PEDESTAL
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PEDESTAL AFRICA LIMITED
AFRICA INVESTMENT NOTES INVESTMENT TRENDS | CAPITAL FLOWS | SECTOR INSIGHTS | ENTERPRISE | M&A A MONTHLY PUBLICATION OF PEDESTAL AFRICA LTD. | VOLUME 3 | ISSUE 11
UNLOCKING THE GROWTH POTENTIALS OF THE AFRICAN INSURANCE INDUSTRY
INSURANCE PENETRATION RATE <1.00% 4.00% - 10.00% 1.00% - 4.00% >10.00%
Insurance Penetration across Sub Saharan Africa
Sub Saharan risk and Opportunity Matrix Size of bubble reflects market size 2018
Lower opportunity, lower risk
South Africa Mauritius
Ghana
Higher opportunity, lower risk
Kenya Zambia
Less risk >
Malawi Zambia Ghana
Tanzania
Kenya Uganda
Malawi
Uganda Nigeria
Tanzania Nigeria 0
2
4
6
8
10
Penetration Rate %
12
14
16
18
Lower opportunity, higher risk
Higher opportunity, higher risk
Greater opportunity >
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IN THIS ISSUE Unlocking the Growth Potentials of the African Insurance Industry PAGE 02 Country of Focus:
Cote D'ivoire
Investment Trends Around Africa
PAGE 08
Emerging Ideas
Africa Drone Market PAGE 12 Revolution REFERENCES:
CONTACT US AT PEDESTAL AFRICA LTD. Email: info@pedestalafrica.com Web: www.pedestalafrica.com Phone: +2348084941390 LinkedIn: Pedestal Africa Ltd.
Infographics https://www.ey.com/Publication/vwLUAssets/eyinsurance-opportunities-sub-saharanafrica/$FILE/ey-insurance-opportunities-subsaharan-africa.pdf https://www.statista.com/statistics/727403/insuran ce-penetration-in-sub-saharan-africa-by-country/ https://www.consultancy.africa/news/975/africasinsurance-sector-is-struggling-against-tech-andregulatory-disruption Cover Story http://www.theactuary.com/features/2018/07/grow th-potential-for-african-insurance/ http://www.theactuary.com/features/2018/07/grow th-potential-for-african-insurance/ INVESTMENT TRENDS AROUND AFRICA http://www.africanews.com/2018/10/30/merkelpledges-new-investment-fund-to-develop-newmarkets-in-africa/ http://www.africanews.com/2018/11/01/egypt-tobenefit-from-2-billion-dollar-aid-from-imf/ https://qz.com/africa/1439105/naspers-invests314-million-in-south-africa-tech-startups/ https://guardian.ng/business-services/nigeriamorocco-boost-strategic-dialogues-with-newinitiative/ https://www.esi-africa.com/gabon-to-developwater-production-unit-two-hydro-plants/ https://www.kahawatungu.com/2018/11/12/startup s-receive-ksh11-million-googles-launchpadaccelerator-africa-program/ COUNTRY OF FOCUS http://www.worldbank.org/en/country/cotedivoire/o verview
PAGE 05
38-Year-Old Ghanian Entrepreneur Builds $1 Billion Oil Company In Ghana PAGE 14
https://epthinktank.eu/2017/06/12/cote-divoire-brighteconomic-prospects-overshadowed-by-recentinstability/2017-06-09-15_11_24-blog-post_coted_ivoire-pdf-adobe-acrobat-pro-dc/ CAPITAL APPRAISAL https://www.newswire.ca/news-releases/consortiumof-africa-oil-delonex-and-vitol-announces-acquisitionof-producing-assets-in-deepwater-nigeria699194171.html GOVERNANCE AND POLICY https://www.dailysabah.com/economy/2018/10/13/tur keys-multidimensional-african-policy-cementseconomic-ties-with-continent EMERGING IDEAS https://techcrunch.com/2018/09/16/africanexperiments-with-drone-technologies-could-leapfrogdecades-of-infrastructure-neglect/ INVESTMENT DEAL FOCUS Forbes Africa: https://www.forbes.com/sites/mfonobongnsehe/2018/ 08/27/meet-the-38-year-old-entrepreneur-who-builta-1-billion-oil-company-in-ghana/#6da87c4f1621 Africa Business Central: africabusinesscentral.com INVESTOR'S DIARY https://www.miningindaba.com/ehome/index.php?ev entid=283869& https://vc4a.com/miic-ria/africa-2018-forum/ https://vc4a.com/seedstars-world/seedstars-africasummit/ https://vc4a.com/techpoint-ng/techpoint-build-2/ https://10times.com/finovate-africa
AFRICA INVESTMENT NOTES | 01
UNLOCKING THE GROWTH POTENTIALS OF THE AFRICAN INSURANCE INDUSTRY
A
frican insurance has plenty of opportunities to grow and innovate across the entire spectrum of insurance business. Increasing numbers of insurers are finding viable business models, the regulatory environment is evolving and adding clarity to the operating environment, and there is a strong spirit of innovation and growth within the market. There are challenges, though: business requires a long-term view; companies must tighten corporate governance and communicate their value; and there is an urgent need to develop a strong and diverse talent pipeline. The insurance industry across Africa continues to be one of the most disrupted, but at the same time the industry continues to innovate and adapt to take advantage of the many opportunities for growth that are also emerging. In the years following the global financial crisis, economic and political uncertainty across the continent slowed down economic and insurance sector growth. Despite this, Africa's insurance market remains one of the least penetrated in the world and the opportunities for growth are tremendous. There is massive growth potential across all African markets at the consumer level. However, addressing the large protection gaps revolves around the same three key consumer factors seen in other markets: awareness, affordability and access. When addressing these issues, it is important to realise that people are not waiting for insurance to solve their problems. Most already have ways to deal with loss, even if they are not insured. People will sell their possessions, borrow money or lend their support to peers to pay for burials and healthcare, or to rebuild after disasters. This means we cannot assume that a lack of insurance will translate into demand for insurance. Instead, we need to think about how insurance fits within the consumers' own ecosystem. This is why topics such as microinsurance, Takaful and alternative distribution are so important â&#x20AC;&#x201C; they provide ways for people to become part of the ecosystem. Takaful, as a Sharia-compliant form of financial protection, has huge potential to service the continent's Islamic communities. Its power is in its 02 | AFRICA INVESTMENT NOTES
principle of providing a protection model that is in harmony with the community's underlying social and ethical beliefs. This is a basic principle that can be extended beyond Islamic communities. Microinsurance has long been discussed as a way to close the protection gaps in sub-Saharan Africa. Admittedly, there are concerns about the sustainability of microinsurance programmes, which rely heavily on subsidies or donor programmes â&#x20AC;&#x201C; but the success stories that have emerged continue to make a compelling case, when microinsurance is done well. The 2017 pay-outs that the insurance industry made to Kenyan pastoralists under the Kenyan Livestock Insurance Programme are a proof point for an innovative microinsurance programme. The programme applies satellite-based techniques to determine when there is enough grass to feed the pastoralists' livestock; in effect, we are insuring the grass so that cows don't die when there is drought. The same techniques and approaches that have made microinsurance successful can be developed to serve other consumer segments. Vast numbers of small businesses and middle-income earners could afford insurance but are not being served by products targeting higher income levels. In this sector, the partnership model that is so critical to microinsurance has enormous potential. Affinity groups, cooperatives and telecom companies, for example, can offer insurance distribution to expand their value proposition to customers or members. 'Freemium' models, where the consumer gets insurance as part of a membership or a subscription, have been successful in expanding awareness and uptake of insurance â&#x20AC;&#x201C; but also in supporting key sales and retention targets for the distributors. The informal sector, which forms a large part of African economies, is not always captured in traditional GDP figures. However, there are innovative models to tap into this market and encourage education about financial services. A commitment to financial inclusion is, therefore, of utmost importance when spreading the insurance safety net. Africa's insurance industry is facing more disruption
than any other industry, posing challenges for some while opening up business opportunities for others. The pace of change in the insurance industry has taken place more rapidly than originally anticipated and will accelerate further. Technology and data are now considered the most important global trend disrupting the industry, but they are also increasingly being used by the industry to accelerate growth. Across all of Africa, the increased use of technology, on the back of the exponential growth of mobile phones, has significantly contributed to the large number of new customers and more tailored products. Technology presents insurers with powerful tools to better understand customer needs and expectations through data mining capabilities and artificial intelligence (AI). However, it is expensive and not always easy for insurers to “go it alone”. Consequently, some insurers have formed partnerships with technology companies to improve operational efficiency and respond quickly to changing customer expectations. Technology, specifically mobile phones, social media, and data analytics are seen as the top enablers to increase access to new customers, at reduced cost and to analyse behavioural data, in order to design new, more appropriate products. Regulatory and accounting changes: Behind technology, insurers also identified stringent risk based prudential capital and market conduct regulations as the second most disruptive issue. By now, most insurers are used to regulations and this has become “business as usual”. Insurers across the African continent have embraced the regulatory changes and are ready and willing to comply with new legislation and regulations. But, while most insurers have adopted new ways of compliance, the introduction of IFRS 17 is also expected to add new pressure. It is also positive to note that that the intensity of regulatory concerns is reducing among insurers. Although the unrelenting regulatory changes come with increased costs and implementation challenges, they also present hidden opportunities for insurers to better manage risk and allocate capital more appropriately. Some of the new regulations are expected to prompt insurers to redesign simpler and more appropriate products for customers. For example, the less onerous regulatory capital and conduct regulations being introduced by the pending Microinsurance framework in South
Africa offer alternatives to reduce the costs of insurance at the lower end of the market Convergence, the new “Scramble” for Africa's customers: Changing demographics and social changes, in particular the rise of a middle class, are driving insurers, bankers, and non-traditional players such as retailers and mobile operators to compete for the power of owning customers and customer information. We have started to see a convergence of insurers and bankers around customers. While most of the major banks have had insurance operations for years, there has been a renewed interest by other banks to also start insurance operations. Likewise, some insurers are setting up separate banking operations, and mobile phone operations and retailers are pushing in. All of this is with the aim of owning more customers and cross selling various products to them. In addition, insurers are also adopting multichannel distribution strategies and taking more direct ownership of their customer data and relationships. They are designing simpler products leaning towards technology based direct mobile and online channels of distribution. While the more complex products will still require intermediation, the use of brokers may gradually reduce as insurers invest in their own in-house channels. Talent shortages – workforce of the future: Insurers also highlighted talent shortages as a top issue in our survey. This is notable in the areas of technology and actuarial skills. In order to attract and retain talent, insurers need to invest more in training their “workforce of the future”. Alongside this, employee expectations are changing. Employees of the future expect better work-life balance. AFRICA INVESTMENT NOTES | 03
Insurers should not only be thinking about or investing in a workforce of the future. They should also start thinking about jobs that may not yet exist. While the African insurance industry is going through significant change and client expectations are changing the rise of the new middle class and digital natives offers new opportunities for insurers, using technology, to better understand their customers and use customer data for more relevant product design and better pricing for risk. Insurers need to ensure that they can do so while navigating increasing regulatory compliance issues, overhauling legacy IT systems, and investing in a workforce of the future. Operational procedures and
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business structures will also need to be updated to become more efficient. “Insurers across Africa face exciting new opportunities for growth on the back of a rising middle class and increased demand for new and innovative solutions. Most insurers know what to do – the winners will be those that are best at execution,” Crafford says. “Insurers, who are client-centric, innovative, technologically up-to-date, and who invest in a workforce of the future, will lead the charge to increase insurance penetration levels in Africa,” Muguto concludes.
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Investment
Trends Around Africa
NASPERS TO INVEST $314 MILLION IN SOUTH AFRICAN TECH FIRMS Naspers, the Cape-Town based giant, has announced plans to invest $314 million in tech businesses in South Africa over the next three years. Of that amount, around $92 million will be committed to Naspers Foundry, a startup fund for tech businesses. The fund, Naspers says, “aims to fund and support South African technology start-ups seeking to address big societal needs.” Naspers will spend the remainder on start-ups it has already invested in, including OLX, delivery service Mr D Food and e-commerce firm, Takealot. The fund and the focus on South Africa could have an outsize impact on the country's tech startup ecosystem and could in turn attract more tech investment dollars to countries beyond South Africa. But that might depend on whether it has relatively early successes. Naspers' growing commitment to funding local startups is crucial as, having morphed from largely being a traditional newspaper media company into an internet conglomerate, the company is best known for its large investments outside Africa. Its $32 million bet on a 46.5% stake in Tencent, the Chinese internet company, in 2011 was the key to its overall transformation. As Tencent's valuation has since shot up, so has Naspers' stake which is now worth over $100 billion. Back in February, Naspers led a $100m Series F investment in Swiggy, an Indian online food ordering and delivery platform. The company has also backed Flipkart, the Indian e-commerce company, with a $616 million investment—a move that paid off when its 11% stake was sold for $1.6 billion in May. But Naspers is yet to find similar success in Africa. So far, several of its investments on the continent in classified platforms and e-commerce marketplaces—notably including Nigeria's Konga—have been written off. An obvious factor in the disparity in the size of Naspers' investments within and outside the continent is the nascent stage much of Africa's tech ecosystems are still in. Crucial features of seamless e-commerce such as online payments and
delivery logistics are still relatively new in many parts of Africa. But increased funding from Naspers and other investors will be critical to solving these issues as tech start-ups across the continent look to win swathes of market share in quickly urbanizing African cities with growing middle-class populations. Naspers' funding drive is also likely part of efforts to define itself as a global internet company more than anything else. Last month, Naspers announced plans it would spin off its lucrative video entertainment business—made up of pay TV giant MultiChoice and streaming service Showmax—on the Johannesburg Stock Exchange next year. CEO Bob van Dijk explained the move as part of Naspers' “evolution into a global consumer internet company.” MERKEL PLEDGES NEW INVESTMENT FUND TO DEVELOP NEW MARKETS IN AFRICA The German Chancellor Angela Merkel has called for more private investment in Africa as she hosted African leaders as part of a concerted effort to combat underdevelopment on the continent. Merkel said her government will establish an investment fund to help develop new markets. ''The German government have met and reflected on how to take further action. We will create an investment fund for the development of small and medium-sized enterprises, both European and African. With this fund, participation and loans will be financed in order to enable, for example, the launch of new markets'', Merkel said The Berlin Summit, was attended by 12 leaders, including South African President Cyril Ramaphosa and Rwanda's Paul Kagame. Both leaders presented the continent as a stable investment destination. ''We can say unequivocally that Africa is indeed open for business. And we are delighted to have this opportunity for African countries to present viable, bankable and investable projects. We invite you to take a greater interest in our continent. Thank you very much”, Ramaphosa said.
AFRICA INVESTMENT NOTES | 05
Kagame said ''as a result of the financial and institutional reform, the African Union has achieved savings of 12 per cent in its next budget and Member States are paying a larger share of the bill. We have also signed agreements on the free movement of people and a continental free trade area, the FTA, making Africa a single trading bloc''. The G20 Pact with Africa was initiated under the German G20 presidency and aims to promote private investment on the continent. EGYPT TO BENEFIT FROM 2-BILLIONDOLLAR AID FROM IMF Cairo could benefit from a 2-billion-dollar financial aid proposed by the International Monetary Fund, IMF. The institution is happy that Egypt has continued its good performance and made enormous economic progress, according to a report by an expert mission to the country. The payment, which is yet to be approved by the governing bodies of the international monetary institution, is part of a 12-billion-dollar support program approved in November 2016. If the disbursement is approved, the total amount paid under this plan will have reached 10 billion dollars to date. The IMF notes the acceleration in growth to 5.3%, a decline in unemployment to below 10% and a decline in the current account deficit due to remittances from Egyptians living abroad as well as a recovery in the tourism sector. The experts also highlight the prudent monetary policy of the central bank and the country's profitable banking network. NIGERIA, MOROCCO BOOST STRATEGIC DIALOGUES WITH NEW INITIATIVE The Nigeria Economic Summit Group (NESG), the Africa Economic Development Policy Initiative (AEDPI), and OCP Policy Centre of Morocco, have partnered to launch the maiden edition of the “Morocco-Nigeria Strategic Dialogues, which focuses on enhancing opportunities for growth and development. The partnership would bridge the gap; serve as a catalyst for debate, initiate ideas related to the economic future of both countries, as it provides a platform for comparative analysis of the challenges and potential of the two economies as well as possible actions to promote complementary exchanges and synergies between them. In a statement signed by the Managing Director, OCP Policy Centre, Karim El Aynaoui, the edition will focus on fiscal and monetary policies in times of uncertainty; the complementarities between Nigeria and Morocco in the energy sector. It will also assess the role of financial markets, and the mobilisation of local 06 | AFRICA INVESTMENT NOTES
resources, as well as the role of youth and diaspora at the regional and continental levels. “It will also explore the roles of Morocco and Nigeria, as two strategic players within the African continent,” Aynaoui was quoted, adding that these two emerging countries have considerable leverage and relevant experience in multiple sectors. “When it comes to the role of fiscal and monetary policies, it is worth noting that price stability is important in avoiding prolonged inflation and deflation and represents a significant objective of monetary policy. Monetary and fiscal policies are both very important in ensuring a stable economy, and Central Banks and Ministries of Finance have an important role to play in mitigating the impact of commodity prices fluctuation on the economic activity, and how they can work to provide price stability,” the statement continued. With regards to the mobilisation of local resources, it said majority of African countries are subjected to crippling foreign debts, which could, ultimately, paralyse the economic capacities of the country if the foreign debt to GDP ratio remains dangerously high. This session during the conference, aims to explore the impact of the reliance on foreign financial markets on macroeconomic policies, as well as discussing the role that could be played by the domestic financial system in balancing the effects of the foreign financial aid systems. To unlock African agricultural potential, and in the spirit of both countries' commitment to South-South cooperation, Morocco and Nigeria strive to strengthen their partnership in the sector by promoting joint initiatives. This is reflected in several Memoranda of understanding (MOUs) signed between OCP Group, Fertilizers Producers and Suppliers Association of Nigeria (FEPSAN), and the Nigeria Sovereign Investment Authority (NSIA).
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AFRICA INVESTMENT NOTES | 07
COUNTRY OF FOCUS
Cote D'ivoire
C
ôte d'Ivoire has long been regarded as one of West Africa's richest and most diverse countries due to its linguistic, ethnic and religious diversity. While agriculture remains a key driver of economic progress, there is an abundance of other natural resources, including crude oil – with proven reserves of around 100m barrels – natural gas and diamonds. As a member of UEMOA, the African Union and ECOWAS, Côte d'Ivoire is an active player in regional politics, having also developed particularly strong ties with Morocco in recent years. Since 2012, the economy of Côte d'Ivoire has turned in a stellar performance, marked by a rapid increase in GDP that has triggered the beginnings of a reduction in poverty. For the 2016-2020 period, the Government adopted a new National Development Plan (NDP) designed to transform Côte d'Ivoire into a middle-income economy by 2020 and further reduce the poverty rate. In April 2016, donors pledged $15.4 billion in grants and loans to support the NDP. The World Bank Group committed to doubling its support over the next four years to approximately $5 billion.
The economic outlook for the next two to three years is positive, and the GDP growth rate is projected to reach 7% in 2018 and 2019. This bodes well for the maintenance of moderate inflation and the control of public finances through prudent fiscal and monetary policies, as well as the furtherance of reforms aimed at improving the business climate and facilitating the efficient use of public-private partnerships. However, the Ivorian economy remains vulnerable to such external risks as volatility in the prices of agricultural and mining products, climate conditions, global and regional security risks, and a tightening of regional and international financial markets. Recent accomplishments aside, Côte d'Ivoire maintains its position as one of the countries with the world's highest gender inequality rates, borne out by its ranking (171st out of 188 countries) in the United Nations Gender Equality Index.
Côte d'Ivoire, GDP Growth in % 12.00
As the world's leading cocoa and cashew nut producer and an oil exporter with a major manufacturing sector, Côte d'Ivoire wields considerable economic influence in the sub-region. In 2017, Côte d'Ivoire continued to be one of Africa's most vibrant economies, with a growth rate that is expected to hold steady at around 7.6%. This sound performance is attributable to the rebound in agriculture and attests to the country's resilience to internal and external shocks. The outlook in the short and medium term remains encouraging. 08 | AFRICA INVESTMENT NOTES
10.10
10.00
9.27 8.82
8.00
8.95
7.52 6.85 7.20 7.19 7.01 6.89 6.61
6.00 4.00 2.00 0.00 -2.00 -4.00
-4.20
-6.00
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
CAPITAL APPRAISAL CONSORTIUM OF AFRICA OIL, DELONEX AND VITOL ANNOUNCES ACQUISITION OF PRODUCING ASSETS IN DEEPWATER NIGERIA
A
consortium led by Vitol and comprising Africa Oil Corp (“Africa Oil”) (25%), Delonex Energy Ltd.(“Delonex”) (25%) and Vitol Investment Partnership II Ltd. (“Vitol”) (50%), (collectively, the “Consortium”), is pleased to announce that it has entered into a Share Purchase Agreement (SPA) to acquire a 50% ownership interest in Petrobras Oil and Gas B.V. for $1.407 billion. BTG Pactual E&P B.V. will continue to own the remaining 50% of POGBV. The transaction is subject to customary conditions precedent. The primary assets of POGBV are an indirect 8% interest in Oil Mining Lease (OML) 127, which contains the producing Agbami Field, operated by affiliates of Chevron Corporation, and an indirect 16% interest in OML 130, operated by affiliates of TOTAL S.A., which contains the producing Akpo Field and the Egina Field, which is expected to commence production by the end of 2018. Current production of 368,000 barrels per day is anticipated to increase to over 568,000 barrels per day by the second half of 2019. OIL COMPANIES
The Consortium Africa Delonex Vitol Investment Oil Energy Partnership II Ltd. Corp Ltd BTG Pactual E&P B.V.
ACQUISITION % RATE
$1.407 50% Ownership interest in Petrobras billion Oil and Gas B.V.
50%
$1.407
and ultimate OML 127 tract participation in the Agbami Field, which is subject to a redetermination process. The Consortium's funding required to ultimately close the transaction will be reduced by any leakage paid to the Seller by POGBV, including dividends, and increased by any contributions made to POGBV by the Seller during the period between the Effective Date and completion. POGBV has an existing reserve-based lending facility, with a syndicate of international banks and commitments of $1.245 billion, which POGBV and the Consortium believe may be increased.
The three fields in these two licenses are all giant fields, located over 100 km offshore Nigeria, and are some of the largest and highest quality in Africa. Two of these fields, Agbami and Akpo, have been on production since 2008 and 2009, respectively, and in 2017 averaged a combined gross production rate of approximately 368,000 barrels of oil per day. Lifting costs in 2017 were well below $10/bbl. The TOTAL-operated Egina development project in OML 130 is the largest investment project currently ongoing in the oil and gas sector in Nigeria. The Egina FPSO, with a 200,000 barrel of oil per day capacity is currently on station and is being hooked up to existing wells. Egina first oil is expected before the end of 2018 and quickly ramp up to plateau production of approximately 200,000 barrels of oil per day during the first half of 2019. The fields all have high quality reservoirs and produce light sweet crude oil with state-of-the-art Floating Production, Storage and Offloading (“FPSO”) facilities. In 2017, daily oil production from the Agbami Field averaged approximately 240,000 barrels of crude oil. Production commenced from the field in 2008 and has been on plateau for over 8 years. An infill drilling program is ongoing, aimed at extending plateau into 2020. The field spans OML 127 and OML 128 and is subject to a unitization agreement, with 62.5% of field production currently allocated to OML 127. A redetermination process has been subject to expert review and arbitration in order to finally determine an increase in the portion of the Agbami Field attributable to OML 127. During 2017, POGBV's entitlement of daily oil production averaged approximately 21,000 barrels of crude oil (based on a 62.5% tract participation). In addition to the current fields under production and development there are other growth opportunities in horizons not yet under developed in existing fields and adjacent fields being considered for development together with exploration opportunities.
AFRICA INVESTMENT NOTES | 09
GOVERNANCE AND POLICY TURKEY'S MULTIDIMENSIONAL AFRICAN POLICY CEMENTS ECONOMIC TIES WITH CONTINENT
T
urkey has been pursuing a multifaceted foreign policy in its ties with African countries and focusing on expanding economic ties, which has resulted in a threefold increase in trade volume with the continent. Following the end of the Cold War, the international system was replaced with a multipolar global order and Turkey redefined its foreign policy as an active global actor accordingly. Ever since, relations with Africa have constituted a significant part of Ankara's multidimensional foreign policy. The intensified diplomatic efforts have been coupled with business diplomacy and bolstered Turkey's economic ties with African countries. These strengthening economic relations have boosted trade volume threefold while increasing the number of projects undertaken by Turkish contractors. In the past week, with contributions by the Trade Ministry and the African Union (AU), the 2nd Turkey-Africa Economy and Business Forum was held in Istanbul with the participation of President Recep Tayyip Erdoðan, business people from Turkey and Africa, and politicians from different countries. The third edition of Turkey-Africa partnership summit will be organized in Istanbul in 2019. Mahmut Önügören, executive committee member of Istanbul based Friends of Africa Association (TADD) and a founding partner of the investment company MON, which focuses on investing in agricultural, energy, industrial, retail and construction sectors, mainly in Africa, told Daily Sabah that the agreements between the Turkish government and African countries, and deals between companies operating in Africa will continue. "Turkey exerts effort to strengthen its economic ties with Africa," he said, adding that three new agreements were signed, including a trade and 10 | AFRICA INVESTMENT NOTES
economic cooperation agreement between Zimbabwe's government and Turkey during the 2nd Turkey-Africa Economy and Business Forum. In a bid to enhance trade relations, Turkey is also planning to use local currencies in commercial exchanges with countries on the continent, the president said in his address at the summit. Turkey's opening up to Africa, which dates back to the Action Plan adopted in 1988, took shape in 2005. Since then, the country has focused on comprehensive and long-term policies based on diversifying its relations with the continent. In that sense, the fields of agriculture, water resource management, rural development, health, micro-macro enterprises and security have played pivotal roles in Turkey's economic transactions with Africa. The Turkish government declared 2005 the "Year of Africa." In that sense, Erdoðan, who was prime minister at the time, highlighted the economic potential between Turkey and African countries while speaking to reporters at Ankara's Esenboða Airport prior to his visit to Ethiopia at that year. In a reciprocal move, the AU declared Turkey its strategic partner in 2008, and relations between Africa and Turkey gained momentum when the first-ever Turkey-Africa Cooperation Summit was held in the commercial capital Istanbul with the participation of representatives from 50 African countries that year.
Supporting the continent in the economic sphere to fend off the difficulties that the African countries have encountered in terms of trade and investment, Turkey has made a financial contribution of $1 million to the AU since 2009 and opened Commercial Consulates in 26 African capitals. The establishment of the business councils by the Turkish Foreign Economic Relations Council with 19 subSaharan countries allows for strengthening the economic partnership between Africa and Turkey. In accordance with the efforts to establish a contractual basis for the mutual economic relations, Turkey signed trade and economic cooperation agreements with 38 African countries. Stressing that the relations between Africa and Turkey have been developing consistently since 2005, Önügören said, "Turkey has opened 41 embassies throughout the continent; correspondingly, the trade volume has been also increasing." Turkey's trade volume with Africa steadily increased more than threefold as it was only $5.4 billion in 2003 and in 2015, the volume exceeded $17.5 billion. Turkish exports to Africa mainly consist of processed food, iron, steel, construction materials, electronic devices and apparel. In turn, Turkey's imported items from the continent includes oil, raw materials, minerals and gold. Gürkan Kaya, a finance manager from MNG Orko, a mining company that operates in Africa to produce gold, however, stated that, "We are just beginning to develop our relations; we need to make more agreements with African countries." According to information shared by the Economic Community of West African States (ECOWAS), the share of African countries in the overall international business volume of Turkish contractors is around 21 percent, while the share of North Africa is 19 percent; and Turkish contractors have so far undertaken over 1,150 projects in Africa, which are worth $55 billion. Taking this into account, Kaya stressed that, "Because Africa has a large number of natural
resources, investors want to do business here; the potential of Africa is very high." Additionally, according to a report by the Turkish Foreign Ministry published in October 2015, Turkey's investments in Africa generated 16,593 jobs in 2014 throughout the continent. Moreover, Turkey has seen an influx of African students studying in the country thanks to scholarships provided by the government or through bilateral education agreements with African countries. In this regard, the number of scholarships granted for the education of African students has substantially increased. Furthermore, Turkish Airlines (THY) flies to 48 destinations in 31 African countries and as a result of these direct flights, cultural and social exchanges have intensified between Turkish and African communities. In the past few decades, humanitarian aid has been one of the prominent elements in Turkey's African policy. As Turkey has become a leading country in the continent in terms of humanitarian issues, according to the Global Humanitarian Report 2018, Turkey was ranked the top country for humanitarian aid spending. In 2013 and 2014, Turkey also become the third-largest donor in the world. Accordingly, in 2014, regarding the contribution of nongovernmental organizations in the areas of education, health and capacity building, Turkey disbursed $3.3 billion to Africa, which closely corresponds to 0.42 percent of its gross national income. As a part of Turkey's developmental aid to Africa, the Turkish Cooperation and Coordination Agency (TÝKA) currently operates in the continent through 15 program coordination offices and with the help of these offices, technical assistance is provided to African countries. Along with the activities of TÝKA, Turkey also works with inter national humanitarian organizations, including the World Food Program (WFP) and the World Health Organization (WHO), to provide humanitarian assistance to Africa.
AFRICA INVESTMENT NOTES | 11
EMERGING IDEAS AFRICA DRONE MARKET REVOLUTION A
drone can be defined as an unmanned aircraft. It is formally known as unmanned aerial vehicle (UAV) and unmanned aircraft system (UAS). In simpler terms, a drone is a flying robot. A drone can be remotely controlled or fly autonomously using software-controlled flight plans in its embedded system, working in conjunction with onboard sensors and GPS. A drone is used for a wide range of applications, ranging from hobby to commercial and military purposes. Some of its recreational uses include photography and videography. The military uses drones for spying and surveillance purposes. Its commercial uses include monitoring, data collection, and data analysis of various industry assets such as pipelines, power plants, and oil platforms. However, its crucial uses include delivery of emergency aid such as medicines and to act as a first responder during environmental or man-made disaster areas. Drones need to stay in the air for as long as possible, monitor ongoing situations, collect data, and send it for analysis. A drone revolution is coming to sub-Saharan Africa, Countries across the continent are experimenting with this 21st century technology as a way to leapfrog decades of neglect of 20th century infrastructure. Over the last two years, San Francisco-based startup Zipline launched a national UAV delivery program in East Africa; South Africa passed commercial drone legislation to train and license pilots; and Malawi even opened a Drone Test Corridor to African and its global partners. In Rwanda, the country's government became one of the first adopters of performance-based regulations for all drones earlier this year. The country's progressive UAV programs drew special attention from the White House and two
12 | AFRICA INVESTMENT NOTES
U.S. Secretaries of Transportation. Some experts believe Africa's drone space could contribute to UAV development in the U.S. and elsewhere around the globe. It is clear that the UAV programs in Malawi and Rwanda are getting attention from international drone companies. Opened in 2017, Malawi's Drone Test Corridor has been accepting global applications. The program is managed by the country's Civil Aviation Authority in partnership with UNICEF. The primary purpose is to test UAV's for humanitarian purposes, but the program “was designed to provide a controlled platform for governments and other partners to explore how UAV's can help deliver services,” according to Michael Scheibenreif, UNICEF's drone lead in Malawi. That decision to include the private sector opened the launch pads for commercial drones. Swedish firm GLOBEHE has tested using the corridor and reps from Chinese e-commerce company JD have toured the site. Other companies to test in Malawi's corridor include Belgian UAV air traffic systems company Unifly and U.S. delivery drone manufacturer Vayu, according to Scheibenreif. Though the government of Rwanda is most visible for its Zipline partnership, it is shaping a national testing program for multiple drone actors. “We don't want to limit ourselves with just one operator,” said Claudette Irere, Director General of the Ministry of Information Technology and Communications (MiTEC). “When we started with Zipline it was more of a pilot to see if this could work,” she said. “As we've gotten more interest and have grown the program, this gives us an opportunity to
open up to other drone operators and give space to our local UAV operators.” Irere said Rwanda has been approached by 16 drone operators, “some of them big names”—but could not reveal them due to temporary NDAs. She also highlighted Charis UAS, a Rwandan drone company, that's used the country's test program, and is now operating commercially in and outside of Rwanda. Africa's commercial drone history is largely compressed to a handful of projects and countries within the last 5-7 years. Several governments have jumped out ahead on UAV policy.
around the world have been developing and implementing performance-based regulations for unmanned aircraft,” said Leslie Cary, Program Manager for the International Civil Aviation Authority's Remotely Piloted Aircraft System. “ICAO has not monitored all of these States to determine which was first,” she added. Other governments have done bits and pieces of Rwanda's drone policy, according to Timothy Reuter, the head of the civil drone project at the World Economic Forum. “But as currently written in Rwanda, it's the broadest implementation of performance-based regulations in the world.”
In 2016, South Africa passed drone legislation regulating the sector under the country's Civil Aviation Authority. The guidelines set training requirements for commercial drone pilots to receive Remote Pilot Licenses (RPLs) for Remotely Piloted Aircraft Systems. At the end of 2017 South Africa had registered 686 RPLs and 663 drone aircraft systems, according to a recent State of Drone Report.
With Europe, Asia, and the U.S. rapidly developing drone regulations and testing (or already operating) delivery programs, Africa may not take the sole position as the leader in global UAV development — but these pilot projects in the particularly challenging environments these geographies (and economies) represent will shape the development of the drone industry.
Over the last year and a half Kenya, Ghana, and Tanzania have issued or updated drone regulatory guidelines and announced future UAV initiatives. In 2018, Rwanda extended its leadership role on drone policy when it adopted performance-based regulations for all drones—claiming to be the first country in the world to do so.
The continent's test programs — and Rwanda's performance-based drone regulations in particular — could advance beyond visual line of sight UAV technology at a quicker pace. This could set the stage for faster development of automated drone fleets for remote internet access, commercial and medical delivery, and even give Africa a lead in testing flying autonomous taxis.
Rwanda is still working out the implementation of its performance-based regulations, according to MiTEC's Claudette Irere. They've entered a partnership with the World Economic Forum to further build out best practices. Rwanda will also soon release an online portal for global drone operators to apply to test there. As for Rwanda being first to release performancebased regulations, that's disputable. “Many States
“With drones, Africa is willing to take more bold steps more quickly because the benefits are there, and the countries have been willing to move in a more agile manner around regulation,” said the WEF's Reuter. “There's an opportunity for Africa to maintain its leadership in this space,” he said. “But the countries need to be willing to take calculated risk to enable technology companies to deploy their solutions there.”
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AFRICA INVESTMENT NOTES | 13
INVESTMENT DEAL FOCUS
38-YEAR-OLD GHANIAN ENTREPRENEUR BUILDS $1 BILLION OIL COMPANY IN GHANA team of investors and established Westland Alliance Ltd, a telecoms company that provided international call routing services for AT&T and several international calling card companies. Westland Alliance and its subsidiaries eventually diversified into cell towers and value-added services (VAS) for mobile phone companies. The company was extremely successful, but it wasn't long before he got opted out to focus on the next big opportunity.
Kevin Okyere, one of Ghana's savviest yet understated entrepreneurs, has set the bar high by developing the highly promising West Cape Three Points Block 2 offshore Ghana (WCTP2). Springfield Group, the energy conglomerate he founded and controls, owns an 82% interest and operatorship in the block which covers 673 square kilometres in the Gulf of Guinea's Tano Basin. This is the first homegrown Ghanaian company exploring for oil. “We can't afford to fail,” asserts Kevin Okyere the head of one of West Africa's most successful energy conglomerates. “I mean, we're the first Ghanaian company to venture into oil exploration. We are in a unique position to set a precedent for indigenous companies looking to participate in the upstream sector. If we succeed, then we'd have sent a strong message – that Ghanaians are just as capable. That's really important to me.” He says. In just 12 years, Kevin Okyere, only 38, has built his company, Springfield Group, into a $1 billion (annual revenues) multi- faceted Ghanaian energy company. Springfield Group is involved in trading and transporting hydrocarbons, terminalling and storage, gas stations, and recently, oil exploration. The company employs hundreds of people in Ghana and Nigeria. In 2005, Okyere, a graduate of Accounting from the George Mason University in Virginia, put together a small 14 | AFRICA INVESTMENT NOTES
In 2006, while still running Westland Alliance, Okyere started working with a business acquaintance who supplied crude oil and condensates to the Tema refinery. As Okyere interacted frequently with this associate, he learned that there was a shortfall of storage facilities for petroleum products in Tema. Flush with cash from his telecom adventures, he acquired land and began building a storage tank farm in Tema, close to the refinery. When he invited officials from Ghana's National Petroleum Authority to inspect his construction project, they were so surprised that someone so young – he was 26 at the time – was undertaking such a capital-intensive project and employing scores of indigenous Ghanaians. The officials were so impressed with what he was building, so much that they asked him to apply for a Petroleum Product import license. That marked the genesis of Springfield Energy's flagship trading business. Ever since 2008, Springfield Energy has imported refined petroleum products such as gasoline, dual-purpose kerosene, gasoil, naphtha and jet fuel to Ghana. The company is now the dominant importer of fuel products into Ghana with revenues of more than $1 billion in its trading business alone. Springfield Group has consistently ploughed its profits from its core trading business into building and acquiring other businesses within the energy value train and now co-owns gas stations in Ghana, storage facilities, an oilfield services subsidiary and a haulage company. In 2011, looking to expand their business beyond Ghana, Okyere and his partner, Geena Malkani, visited Nigeria to explore opportunities in the downstream space. They formed a new company, Springfield Ashburton, and applied to the state-owned oil corporation, the Nigerian National Petroleum Corporation (NNPC), to be included among the international companies to be awarded the lucrative crude oil lifting contracts. For two years – in 2012 and 2013, Springfield Ashburton tried without success make the cut. In 2014 - three years after Springfield Ashburton had been registered in Nigeria – and after partnering with BP PLC, they were enlisted for the 2014/2015 Crude Oil Term Contract. It was the first time a Ghanaian company – an unknown trading house in
Nigerian circles, was awarded the highly coveted longterm oil contract. Springfield Ashburton still does business in Nigeria and in 2015 was shortlisted by the NNPC for the Offshore Processing Agreements (OPA) – a contract whereby oil traders or refining companies lift crude, refine it abroad and deliver the resulting products back to the NNPC. NNPC subsequently discontinued the entire Offshore Processing Agreements discontinued the Offshore Processing Arrangement, adopting direct trading of Nigeria's oil instead. In 2012 Okyere applied for an oil block in Ghana, setting his sights on WCTP2, an oil block with proven reserves on it. Kosmos Energy, a Dallas, Texas-based Oil Company and Tullow Oil, which are currently producing oil from the Jubilee oil field, had just relinquished WCTP2 which was carved out of the West Cape Three Points block, following the delineation of the Jubilee unitization area. The Ghanaian government, worried that Okyere could simply flip the block for a profit, compelled him to set up a full-fledged E&P unit before they could award the block to Springfield Group. The government also required Okyere to commit at least $100 million over a 7-year period in developing the block. Okyere set up Springfield E&P in 2012, but it wasn't until 2016 – four years later, that the government awarded Springfield the rights to explore for oil on WCTP2 and it was ratified by parliament. Okyere subsequently hired oil veteran Bernard Vigneaux, a former executive of Total and Perenco, to lead exploration efforts.
The block, WCTP2, is located in an enviable position, with Tullow Oil/ Kosmos Energy's prolific Jubilee field immediately to the west, Hess' Greater Pecan project to the south and Eni's Sankofa-Gye Nyame field to the east. The previous operator of the block, Kosmos Energy, drilled five exploration wells in WCTP2 including the Odum and Banda oil discoveries which are substantial. Based on vintage seismic 3D data inherited from Kosmos Energy, Springfield has been able to identify a number of large Campanian-age leads and prospects on the block. The company is currently evaluating about 800-square kilometres of fresh 3D broadband seismic data that PGS' Ramform Titan vessel acquired on the deep-water block earlier this year, whilst simultaneously conducting exploration activities for new leads and prospects. It's a ridiculously expensive venture, and so far, Okyere has pumped in $70 million of his own funds into the project. According to him, the entire block is sitting on 3.5 billion barrels of oil and 5 trillion cubic feet of gas. Springfield E&P is set to drill a debut well in January 2019. “For me, the most important reason we are pursuing this is to prove that Ghanaians can do it. We have a trading business that is doing well, and I could easily take the safe route to making more money by investing in real estate or something less tedious. But we look at ourselves as the indigenous pacesetters in this industry. If we are successful – and we will be, new local players will come up, and that's very important for the ecosystem,” he says.
RACKCENTRE
AFRICA INVESTMENT NOTES | 15
INVESTORS DIARY AFRICAN MINING INDABA 2019
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Investing in African Mining Indaba gives an opportunity to meet with only investors, mining companies and other firms involved in the deal-making process like banks and brokers, all in one place. Apart from that, this is the only platform where mining company COOs and Project Directors discussed the latest disruptive tech and innovative investment strategies, it also has Panels and Workshops where key stakeholders come together to define a common vision for sustainable development in Africa's mining industry. 2019 edition of Investing in African Mining Indaba will be held at Cape Town starting on 04th February. It is a 4-day event organised by Mining Indaba LLC.
The top people from the corporate, government, startup and the investment world will join the summit to share knowledge, connect regional/global stakeholders and to inspire attendees to believe in the potential of innovation on the African continent. The 20 Seedstars World local winners will take part to an intensive bootcamp and an investor day. The Summit will end up with a regional conference. An event open to public filled with disruptive conferences, networking sessions, inspirational talks and workshops about how to impact people's lives in emerging markets through entrepreneurship and technology.
Investing in African Mining Indaba is solely dedicated to the successful capitalisation and development of mining interests in Africa. This event unites investors, mining companies, governments and other stakeholders from around the world to learn and network, all toward the single goal of advancing mining on the continent. The unrivalled networking is matched by an agenda that features Heads of States, Mining Ministers and the most influential people in African mining. AFRICA 2018 FORUM The Africa 2018 Forum is an international, landmark event hosted under the High Patronage of H.E. Abdel Fattah Al Sisi, President of the Arab Republic of Egypt, aiming to promote greater economic integration through increased investment flows into Africa. This year's edition will take place from the 8-9 of December 2018 in Sharm El Sheikh, Egypt, and is organised by the Government of Egypt â&#x20AC;&#x201C; through the Ministry of Investment and International Cooperation â&#x20AC;&#x201C; and COMESA Regional Investment Agency (RIA). Africa 2018 is a unique business-to-business and government-to-business platform, bringing together policy makers, financiers, leading industrialists and young entrepreneurs. This year's Forum will focus on developing intra-African investments and the effort to create the world's largest trading bloc of 1.2 bn people. The programme features world-renown keynote speakers, interactive panel discussions, expert presentations and B2B engagement opportunities. SEEDSTARS AFRICA SUMMIT The Regional summit is the final event of Seedstars tour in Africa, which will hold in Dar es Salaam, Tanzania from December 10-13, 2018. After visiting more than 20 different countries from May to November 2018, Seedstars world is bringing together the best entrepreneurs from across the continent for a regional 16 | AFRICA INVESTMENT NOTES
TECHPOINT BUILD Techpoint Build is the largest conference and exhibition that connects the startup and SME community with all industries, bringing together people from different states across Nigeria and other neighbouring countries. Techpoint Build will hold on 26th January 2019. The event features a highly educative keynote address, pragmatic panel sessions, pitch storm with start-ups, investors and experts as we seek to harness and morph a new continent starting from the biggest black nation in the world by our actionable plans and solutions. Techpoint Build will feature a variety of talks and panel sessions on new, important and thought-provoking ideas. This is where business leaders, forwards thinkers, social innovators will get to discuss the way forward for tech companies in Nigeria. We have various sessions on retail, e-commerce, communication, government inclusion, funding/investment, export and much more. The aim is to unlock the potential within the sector projecting future growth. FINOVATE AFRICA Finovate Africa is a blockchain / cryptocurrency conference starting 27th November 2018 in The Westin Cape Town, Cape Town, South Africa. Finovate Africa will support the network of financial institutions, telecoms and fintechs building a new infrastructure. Newest technologies will be demoed live on stage and insights from market leaders and disruptors. FinovateAfrica's demos will showcase the best new innovations in financial and banking technology from over 20 leading established companies and brand-new startups. Each hand-picked company will receive just 7 minutes on stage to provide an inside glimpse into their latest developments. Networking sessions will follow the demos each day, giving you the chance to speak directly with the innovators you see on stage, along with the rest of the awesome audience.
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