success-in-africa https://www.ifc.org/wps/wcm/connect/5c9e9f2f779a-4ab7-beb6e3aa65b00a85/Africa+CEO+Forum+Report_FIN3 _Web-lores.pdf?MOD=AJPERES https://www.pwc.com/ng/en/assets/pdf/westafrica-the-continent-growth-investment-engine.pdf Www.ipe.com
Emerging Ideas: Www.africa.com Africanexponent.com, Julu 2018 Itnewsafrica.com, August 2018
Investmet trends around Africa: http://footprint2africa.com/ http://www.itnewsafrica.com/ Http://disrupt-africa.com Www.mondaq.com; 2018
Capital Appraisal: www.fdiintelligence.com Governance and Policy: Allafrica.com Africa.com Investment deal focus: www.dailyglobewatch venturesafrica.com https://www.wantedinrome.com Https://techtrend.com.ng Investor's Diary: https://oilandgascouncil.com/event-events/msgbcbasin-summit/ http://www.future-energy-eastafrica.com/ http://www.africainvestor.com/product/ai-family-officeforum-2018/https://www.nigeriahotelconference.com/ http://www.africaprocurementsummit.com/
AFRICA INVESTMENT NOTES | 01
LADIES-ONLY FITNESS CENTRES
FRANCHISEES
WANTED Curves Ladies-only fitness group is the largest Fitness franchise in the world. Founded in Texas, USA, in 1992. Curves now has over 7,000 Outlets in 94 Countries. Curves equipment are specifically designed for the woman and can work and tone all her muscle groups in just 30minutes, enabling her lose up to 500 calories in a session. Curves uniquely combines strength training and sustained Cardlo-wascular activity with Meal Plans to achieve spectacular Fitness and Weight Loss goals in a safe and secure environment. All Curves coaches are ladies who have undergone the Curves incubation programs. Since Curves was commissioned in Lagos in July 2015, by the US Ambassador to Nigeria, membership has grown astronomically with testimonies from healthier and happier women of diverse backgrounds. Now, Curves wants to roll out to the various Cities in Nigeria, including other parts of Lagos State and Abuja. To be a Curves franchisee and benefit from the opportunities in Nigeria’s emerging fitness industry, please visit: www.curves.com.ng OR www.buycurves.com.ng OR Call: 07012228222; 01-3427222. Physical Address: Plot 24B, Block 102, Olabanji Oladide Street, Off Raheem Adeboyejo Street, Lekki Phase 1, Lagos.
PRIVATE EQUITY ON THE RISE IN AFRICA
P
rivate equity investment in Africa is on the rise as Africa is increasingly identified as an attractive destination for private enterprises and investors across all economic sectors, all around the world. Its growing population and abundant resources continue to drive steady economic growth. Traditionally, the continent's abundance of natural resources, including mining and exploration, has been the driving force behind investment interests. But the growing demand for telecommunications, infrastructure, consumer goods and financial services, has widened the range of opportunities for potential investors even further. In addition, favourable demographic trends, economic reforms, infrastructure investment, improved governance and political stability, adoption of technology, and strong agricultural production continue to contribute to the pace of development of the region. Against the backdrop of continued economic growth in Africa, the need for enabling investment is clearly evident. Although
requirements vary from country to country, a huge demand-supply gap currently exists across African region in key economic sectors such as financial services, energy & power, heavy industry / manufacturing, consumer & retail, transport, healthcare, and mining. These macro trends will continue to play out over the next decade and will continue to provide private equity firms with a wide range of compelling opportunities. Demographic statistics suggest that Africa already has a larger middle class earning the equivalent of more than $20,000 per year than India. By 2030, it is forecast that more than half of Africa's population will live in urban areas, up from one-third today. These trends, along with GDP growth rates in excess of 4-5%, all support forecasts of growth in the consumer goods and services sectors, which will open up investment opportunities. The African continent comprises 44 countries in Sub-Saharan Africa and 8 in North Africa and can be divided into five sub-regions East, West, Southern, Middle and North. Of these five subAFRICA INVESTMENT NOTES | 03
Sub-Saharan Africa in particular continues to attract investor interest. According to EMPEA's LP survey, roughly 36% of respondents plan to either expand or start investing in subSaharan Africa over the next two years the highest percentage across all emerging market regions. This should assist firms as they seek to close or launch new investment vehicles dedicated to Africa. By now, most investors are well aware that Africa's investment opportunities go well beyond commodities. Africa's recent growth has been marked by development and growth across a range of consumer-related sectors, including RCP (retail and consumer products), financial services and TMT (technology, media and telecoms). The pace of diversification of economic activity in Africa is helping increase employment levels in the region and leading to the creation of a new consumer class. This in turn attracts more foreign investment into the region, which will only accelerate the growth of the new middle class and help grow their spending power. All in all, private enterprises and investors that are prepared to take advantage of these trends
04 | AFRICA INVESTMENT NOTES
OPPORTUNITIES Despite the recent economic drag, Africa is a rapidly expanding market. Sub-Saharan Africa's regional economy has quintupled over the last two decades, from $300 billion in 2000 to $1.6 trillion in 2017, and is projected to surpass $2 trillion within two years. This rapid growth has been driven by Africa's services sector, which represents a tremendous economic opportunity as it contributes more than half the region's output. The sector grew at an average 6.6 percent over the last decade as the middle class in the region continued to expand. Conversely, the region's manufacturing sector, which has grown on average 3.1 percent over the last decade, has played a less prominent Share of number and value of African PE deals, by sector, 2012-2017 Customer Staples Consumer Discretionary Financials Industrials Information Technology Health Care Utilities Materials Real Estate
17%
10%
15%
7%
15% 14% 8% 7% 6% 6% 6%
% share of PE deals by value, 2012-2017
Clearly, investors see significant long-term potential in the region. Africa should remain high on LPs' radar screens as its private equity industry continues to grow and mature, while some emerging markets with which the region competes for capital reach saturation, and as existing investments are harvested and add to the industry's success stories.
and serve Africa's burgeoning consumer classes stand poised to tap new markets and reap significant gains. Private equity investors offer more than just funds. By injecting risk-capital, they become partners in a firm's growth. It helps unlisted dynamic companies to expand, create jobs and ultimately facilitate growth in their economies. Therefore private equity is a perfect fit for developing Africa.
% share of PE deals by volume, 2012-2017
regions, West Africa is divided into Anglophone and Francophone West Africa. Each of the subregions is typically dominated by one country that provides a larger hub market for many increasingly regional companies Kenya in the east, Nigeria in the west, South Africa in the south, and Egypt in the north offer the most developed country-specific markets.
9% 4% 1% 3% 21% 5% 3%
Energy
3%
15%
Telecommunication Services
3%
22%
PRIVATE EQUITY DEALS KEY FINDINGS * Number of reported private equity deals, 2012-2017: 953 * Total value of reported PE deals, 2012-2017 $24.4bn * Media deal size, 2012-2017 $7mn
PRIVATE EQUITY ON THE RISE IN
AFRICA
There exists a robust supply of privately held companies in Africa that can capitalize on favourable local demographics, attractive economic trends and growing consumer incomes on the continent. However, in many African countries, underdeveloped capital markets and unfavorable lending terms can result in a financing gap for these companies. Private equity fills this need for investment capital and can permit investors to access targeted high growth opportunities. There are numerous examples of African companies that, with the injection of private equity capital, were able to expand into new markets, launch new products, and achieve revenue and profitability growth. Institutional investors looking to build African private equity exposure have many options. While the options and their appropriateness typically vary depending on the size, sophistication and risk tolerance of investors, there are a handful of common approaches. African private equity can be accessed by building an in-house platform dedicated to developing a robust program of several local funds, or through commissioning broader investment managers (either global or panAfrican private equity funds) or specialized managers like funds of funds. In all cases, investment managers developing funds dedicated to Africa should have the expertise, personnel, networks, systems and experience, ideally though a demonstrable
track record, to execute well. Just as important is an investment manager's ability to provide an investment vehicle that will prudently and efficiently address all legal, tax and accounting matters so that the experience for the investor is seamless. Lastly, institutional investors should consider the strategy offered by investment managers. Strategies will likely vary, but those targeting consumer-oriented opportunities are likely to benefit from the demographics and trends supporting the relentless growth of the African market. Despite clear evidence to the contrary, Africa in many ways continues to suffer from a decades-long perception that the region is an area of economic stagnation, political instability, armed conflict and extreme poverty. Fortunately, a new African narrative has emerged, one that investors ignore at their peril. Sustained underinvestment is giving way to a rapidly growing middle class and rising consumer power. The outlook for the continued development and maturation of Africa's private equity industry is bright. Indeed, interest in Africa has never been higher and the thesis perhaps never stronger. Moreover, the value that private equity brings financial discipline, access to capital markets, capital for growth and corporate governance has never been clearer. Increased investment from both local and foreign investors across a range of industries is now driving modern Africa's story. Private equity is an increasingly important part of this narrative. AFRICA INVESTMENT NOTES | 05
INVESTMENT
TRENDS
AROUND AFRICA I n v e s t m e n t C o m p a n y, Vantage GreenX Provides $144 Million in funding to Six Renewable Energy Projects in South Africa. South African investment firm, Vantage GreenX Fund Managers has provided R2.05 billion ($144 million) in funding to a six solar and wind energy projects with a combined capacity of 433 megawatts (MW) in the country. The cash was released through the Fund's second renewable energy fund, known as Vantage GreenX Note II. All the projects form part of Round 4 of the South African Renewable Energy Independent Power Producer (REIPP) procurement program, an initiative that seeks to improve the country's power output. Vantage GreenX is part of the Vantage Capital group, which was established in 2001 and currently manages capital of just over R11 billion (over $700 million) in five distinct mezzanine debt and renewable energy debt funds. Launched in 2013, Vantage GreenX focuses specifically on sustainable energy opportunities through its Note I and Note II funds. Vantage has offices in Johannesburg and Cape Town as well as various funds under management targets debt opportunities in a number of highgrowth African countries including South Africa,
Ghana, Nigeria, Cote d'Ivoire, Ethiopia, Kenya, Tanzania, Uganda, Zambia, Botswana, Egypt, Morocco and Namibia amongst others. The GreenX funding was provided to four projects developed by BioTherm Energy and two projects developed by protection company Old Mutual Life Assurance Company South Africa Limited (OMLACSA) and renewable power company, African Clean Energy Developments Limited (ACED).
England-Based Business Intelligence Firm, CRU and Development Group, AFAP Confirm Plans to Link African Agribusiness Projects to Global Investors. London-based business intelligence firm, CRU Events and the African Fertilizer and Agribusiness Partnership (AFAP) have come together in a bid to link African agribusiness projects to global investors. AFAP is an independent non-profit organization founded by a Partnership of African development organization. It provides services to the private and public sectors on sustainable development projects and policies focused on market-driven business solutions in fertilizer and agribusiness for agriculture productivity. The two organisations are working with partners from across Africa to offer brownfield (urban development) projects seeking capital investment the chance to make a showcase presentation to an audience of global venture capitalist and financiers.
06 | AFRICA INVESTMENT NOTES
The affair, named the 'Investment Showcase', will take place at the 4th edition of an event dubbed the CRU Africa Fertilizer Agribusiness 2018 Conference from the 24th to the 26thof September 2018 in Cape Town, South Africa. Projects will be selected on the strength of the proposal, with the intention to provide a diverse geographic range and representation from across the fertilizer and agribusiness supply chain. Investors that attend the showcase will be provided with a full package of information and will have the opportunity to meet with project leaders seeking finance.
78% of African Countries Will Offer 4G Services by the End of 2018 A study conducted by data and analytics company, GlobalData reveals that by the end of 2018, a total of 43 out of 55 African countries (or 78%) will offer 4G services. Over the last few years, African countries have been rolling out 4G mobile networks across the continent at break-neck speed. In the last 24 months, even minnows such as Djibouti, The Gambia and Guinea-Bissau have launched new fast 4G services. The provision of 4G data speeds, in conjunction with recent smartphone usage trends fuelled by falling device prices is sure to further spur data revenues for mobile network operators across both the urban and rural parts of Africa. Countries yet to launch 4G services by the end of 2018 include Burkina Faso, Cape Verde, Central African Republic, Equatorial Guinea, Eritrea, Guinea, Lesotho, Mauritania, Mozambique, and SĂŁo TomĂŠ and Principe.
Nigerian fintech startup, Mines raises US$13m Series A funding Nigerian fintech startup Mines, which builds digital credit products for underserved
populations, has secured a US$13 million Series A funding round as it aims to expand into other emerging markets. Founded in 2014, Mines provides a Credit-as-aService digital platform that enables institutions in emerging markets to offer credit products to their customers, with no smartphones required. Leveraging their own data sets, domestic institutions are able to serve loans to customers ignored by available credit systems and open up entirely new revenue opportunities. The company's proprietary technology has been used by over one million customers in Nigeria since it was launched last year. Mines is now the leading provider of consumer credit in the country, counting mobile operators 9mobile and Airtel, payment processors Interswitch and NIBSS, plus several banks, amongst its partners. Mines plans to use the investment for talent acquisition, continued growth in Africa, and expansion to South America and South-East Asia.
Ethiopia Inaugurates Africa's First $120 Million Waste to Energy Facility Since its inception in 2014, the Government of Ethiopia and a number of international conglomerates have been anticipating the kickstart of the multimillion project. The rise of renewable energy in Africa has opened doors for new technology to find its way in strengthening economies with a better methodology to curb divers challenges. Ethiopia, like most African nations, has been facing a huge barrier in waste disposal in Addis Ababa. The foul smell of mountains of waste has threatened the life of flora and fauna as well as residents. The incineration plant i.n Addis Ababa will transform the economic outlook of the nation, drive the ease of doing business in the environment. The facility will incinerate at least 1,400 tons of waste a day, converting the landfill into energy. The project dubbed as Reppie was constructed to spearhead the nation into a AFRICA INVESTMENT NOTES | 07
climate resilient green economy, as most European countries are. 30% of the capital's households will be supplied with electricity from the plant. This is the same percentage of the number of households that have access to electricity. The East African nation's $375 million Electrification Program which aims at powering its citizens by 2025 has been backed by World Bank which is one of the largest electrification programs in the continent by the international financier. The country's economic growth in 2018 was forecast to be 8.5%, probably a slight margin from the expected 10% of every year. To drive the economic prowess, the need for improved infrastructure and technology is a paramount requirement. Living standards should be improved, with employment opportunities provided to access labour force and generally contribute to the GDP of the country. A number of companies in the manufacturing sector will greatly benefit from this plant to improve their production. Reppie is a perfect model for other African countries which could be imbibed to improve the environment and open business opportunities for the local industry and lure potential investors to the various sectors.
TOYOTA WINS COURT DISPUTE OVER INFRINGEMENT OF "LEXUS" TRADEMARK AGAINST SUBAYA METALWARE NIGERIA LTD
T
oyota, a vehicle manufacturing company, won a court dispute against Subaya Metalware over the infringement of the Lexus trademark. While Subaya Metalware Nigeria Limited, a manufacturer of electronic products claimed to have a "Lexus" trademark registered in Nigeria under Classes 9 and 11, Toyota asserted that it had registered its "Lexus" trademark in Nigeria under Class 12. Toyota also had car stereo systems fitted in its vehicles which are labelled "Lexus Premium System." The suit which was filed in 2014, was instituted by Subaya at the Federal High Court, Lagos Division after Toyota filed applications to register a "Lexus & Device" trademark in Classes 9 and 11 under the Nice Classification at the Trademarks Registry, contending that the applications filed by Toyota under Classes 9 and 11 qualified as use and infringement of Subaya's existing "Lexus" trademarks. The Federal High Court decided the suit in favour of Subaya and held that Toyota's car stereo system fell under Class 9 as it is an electronic apparatus that transmits and reproduces sounds. It also held that the trademark applications made by Toyota (which were withdrawn before the commencement of the suit) infringed on the Subaya's registered trademarks. The Federal High Court therefore found Toyota liable for infringement and passing off and proceeded to award Subaya damages in the sum of N500,000,000 (five hundred million Naira) and costs in the sum of N250,000 (two hundred and fifty thousand Naira). Toyota was dissatisfied with the decision of the Federal High Court and appealed the judgment. The Court of Appeal unanimously set aside the decision of the Federal High Court.
The exterior of the Reppie waste energy facility in Addis Ababa
Ethiopia's first waste-to-energy facility was inaugurated on Sunday in the presence of high-level Ethiopian and foreign dignitaries.
08 | AFRICA INVESTMENT NOTES
The Lagos Division of the Court of Appeal held that the mere filing of a trademark application at the Trademark Registry does not amount to the use or infringement of an existing trademark. The court also decided that stereo systems that are installed in cars form part of the vehicle and therefore fall in Class 12, rather than Class 9 under the Nice Classification 2.
COUNTRY OF FOCUS FOR SEPTEMBER
Zimbabwe
Z
imbabwe's shift from a closed economy to an open, productive and peaceful one has rapidly had its effect on the country.
In January 2018, at the World Economic Forum in Davos, President Mnangagwa announced that Zimbabwe was open for business again, abandoning all isolationist policies in order to revolutionise the nation's economy and build up the country to its full potential. President Mnangagwa administration's focus lies in providing a stable political environment, while improving ease of business and reinforcing agricultural, mining, ICT and tourism sectors. In order to enhance ease of doing business, the government has implemented several legal, institutional and administrative reforms, such as the National Investment Policy while establishing the one-stop shop Investment Centre.
Zimbabwe's agricultural sector accounts for 50 % of employment in the country's GDP as well as 25 % of total annual exports. The government aims to continue its food self-sufficiency by increasing utilisation of the land and productivity through mechanisation and modernisation of the sector. Zimbabwe has the second largest platinum and chrome deposits, and an immense wealth with over 60 minerals and 800 mines with a capacity to earn US$18 billion per annum. The new dispensation is intent on ensuring investor friendly mining policies and consequently has been rapidly growing its
economy with mining investors as major players. The recently signed US$ 4.2 billion platinum investment agreement by Karo Resources is the largest investment in Zimbabwe's mining to date and will directly create 15,000 jobs. The development of ICT infrastructure and harnessing of technology-driven innovation in all sectors of the economy has been key to the development of the economy. The National Backbone Optic Fibre Project led to the construction of The TelOne Data Centre, a powerful and reliable information nerve centre that ensures the efficiency and data security of enterprise operations. The Zimbabwean National Tourism Master Plan seeks to boost foreign and domestic tourism while leveraging private-sector led investment to maximise the country's numerous tourist attractions and natural wonders. “Tourism accounts for about 11.9 percent of the national GDP but we think its contribution can grow up to 15 percent,� states Managing Director of Zimbabwe Tourism Authority Dr Karikoga Kaseke. The Ministry of Tourism has allocated a US$15 million Revolving fund to facilitate tourist activities. Zimbabwe's new horizon switches the nation's dial on investment radars. The country's motto is simple: 'Unity. Freedom. Work'. For the first time in a generation, some Zimbabweans see a path to exactly these essences, and opportunities abound to capitalise on a renewed drive for progress and economic growth.
AFRICA INVESTMENT NOTES | 09
Capital Appraisal
In spite of political and social upheaval, Egypt has enjoyed a strong few years when it comes to attracting FDI. Greenfield investment monitor FDI Markets shows that FDI into Egypt has increased steadily from 2013 to 2017. In 2013 Egypt recorded 49 investments with a capital expenditure of $4.37bn and 7453 new jobs created. The number of investments increased by 20.41% to 59 during 2014 and capital expenditure and the number of jobs created also witnessed a stark increase, from $4.37bn to $17.63bn and from 7453 to 22,81.
EGYPT FDI ON THE RISE BETWEEN 2013 AND 2017 Projects / Investments 100 90 80 70 60 50 40 30 20 10 0
2013
2014
T
he number of investments into Egypt continued to increase between 2014 and 2015, recording an additional seven projects. In contrast, the capital expenditure and the number of jobs created during the same period witnessed a decline, of 16.61% and 42.72%, respectively. Between 2015 and 2016 the number of projects once again increased from 66 to 79, jobs created increased from 13,107 to 19,181 and capital expenditure increased from $14.7bn to $40.91bn, the highest level of capex recorded since fDi Markets began recording data in 2003. Egypt recorded 92 FDI projects in 2017 by 73 investing companies with a capital expenditure of $37.62bn and 17,524 new jobs created. Between January 2013 and December 2017, the primary investing country in Egypt was the United Arab Emirates with 52 investments, followed by the US 10 | AFRICA INVESTMENT NOTES
2015
2016
2017
with 45 and Saudi Arabia with 29. Of the total 345 investments made during this timeframe, Cairo, the country's capital, attracted the lion's share with 23.48% of the investment. The key industries for investment were financial services, followed by alternative/renewable energy and transportation which combined made up 28.12% of all investment recorded during the fiveyear period. Despite only ranking sixth in terms of industry investment, Egypt's coal, oil and natural gas sector contributed
the highest capital expenditure with $51.07bn. This was primarily due to a $30bn project announced by Russia-based energy company Rosatom in December 2017, which will see the firm build a power plant in El Dabaa as part of a joint venture with Egyptian authorities. It will comprise four water-energetic reactors of 1200 units, each with a capacity of 1200 megawatts. The first unit of the 4800-megawatt plant is to be commissioned in 2026 and will serve the local market. Data for 2018 is only available from January through to May. However, when compared to the same timeframe in 2017 it seems the upward trend is not set to continue. The first quarter of 2018 has seen a decline in the number of projects recorded from 35 to 21 when compared with the same period of 2017. The second quarter of 2018 has also decreased from 14 to six, although it remains to be seen whether data from June 2018 will bolster project numbers for the quarter and if the remaining two quarters of 2018 can turn the year around.
GOVERNANCE & POLICY
African Governments commit to combating Illicit Financial Flows from Africa
A
frican countries are committed to mobilizing adequate and predictable resources to finance the sustainable development goals agenda but they continue to be impeded by a number of factors, chief among them the loss of more than $50 billion annually through illicit financial flows. During the fifth African Leadership Forum (ALF) held in August this year, former President of Tanzania, Benjamin Mkapa urged African leaders to be innovative in combating illicit financial flows by rethinking their models of financial development in their countries. He said in order to confront the problem of illicit financial flows, it was important to turn around complicity of financial institutions, customs systems, tax authorities and laxity of other state organs. "Governments should encourage innovation and private initiatives but not be an obstacle to enterprises," he said. There is growing evidence on the continent that illicit financial flows currently exceed overseas development assistance. Leaders at the forum suggested reorganisation of economies, strengthening of country economies through supporting local enterprises and capacity of revenue institutions and regulations to curb illicit financial flows. "It is estimated that $100 billion a year, about four percent of Africa's GDP, have been illegally earned, transferred, or used, much of it due to mis-invoicing. This retards Africa's growth; weakens public institutions and rule of law; discourages the culture of paying taxes and value-addition to natural resources; and results in countries' over relying on official development assistance," says Mr. Sylvian Boko, Principal Regional Advisor and Head of Development Planning and Statistics at the Economic Commission for Africa (ECA). In another development, Speaker of National Assembly in Malawi, Richard Msowoya also argued that Africa loses more money to illicit financial flows than it receives in foreign aid. He alluded to the need for Public Accounts Committee's in African countries to seriously take the challenge of illicit financial flows into consideration, by moving from the mere scrutiny of what was
misappropriated in the approved budgets to seriously scrutinize the huge amounts of funds that are lost through, illicit financial flows. Msowoya was speaking during the official opening of the fifth meeting of the Executive Committee of the African Organization Committees (AFROPAC) and the African voice and strategic planning. In his keynote address, Rwanda's President Paul Kagame said Africa can finance its own development through rethinking how regional integration can grow local economies and by government being enablers of local businesses as opposed to being obstacles. "Africa can finance its own development. Atleast a big part, no doubt. We know it because Africa finances other peoples' development," said Mr Kagame. He proposed that Africa can reach a turning point through accountability. "For example, on domestic finance, we have to build the trust that public funds will be spent on the right things, this is the foundation of good policies," he added.
Africa’s Illicit Outflows
Africa loses more through illicit outflows than it gets in aid and foreign direct investment
INFLOWS
Other illicit outflowa $25bn
OU TF LO
WS
Trade mispricing $38.4bn
Trade Mispricing: Losees associated with misrepresentation of export of export and import values. Other illicit flows: Funds that are illegally earned, transferred or utilized and include all unrecorded all unrecorded private financial outflows. AFRICA INVESTMENT NOTES | 11
EMERGING IDEAS
The Fourth Industrial Revolution (4IR): Birthing Our Dream Africa?
1st
2nd
3rd
4th
Mechanization, water power, steam power
Mass production, assembly line, electricity
Computer and automation
Cyber Physical Systems
F
rom time, the world in juxtaposition to evolution of production has been partitioned into dispensations which were termed 'Industrial Revolutions'. The First Industrial Revolution achieved mechanized production through the use of water and steam power. During the Second, mass production was introduced through electric power; and the Third on which the present built on, accomplished automated production through the use of electronics and Information Technology (IT).
dispensation which has the potential to birth the Africa of our dreams; it is a new chapter for the world and disrupts the norms especially in the area of industrialization. This Industrial Revolution fundamentally changes everything about us as individuals and a people. It evolves with the speed of light and we seem to be following through at a linear velocity, as it appears our DNA was wired before hand for this.
IT IS ALL ABOUT CONNECTION We are currently on the edge of the single most significant threshold in human history, the Fourth Industrial Revolution (4IR). A 12 | AFRICA INVESTMENT NOTES
Like its predecessors, 4IR will completely change how we live and work. Facilitated by
the emergence of digital systems, communications that are networked, AI and machine learning as well as powerful largescale data analysis the Fourth Industrial Revolution will centre on the integration of these technologies into streamlined business and production processes in order to make them self-sustaining and optimised for efficiency. In short, the Fourth Industrial Revolution is about being connected, to everyone and everything at all times. In business we will be closer to our customers than ever, making customer experience (CX) even more critical. To deliver meaningful experiences in an uber-connected world, CX innovations will be from the outside in with a far deeper understanding of customer needs and then the ability to align product and service experiences to these specific identified needs. This in turn will up the ante in terms of customer expectations which will mean that CX continues to evolve at a very brisk pace.
TRUE MASS-CUSTOMISATION It would indeed come in handy to understand how customer-relevant digital strategies will be developed in 4IR, across business functions and customer experiences. The critical factor remains having a deep and clear understanding of who your customer is and what is important to them. This touchstone will serve to align all aspects and divisions of your business towards plotting a course that will optimise engagement between your brand and your customers.
in 4IR to omni-channel. Single-channel only provided one avenue for customers to engage with a brand, multi- and cross-channel provided various options but often still restricted by functional silos. Omnichannel experiences are far more brand aligned and more integrated across all channels while a single view of the customer is leveraged and coordinated in a far more strategic way. There is no doubt that 4IR will be transformative. Rapidly introducing new technologies, unrelenting streams of innovation will inspire and maybe even frighten us sometimes, working together in ways we'd never imagined and forcing us to reconsider what privacy means. Recently, Founder and Executive Chairman of the World Economic Forum, Professor Klaus Schwab, called on leaders and citizens, in a presentation about the Fourth Industrial Revolution, to “together shape a future that works for all by putting people first, empowering them and constantly reminding ourselves that all of these new technologies are first, and foremost tools made by people for people.� Only time will tell whether a future world, where we are all connected all the time and never switch-off will be the realisation of a utopian dream or the fulfilment of a dystopian nightmare.
The future is still about people (and machines) This omnichannel customer experience will be another hallmark of 4IR. The evolution of how customers engage and interact with your organisation has expanded from single channel to multi-channel through to cross-channel and now AFRICA INVESTMENT NOTES | 13
Investors Diary MSGBC Basin Summit and Exhibition The MSGBS Basin Summit & Exhibition is the only gathering entirely dedicated to exploring the potential of the MSGBC (Mauritania, Senegal. The Gambia, Guinea Bissau, Guinea Conakry) region. It presents a unique meeting place, facilitating the conversation between the public and private sector, as well as between international and local companies. The summit is basically to explore the oil and gas potential of Africa's most exciting E&P hotspot. The MSGBC Local Content forum is a pre-
Nigeria Hotel and Tourism Investment Conference Nigeria Hotel and Tourism Investment Conference (NHTIC), is an annual event of international level aimed at promoting the Hotel and Tourism business and related Real-Estate projects in Nigeria and the West African region. to develop in the coming years. It will certainly help you understand where the industry is today and where it is heading, but above all, it helps you understand where the opportunities lie, how to meet the right partners and build the partnerships that may increase business opportunities. We will be discussing about hotels, resorts, related real estate projects -including shared ownership- or about overall leisure and tourism development projects in Nigeria and areas of influence in West African sub region. 14 | AFRICA INVESTMENT NOTES
conference gathering, focused entirely on developing strategies for local content and in-country capacity within the MSGBC Basin. The forum coming up 24th October 2018 at King Fahd Palace Hotel, Dakar, will tackle pressing issues including strategies to develop a skilled local workforce, understanding the requirements for education and training, managing the expectations of local communities as well as building the local supply chain.
This is an opportunity to meet top influencers in the sector within and outside Nigeria by September 12th13th 2018, at the Southern Sun Hotel, Ikoyi, Lagos.
AI Family Office Forum 2018 This inaugural summit will bring together industry experts, leaders, heads of state, the opportunity to network, share ideas. It is these connections, together with proprietary research, practical tools and methodologies, and access to top experts and thought leaders, that have made the Africa investor Ai Family Offices Forum so valued in this community. The Summit schedules to hold on 6th November 2018 will examine Africa's positioning in the current global geopolitical environment, the impact of protectionism on Africa's growth prospects and the increased importance placed on investing in sustainable economic integration for growth.
Future Energy East Africa Future Energy East Africa is the largest and longest running regional power conference and exhibition in East Africa, making it a well-known and trusted brand. The event boasts both a strategic conference and a large trade exhibition. This provides a platform for public and private stakeholders to engage in discussions around the future of the East African energy sector, giving stakeholders the opportunity to benchmark their operations, challenges and achievements against their peers and seek suppliers who are looking to gain access to projects across the region. The 2018 Future Energy East Africa conference and exhibition will bring together leaders from the regional and international power and energy community to discuss the status of critical projects, spot lucrative opportunities and share best practice. The annual event fosters a platform for key partnerships to be formed, projects to be benchmarked and knowledge to be transferred. The event is scheduled to hold on 12th-13th September 2018 at KICC, Nairobi, Kenya.
Foreign Direct Investment Expo The Foreign Direct Investment Expo is a unique platform which connects the world's most dynamic and prosperous investment opportunities with the most ambitious and innovative investors and The Foreign Direct Investment Expo connects ambitious firms looking for new locations to base their businesses, with a wide set of regions, countries and cities offering a range of benefits and incentives to relocate.
Packed with expert advice, knowledge, world leading speakers and suppliers, the FDI Expo stands as the most important summit for businesses looking to set up overseas operations. business owners coming up on 14 & 15 November 2018 at the Excel Exhibition Centre, London. http://www.fdishow.co.uk/
Africa Procurement & Enterprise Development Summit Smart Procurement, The Zambia Institute of Purchasing and Supply (ZIPS), The Malawi Institute for Procurement and Supply (MIPS) and the Procurement Regulatory Authority of Zimbabwe (PRAZ) will host the first regional Africa Procurement and Enterprise Development Summit, 21-23 November 2018. The Summit is themed to transform and modernise procurement in Africa to meet social and economic objectives and to examine the feasibility of creating platforms necessary for small businesses to grow until they become real industry players. Africa is embracing newer models of managing the growth of its economy through enterprise and supplier development programmes, trade incentives and big business engagement. These are becoming global actions to inspire economies and create jobs. Economies and big industry players therefore need to place more emphasis on small business sourcing strategies to enable a more regional integrated solution, thus allowing SMME mobility in Africa. Supporting organisations are providing products and solutions for SMME development and business support.
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AFRICA INVESTMENT NOTES | 15
INVESTMENT DEAL FOCUS
Nigerian owned Global Infrastructure Partners (GIP) acquires Italian railway company, ‘Italo Trains’ in new Investment Deal.
G
lobal Infrastructure Partners (GIP), a leading independent, global infrastructure investor, announced today that its third equity fund, Global Infrastructure Partners III, recently made a ground breaking investment move which saw to the acquisition of 100 per cent of the equity interest of Italian railway operator, Italo-Nuovo, for 1.94 billion Euros in cash through its current equity fund, Global Infrastructure Partners III. Italo, headquartered in Rome is the first and only private operator in the European high-speed rail passenger transportation market, and the second largest operator in Italy, with a market share of more than 35 percent in terms of passenger/km per year. Adebayo Ogunlesi
Since 2012, Italo has offered high-end, long-haul, high-speed railway transportation services through a fleet of 25 AGV train sets under the Italo brand and four new EVO-Italo branded trains, with the fleet set to increase to 42 trains by The company's network connects Italy's most densely populated and economically active cities and presently runs 68 daily services on three key routes serving 19 railway stations and 14 major Italian cities, including Rome, Milan, Venice, Florence, Bologna and Naples. The company expects to increase frequencies, as the new EVO fleet becomes available, to 98 daily services. In 2017, 12.8 million passengers travelled with Italo (signifying a 15 percent increase compared to 2016), generating approximately 455 million Euros in revenue and EBITDA of approximately 156 million Euros. In the three-year period 2015-2017, total operating revenues and EBITDA recorded a CAGR of 21 percent and 78 percent respectively. Global infrastructure Partners, (GIP), is an independent infrastructure fund manager that combines deep industry expertise with industrial best practice operational management. GIP's current equity fund, Global Infrastructure Partners III, makes equity investments in high-quality infrastructure assets in the energy, transport and water/waste
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sectors where GIP possesses deep experience and strong relationships. Until now GIP, which is chaired by Nigerian-born, Adebayo Ogunlesi, has invested almost exclusively in infrastructure projects, as its name suggests. Its portfolio includes airports (Gatwick and Edinburgh it sold off the small London City at a considerable profit in 2016), container terminals, energy generation, storage and distribution systems. However, Railways are a new departure and GIP has no experience operating trains or working with the Italian railways. When it bought Gatwick airport in 2012 Ogunlesi spelt out in an interview that his formula was to provide an excellent service for both passengers and airlines, insuring punctuality and speed of turn-round. The same blueprint could apply to train services, even though Italo is the equivalent of an airline rather than an airport. “We look forward to supporting the Company's ambitious growth plans and ongoing commitment to providing quality service to Italo's passengers,” says Adebayo Ogunlesi, Chairman and Managing Partner of GIP.
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HIRING!! Pedestal Africa offers an exciting opportunity for young people to become a part of our growth team in the following areas: Accounts/Finance Management Graphics Design IT Marketing Architecture/Project Management REQUIREMENTS: A minimun of HND/BSC or its equivalent in the related field Excellent communication skills Positive work attitude Ability to work with minimal supervision Ability to work under pressure and multi-task At least 1 year experience in the chosen areas Must reside in Lagos, Nigeria Interested candidates should forward their CVs to careers.pafricaltd@gmail.com using the desired position as subject of the email, on or before close of business On Tuesday, 25th of September, 2018.
www.pedestalmedia.com +2348084941390