PEDESTAL
AFRICA
PEDESTAL AFRICA LIMITED
AFRICA INVESTM ENT NOTES INVESTMENT TRENDS - CAPITAL FLOWS - SECTOR INSIGHTS - ENTERPRISE - M&A
A MONTHLY PUBLICATION OF PEDESTAL AFRICA LTD. | VOLUME 4 - ISSUE 1 TUNISIA 35
CO OC R O M
18
TOP COUNTRIES ALGERIA 4
WITH COWORKING
EGYPT 92
SPACES IN AFRICA NIGERIA 79
BURKINA FASO 4
GHANA 10 KENYA 24 CAMEROON 3
COTE D’IVOIRE 3
ANGOLA 4
SOUTH AFRICA 67
COWORKING SPACE AND VIRTUAL OFFICES R E D E F I N I N G A F R I C A’ S W O R K P L A C E
MAJOR ATTRACTIONS TO COWORKING SPACES Environment 61.60%, 18% Networking opportunities 75.70%, 22%
Administrative Services 54.50%, 15% Convenience 58.70%, 17% Good coffee 11.10%, 3%
G N I S I H FRANC BASIC CLASS PARTICIPANTS: 1. Individuals considering in investing in a franchise or working in a franchise organisation. 2. Individuals / Organizations involved in the franchise sales and disclosure process like franchise executives managers paralegal and attorneys.
FRANCHISE BASIC CLASS EFFORTS HAVE SIX OBJECTIVES: 1. To build a strong brand and to recruit customers: Building a strong brand requires that the collaboration between franchisor and franchisee recruiting the right team to work with. 2. Creating and Executing a Marketing Plan: The training pan will educate the intending franchisee on how to create a profitable marketing plan that can be realistically executed. 3. To provide basic and adequate information on the laws guiding franchising of a business intending franchisees. 4. The training will equip intending franchisees on the basic tools needed to start up 5. The training will provide an enabling environment for franchisor and franchisees to build a profitable business relationship 6. This training will connect individuals interested in working in franchise organisation with franchiseers that are currently recruiting.
SAT. 27TH
TRAINING PRICE:
APRIL, 2019.
10:00AM - 3:00PM
ENTERPRISE HUBS TRAINING ROOM 22 Water Corporation Road, Victoria Island, Lagos.
AFRICA INVESTMENT NOTES
CONTENT REFERENCE
03 05 08 11 14 16 18
CO-WORKING SPACES AND VIRTUAL OFFICES
INVESTMENT TRENDS AROUND AFRICA
GOVERNANCE AND POLICY
CAPITAL APPRAISAL
COVER STORY https://www.entrepreneur.com/article/319773 http://www.deskmag.com/en/the-rise-of-coworking-spaces-in-africa-958 INVESTMENT TRENDS AROUND AFRICA https://www.bloomberg.com/markets/fixed-income http://www.itnewsafrica.com/2018/12/liquid-telecom-to-invest-400m-inegyptian-network-infrastructure/ GOVERNANCE AND POLICY https://www.lawinsport.com/topics/articles/item/why-africa-urgently-needsto-commercialise-its-sports-sector CAPITAL APPRAISAL http://dailypost.ng/2018/12/19/details-emerge-access-bank-diamond-bankmerger-create-africas-largest-retail-bank/ EMERGING IDEAS https://ewn.co.za/2018/07/09/is-sub-saharan-africa-ready-for-the-electricvehicle-revolution COUNTRY OF FOCUS https://oxfordbusinessgroup.com/ghana-2018/economy
EMERGING IDEAS
COUNTRY OF FOCUS
https://www.afdb.org/fileadmin/uploads/afdb/Documents/GenericDocuments/country_notes/Ghana_country_note.pdf INVESTORS DIARY https://www.adis2019.com/ https://www.movemeback.com/events/africa-tech-summit-kigali-2019/ https://www.movemeback.com/events/blockchain-africa-conference-2019johannesburg/
INVESTORS DIARY
https://www.africa-energy.com/event/africa-investment-exchange-gas-O https://www.africa-energy.com/event/africa-energy-indaba https://www.german-african-business-summit.com/
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CO-WORKING SPACES AND VIRTUAL OFFICES: REDEFINING AFRICA'S WORKPLACE
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decade ago, co-working spaces were only filled by freelancers and start-ups. Compared to the noisy and overpriced coffee-shops with Wi-Fi by the hour, these spaces were just a better alternative that offered a more conducive environment to work. Fast forward to about 9 years and you will notice more established firms and tech companies leaning towards shared spaces along with start-ups. Today many co-working spaces also act as incubators and accelerators that help guide fledgling start-ups with mentorship, legal counsel, resources and even seed money or funding opportunities. The global co-working movement can trace its origins to the emergence of 'hackerspaces' in the mid-1990s. These open workplaces provided physical spaces where people with common digital technology interests could gather to work on projects while sharing ideas, equipment and knowledge. Brian DeKoven, a game designer, coined the term 'co-working' in 1999, identifying a working style to facilitate collaboration and meetings. DeKoven's goal was to introduce a non-competitive process that would foster greater collaboration and support among traditionally isolated and hierarchical businesses. A few years later, a broader concept of coworking emerged with the 2005 launch of the first official collaborative workspace: The San Francisco Co-working Space, located in the city's Mission District. Co-working is a brainchild of computer programmer Brad Neuberg, his non-profit cooperative offered an alternative work community which combined the freedom and flexibility of independent working with the structure and community of traditional offices. By 2008,
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there were 75 co-working spaces in operation across North America and Europe. By 2011, the movement had expanded into Asia, gaining significant popularity in Mumbai, Singapore, Hong Kong and other cities with limited office space and rapidly growing startup communities. Co-working also took root on the African continent, particularly in South Africa. Co-creation Hub, which is the first coworking space in Nigeria has also extended its services to Abuja (the federal capital of the country), and many other spaces like Enterprise Hubs, Lead space, Redahlia Workspace and Lagos Co-work, all emerged into the co-working scene in the past few months. According to Co-working Africa, Egypt houses the most coworking space in the continent with more than 76 shared office spaces in 2016. A prominent one in Cairo, called The District opened its doors to start-ups in 2011, which have attracted other shared office
spaces to the capital, making the city the frontier of co-working spaces in the region. second largest country with shared office spaces after Egypt.
In February 2016, Hapaweb Solution, an IT solution company launched Kumasi's first coworking space in Ghana called HapaSpace adding to the number of the total shared office space in Ghana and Africa. As one of the most innovative company in Africa named by Fast company in 2014, iHub is on top of its game. The co-working space has been in existence for more than 6 years and has currently over 50 permanent staff- and 14,000 members. In Morocco, Sundesk launched a co-living and a coworking space in a small fishing village in Taghazout which is also great for surfers. iNSANE (is the first coworking space in the country), Netspace, Workspot, and TechVerse are amongst the 17 coworking spaces in Morocco. Ethiopia is the only country in Africa that was never colonized, yet its tech scene is far behind a lot of countries on the continent. The reason for this isn't surprising, considering the country has less than 6% internet penetration and 30% mobile phone penetration. IceAdiss didn't see this as an obstacle, they saw an opportunity and created the first coworking space in Addis Abba which host several startups and entrepreneurs in the country. Many coworking spaces are springing up all around the continent and they all have proven to be an essential tool for young entrepreneurs, allowing them access to valuable resources, skills, knowledge, and infrastructure at a minimal cost. There are several factors that contribute to the explosive demand of community workspaces in the past year, and flexibility tops the list. Start-ups and SME's can cut down on operational costs significantly by eliminating the obligation of renting out an entire space for limited human capital. In addition to this, the pay-as-you-use model of co-work spaces allows them the flexibility to rent cubicles without a long-term commitment. Most cowork spaces also take care of basics such as
Wi-Fi and office management allowing their customer to instead focus their time and energy on the important aspects of creating and growing their business. According to Cushman & Wakefield's market research, larger enterprises have also discovered the substantial benefits this flexibility offers. With advancements in automation and technology, and ease of travel, the workforce has become distributed, enabling teams to operate from remote locations. Every so often these teams need to shuffle between different offices and cities for projects. In such cases the cost of leasing or establishing full-fledged offices for a limited duration incurs a high cost and co-work spaces are more economic options. The facilities that co-working spaces today provide are an added bonus. With interiors designed to promote creativity, increase productivity and reduce stress, co-working spaces are attractive, innovative and colourful. They are fashioned keeping in mind the growing class of millennials opting for 'cool' office-spaces with nap-pods, football tables, and breakrooms further popularizing them. Careful attention to detail is given not only the aesthetic of these spaces but the infrastructure itself, with a variety of options in desks, meeting rooms and any other kind of workspace you would need. According to a Jones Lang Lasalle (JLL) study, the top two drivers of co-work spaces are cost and infrastructure, the third factor is networking. The keyword here being 'community workspaces', most organizations in this sector go beyond providing a space and service, to offer both an online & offline community to interact with and learn from. The community is formed and nurtured by organizing frequent meet-ups, forums, talks and events that create opportunities to exchange ideas and network. Add the tag of an incubator or an accelerator to an established co-work space and you now have everything that a start-up or SME needs under one roof to help them grow and flourish.
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INVESTMENT
DEAL
FOCUS
ANDELA RAISES $100 MILLION IN SERIES D FUNDING
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ndela, a company building distributed engineering teams with Africa's s of t w a re d e v e l o p e r s , re c e n t l y completed a $100 million Series D funding round led by Generation Investment Management, with participation from existing investors Chan Zuckerberg Initiative, GV, Spark Capital, and CRE Venture Capital. The most recent financing brings Andela's total venture funding to $180 million. Andela was founded in 2014 to connect Africa's engineering talent with the demand for software developers worldwide. According to the company, in four years, Andela has assessed one hundred thousand applicants, hired one thousand software developers, and integrated them into companies such as Cloudflare, Percolate, and InVision. Founded in 2014, Andela builds distributed engineering teams with Africa's top software developers. Andela is solving the global technical talent shortage by building distributed engineering teams with Africa's top software developers. In four years, Andela has hired 1,000 developers out of more than 100,000 applicants and become known as the “Best Place to Work in Africa,� with tech
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campuses in Lagos, Nairobi, Kampala, and Kigali. Backed by Chan Zuckerberg Initiative, GV and Spark Capital, Andela is powering global engineering teams while catalysing the growth of tech ecosystems across the African continent. In 2015, Andela raised $14 million as series A funding. In 2015, the firm raised $24 million as series B funding. Spark Capital and the Chan Zuckerberg Initiative (CZI) were the lead investors in the first two funding rounds. In 2017, Andela raised $40 million in Series C funding. The funding round was led by CRE Venture Capital, a South African Venture Capital firm, and backed by DBL Partners, Amplo, Salesforce Ventures, and TLcom Capital. Andela plans to use the Series D funds to accelerate the development of its technology platform to identify, develop, and match talent at scale and provide its customers with the data they need to understand developer performance and better manage distributed teams. The company also plans to expand its presence across Africa.
INVESTMENT TRENDS ACROSS
AFRICA
AFRICA'S GDP TO RISE IN NEXT TWO YEARS - IMF Sub-Saharan Africa is among regions in the world projected to record accelerated economic growth in 2019, amid a slowdown in global growth precipitated by heightened trade tensions and rising interest rates in the US. The International Monetary Fund says that GDP growth in sub-Saharan Africa will rise from 2.9 per cent posted last year to 3.5 per cent this year, and 3.6 per cent in 2020. The projection is however a 0.3 percentage point lower, blamed partly on the declining crude oil prices, which have plummeted from a high of $85 a barrel and are expected to average $60 this year. These have significantly impacted growth for oil-producers Angola and Nigeria. One-third of sub-Saharan economies are expected to post growth above five per cent, raising optimism of impressive performance in a year when external shocks, including trade tensions, rising US interest rates, dollar appreciation, capital outflows and volatile oil prices are expected to continue. More critically, the nagging challenges of ballooning debt, expanding recurrent expenditures and slowdown in revenue mobilisation will continue to curtail growth. "Across all economies, measures to boost potential output growth, enhance inclusiveness and strengthen fiscal and financial buffers in an environment of high debt burdens and tighter financial conditions are imperatives," says the IMF in its World Economic Outlook 2019 report. The Fund forecasts that 2019 will not be a good year for the global economy, whose growth is projected to decline to 3.5 per cent from 3.7 per cent last year, largely due to an escalation in trade wars between the US and China. The US has
imposed import taxes on steel, aluminium and hundreds of Chinese products, drawing retaliation from China and other US trading partners like Mexico and Canada. Other factors include the messy Brexit process, Italy's financial struggles, volatile commodity prices and rising interest rates in the US, which are projected to impact heavily on the global economy Growth in advanced economies will slow from an estimated 2.3 per cent in 2018 to 2.0 per cent in 2019 and 1.7 per cent in 2020. Growth in the Euro region is set to moderate from 1.8 per cent in 2018 to 1.6 per cent in 2019, while in the US, it is forecast to remain flat at 2.5 per cent and decline to 1.8 per cent in 2020. Growth in Asia is expected to dip from 6.5 per cent in 2018 to 6.3 per cent this year, and 6.4 per cent in 2020, with China's declining from 6.6 per cent to 6.2 per cent due to the combined influence of financial regulatory tightening and trade tensions with the US. India's growth on the other hand, is poised to pick up to 7.5 per cent from 7.3 per cent last year, benefiting from lower oil prices and a slower pace of monetary tightening, plus easing in inflationary pressures. In Latin America, growth is projected to recover from 1.1 per cent in 2018 to 2.0 per cent this year, and 2.5 per cent in 2020.
GERMAN AUTO GIANT VW (VOLKSWAGEN) ANNOUNCE MULTIPRONGED ENTRY INTO ETHIOPIA Volkswagen brand continues its engagement in emerging countries in Sub-Saharan Africa. In the presence of Frank-Walter Steinmeier, President of the Federal Republic of Germany, a Memorandum of Understanding (MoU) was signed by Thomas Schaefer, Head of the Volkswagen Sub-Saharan Africa Region, and the Commissioner of the
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Ethiopian Investment Commission (EIC), Abebe Abebayehu, on January 28, 2019. Thereby, Volkswagen is taking the fast development of the country into account. Over the last ten years, the GDP growth rate in Ethiopia was above 8 percent – one of the highest worldwide. Moreover, Ethiopia is a priority and focus country for Germany under the “G20-Compact with Africa” initiative. Volkswagen will focus on four key pillars: the establishment of a vehicle assembly facility, localization of automotive components, introduction of mobility concepts such as appbased car sharing and ride hailing as well as the opening of a training centre. As such, VolksWagen will work closely with the Ethiopian higher education and training institutions for skills development and capacity building of local talent. VolksWagen intends on tapping into existing expertise and strategic resources in Ethiopian to help establish a thriving automotive components industry. Ethiopia becomes the third country in Sub-Saharan Africa to signa Memorandum of Understanding with VolksWagen . It follows Ghana and Nigeria who both signed MoUs with VolksWagen in August 2018.
reserves of 214 million tons. In the first phase first phase which will be launched on Thursday, 4 million tpa of ore will be mined, producing 250,000 tpa of zinc concentrate. President Ramaphosa is expected to open the mine along with Mineral Resources Minister Gwede Mantashe, who had in recent times increased calls for local beneficiation of minerals. South African government officials, including the Deputy Minister of Mineral Resources, have visited Vedanta's headquarters in India to discuss partnership in fields such as copper smelting, zinc beneficiation and captive power generation. Local engineers are also expected to travel to India for training as part of the Vedanta global leadership programme.
MULTICHOICE BEGINS TRADING ON JOHANNESBURG STOCK EXCHANGE(JSE)
PRESIDENT RAMAPHOSA TO LAUNCH $400M ZINC MINE IN SOUTH AFRICA'S NORTHERN CAPE
Multi Choice Group (MCG) LTD debuted on the Johannesburg stock exchange on Wednesday, 27 February following a spin off by tech giant Naspers Ltd, which made its intention to list MCG known last year. The listed entity includes MultiChoice South Africa (MCSA), MultiChoice Africa Holdings (MAH), SHOWMAX, Global Digital Platform security provider Irdeto and other subsidiaries and affiliates. The shares of MCG which opened trading at R95.50 ($6.89) gained 16 percent to R111.12 by 11am valuing the company at close to R50 billion although the shares later dipped to R109.86 per share at 1.32pm local time. “Today's listing is an important milestone in our exciting journey of growth” said Calvo Mawela, Multi Choice Group CEO. As one of the fastest growing pay-TV broadcast providers globally, our strong financial position at listing is backed by attractive long-term growth opportunities in both subscriber numbers and revenue. MCG has a highly cash generative core with no financial debt, and we are poised to deliver value to our shareholders over time.”
India's globally diversified natural resources company Vedanta Resources Limited will on Thursday, 28/2/2019 launch a R5.5 billion zinc mine in South Africa's Northern Cape as part of its Black Mountain Mining(BMW) operations. The mine will be launched by President Cyril Ramaphosa. The South Africa Presidency said Gamsberg will exploit one of the largest known, undeveloped zinc ore bodies in the world and will comprise an open pit mine and a dedicated processing plant. The mine has resources and
A statement by the company said the listing and impending unbundling of MCG by Naspers Limited reinforces the commitment of both companies to broad, socio-economic transformation in South Africa. Phuthuma Nathi (PN) shareholders will be allocated an additional 5 percent stake in MultiChoice South Africa (MCSA) for no consideration, thereby increasing their indirect interest in MCSA from 20 percent to 25 percent, and result in a 25 percent increase in PN's share of MultiChoice dividend flows.
ETHIOPIA, DJIBOUTI SIGN GAS PIPELINE DEAL Ethiopia and Djibouti have signed a Deal to build a pipeline to carry Ethiopian gas to an export terminal in the Red Sea state. Ethiopia found extensive gas deposits in its Eastern Ogaden Basin in 1970. Djibouti Energy minister, Yonsi Ali Gued, told Reuters that the deal laid out “key terms that will serve as a basis for related concession contracts”. “It is the most expensive project ever built in the Horn of Africa Region” he said adding that both parties have reached a deal in the principle for mutual benefits.
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GOVERNANCE AND POLICY
COMMERCIALIZING THE AFRICA SPORTS SECTOR
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cross the world, sports have grown beyond mere physical activity or social spectacle and has developed into a major industry with significant contribution to national growth and employment. In Africa however, despite sports being a proven force which provides employment opportunities for economic development of individuals and a nation at large, the role of sports in economic development is yet to be fully realized. The gains of sports in Africa have largely been limited to the sociocultural spectacle and its unifying and happiness factors. Even the occasional hosting of international competitions has not been met with the needed commercialization of the standard infrastructures, leaving under-utilized sporting infrastructures from Abuja to Cape Town.
Much of the success stories emanating from Africa have sport as their theme, from the emergence of individual icons like Didier Drogba to the socio-political impact of South Africa hosting and winning the 1995 Rugby World Cup. Even though the commercial spotlight of sports is beaming on the likes of China, Gulf States and India, sports is deeply embedded in Africa, from rugby and cricket in South Africa, the distance running prowess of Kenyan and Ethiopian athletes, to football all over the continent and especially populous states in the west such as Nigeria. Admittedly, it is hard to see how these African stars could shine without the international stage. Not only are the number of attractive sporting events and competitions taking place within the African continent grossly insufficient, the successful African sportsmen and women often owe the development of their skills to foreign
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training. If adequate structures, institutions, policies and regulatory frameworks as exist in other parts of the globe are replicated in Africa, it is exciting to imagine how the sporting spotlight would focus on the continent, especially given such factors as the young demographics of the continent, the growing reach of social media, the similar time zone as Europe, which makes Africa a hugely attractive market. It is therefore worth considering how much of a socio-economic contribution sport can make to the development of Africa if used locally in a strategic and coordinated way. While there is no doubt that sports could play a critical role in attaining developmental goals, the policy vacuum, poor governance, inadequate investment all show that African governments are yet to fully appreciate this potential and are yet to integrate sport into their national development plans. One thing that is clear from business industries over the years and across the globe is that government policies could either help businesses to grow or kill them,
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as exemplified in the commercialization of the telecommunications industry in Nigeria at the turn of the 21st century. Similarly, the role of the government in England in the infrastructural development of modernized stadiums undoubtedly contributed to the commercialization and development of professional football in England as it is today. Just as the US and UK are using industryspecific legislation to boost commercialization of emerging industries such as the commercialization of the space industry, African governments need similar focus of law and policy to boost sports commercialization for the sake of the socioeconomic benefits. There needs to be a response by African governments to the global developments in the sports industry and one thinks that the possibility of a Sports Industry Bill may not be beyond reason. Drawing an example from the Constitution of Nigeria, the starting point for a legal basis for the role of government in sports
development can be deduced from the Fundamental Objectives and Directive Principles of State Policy, which include harnessing the resources of the nation to promote a dynamic economy and protecting the right of every citizen to engage in any economic activities outside the major sectors of the economy and the promotion of a planned and balanced economic development. However, the following are instances where the African government need to focus on, in order to boost the development of the sports industry in Africa: Infrastructure: in providing an enabling environment, governments cannot ignore the development of sporting infrastructure in the form of standard football pitches, running tracks, swimming pools, etc. Startup sports clubs may not be able to afford high-cost infrastructure from the onset, but affordable access to such infrastructure is sure to boost their progress and viability. Education: while it is easy to focus on athlete education, it is a fact that it takes world class coaches to produce world class athletes. So, continuing education for coaches and trainers is equally vital. Economic incentives: such as tax holidays and subsidized payments for access to highcost infrastructure (e.g. stadiums) for companies investing in or contributing to sports development. Media and intellectual property rights protection: publicity and media exposure are vital to the commercialization in sports. Wide media coverage attracts sponsors who want to reach out to the public with the message of their brand. In canvassing for law and policy to be used to boost commercialization of sports, it is pertinent to acknowledge that sports generally are a self-regulated industry. It has
proven to be practically difficult to draw a line between government involvement and sports self-regulation, particularly in Africa where government in many cases are largely responsible for the funding of sports federations. In as much as sports is self-regulatory, it operates within the wider sphere of society. Just like EU jurisprudence states that sports are subject to EU law as far as it constitutes an economic activity, national governments wield an oversight responsibility due to the socio-economic implications in the commercial nature of sport. In influencing the commercialization of sports, the focus of government is not the day to day administration but ensuring that its policies and legal framework are aimed towards promoting an attractive business environment for sports business to thrive and the protection of rights. Nelson Mandela's speech in 2000, that “Sports has the power to change the world, to inspire, to unite people, create hope is more powerful than governments� is reflective of the immense potential of sports in the modern day. While government action must be backed by the necessary funding and budgetary allocations, government funding for sports in Africa needs to shift from recurrent expenditure such as funding national team travel and participation in international competitions, to focusing on infrastructural and other developmental needs. The economic weight inherent in commercial sporting activities such as manufacture of sporting goods, job creation, employment training, sports infrastructure, hosting of sports events, etc., warrant African countries to incorporate sports into their development policies and agenda.
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CAPITAL APPRAISAL ACCESS BANK, DIAMOND BANK MERGE TO CREATE AFRICA'S LARGEST RETAIL BANK
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he Boards of Access Bank Plc and Diamond Bank Plc has announced that they have received “No Objection” from the Central Bank of Nigeria (“CBN”) regarding a potential merger between the two banks, which is expected to complete in the first half of 2019. Transaction completion is subject to Access Bank and Diamond Bank obtaining shareholder and regulatory approvals (Central Bank of Nigeria, the Securities and Exchange Commission, the Federal High Court (“FHC”) and the National Pension Commission (“PenCom”). Following the signing of the Memorandum of Agreement and announcement of headline terms, which valued Diamond Bank at approximately NGN72.5 billion (~$200m) and will see Diamond Bank shareholders receive NGN3.13 per share in cash and shares, Access Bank and Diamond Bank are today announcing further details, including the rationale and benefits of the deal, the estimated cost synergies, the capital management plan and the timetable.
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*Merger will form a leading Tier 1 Nigerian bank and the largest bank in Africa by number of customers, spanning three continents, 12 countries and 29 million clients. *Brings together treasury, risk management and corporate banking expertise with strong retail and digital banking capabilities to create a financial institution operating across the full suite of products for all customer segments. *Transaction to be concluded via Scheme of Merger following Access Bank and Diamond Bank Court Ordered Meetings expected in March 2019 to approve terms. Subject to shareholder approvals, final SEC, CBN, and PenCom regulatory approvals and FHC sanction expected before end of H1 2019. *Cost synergies conservatively estimated at NGN30 billion per annum, pre-tax, to be fully realised within three years post-completion. Further revenue and balance sheet synergies to be evaluated by joint implementation committee.
The pro-forma capital position of the merged bank will be in full compliance with regulatory requirements for significant financial institutions with an international banking presence. However, in order to meet international standards of best practice and ensure a robust capital buffer, Access Bank and Diamond Bank have jointly agreed a strategic capital management plan and expect to achieve a post-completion Capital Adequacy Ratio (“CAR”) of 20% at the Bank level and 22% at the Group level. The key elements are: *Diamond Bank to take further impairments in line with IFRS9, to be reflected in year end 2018 results. *Access Bank has already finalised terms and obtained regulatory approvals for a Tier II capital issuance, which will raise US$250 million, available for drawdown in January 2019. *Access Bank has also obtained “No Objection” from the CBN to undertake a Rights Issue to raise up to NGN 75 billion (~US$ 207 million) in the first half of 2019. Shareholder approvals and other regulatory approvals will be obtained before the offer opens. This accelerates the capital management plan to support retail growth, previously set out in the Bank's five-year strategy Commenting on the proposed merger, Herbert Wigwe, CEO of Access Bank, said: “I am delighted to announce that we have received the necessary regulatory approvals to pursue a merger with Diamond Bank, one of Nigeria's foremost digital and retail banks, subject to final regulatory and shareholder approvals. The combination of our two businesses will create the largest retail bank in Africa by customer base and a very significant player in the Nigerian market. This is a huge step towards the delivery of our goal to bring the power of banking to millions of people across Nigeria and an exciting transaction for Access Bank and Diamond Bank's customers, staff, and shareholders. “We have a clear plan to maintain our capital strength and are announcing today decisive steps by both banks to ensure their financial stability throughout the process. The overall outcome will be a stable institution with
an extremely strong capital adequacy ratio of more than 20% following completion of the merger, which will be a leading competitor in all the markets in which it operates. “Access Bank and Diamond Bank have complementary operating platforms and similar values, and a merger with Diamond Bank, with its leadership in digital and mobileled retail banking, will accelerate our ambition to become a leading corporate and retail bank in Nigeria and a Pan-African financial services champion. We look forward to bringing our discussions to a successful conclusion and delivering the benefits of the merger to our staff, customers, shareholders and other stakeholders.” Uzoma Dozie, CEO of Diamond Bank, said: “The merger is positive for all of Diamond Bank stakeholders, including customers, employees and shareholders. In particular, customers will benefit significantly through the unrivalled combination of the best of Diamond Bank's retail and digital leadership with the size of Access Bank's balance sheet, corporate names and geographical reach. “In reaching this decision, the shared passion for leveraging Nigeria's youthful and entrepreneurial talent, and a commitment to better outcomes through financial inclusion have convinced us that this is the right combination. “I believe that the combination of two strong and admired brands, with shared values and complementary strengths, will be a strong force for positive change in the Nigerian and African retail landscape. As a result, this merger creates significant potential for sustainable long-term growth which stands to benefit customers, employees and shareholders alike.” Diamond Bank will benefit from Access Bank's strong culture of risk and capital management expertise and a clear strategy for sustainable growth. Access Bank will take advantage of Diamond Bank's unparalleled retail banking expertise and strong digital offering. Together, the two companies would create one of Nigeria's leading banks, with 29 million
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customers, including more than 13 million mobile customers, as well as 3,100 ATMs and around 32,000 POS terminals. Diamond Bank and Access Bank share many of the same areas of focus, including women, youth, entrepreneurs and the financially excluded and will be able to further develop their positioning and market leadership in these growth sectors. Diamond Bank's corporate customers will also be able to benefit directly from Access Bank's corporate expertise in trade finance, cash management, treasury and corporate finance. Diamond Bank currently has 19 million customers, including 10 million mobile users. The combined operation will have relationships with both MTN and Airtel, ensuring that customers of the merged bank will continue to access a strong mobile banking proposition. Access Bank and Diamond Bank also operate from the same technology platform, which the Boards believe will enable them to complete the integration with minimal disruption or impact on customers, in addition to generating significant synergies. Access Bank had a capital adequacy ratio of 20.1% as at 30 September 2018. It is currently concluding a US$250m Tier II capital raising exercise in line with its capital plan to provide a robust capital buffer given the current macroeconomic environment. The Board of Diamond Bank has confirmed to Access Bank that it intends to take a further impairment on its loan book in line with its IFRS 9 implementation by its financial year end on 31 December 2018. Access Bank has sufficient capital headroom to conclude its merger with Diamond Bank after the write down. The pro-forma CAR of the combined entity will be in full compliance with regulatory requirements at the time of completion. However, Access Bank has also accelerated its capital plan, in which it had anticipated raising additional capital to fund retail expansion, to ensure that the quantum and timing take account of the planned merger. It has obtained a CBN “No Objection� for a Rights Issue of up to NGN75 billion (~US$207 million) to be
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launched in H1 2019, which will ensure that it continues to maintain a strong capital buffer above the minimum requirements. A formal notification for an EGM to seek shareholder approval for the rights issue will be issued shortly. The transaction also presents the opportunity for significant cost synergies to be derived from consolidation of support functions and processes, the benefits of scale, branch consolidation and HQ centralisation. These are conservatively estimated to be NGN30 billion per annum, pre-tax, to be fully realised three years post-completion. In addition, there are revenue synergies, such as those from the opportunities created by applying Access Bank's value chain approach to Diamond Bank's existing 19 million-strong customer base, along with the positive impact of Diamond Bank's NGN1 trillion low cost deposit base on Access Bank's cost of funding, enhanced risk management and yield and price improvements driven by market share. The funding and capital synergies are also attractive, with an improved deposit mix, improved access to capital markets and greater efficiency in treasury operations. A Joint Implementation and Integration Committee has been established to ensure that these synergies are properly evaluated, and the resulting profit and growth potential realised. Access Bank plans to leverage the best talent of both banks and combine them to create a leading banking franchise in Nigeria. The combined bank will be led by Access Bank's current CEO, Herbert Wigwe, and will retain the Access Bank name. It is intended that the brand will be redesigned to include strong elements of Diamond Bank's digital and retail brand. Access Bank has a strong track record of M&A in Nigerian banking and has previously demonstrated its integration capabilities in the successful acquisition and subsequent absorption of six institutions in the past 15 years. The same team who led this successful integration will be responsible for delivering the merger with Diamond Bank and overseeing the transition to the enlarged entity.
EMERGING IDEAS
INTRODUCING ENTERPRISE ARCHITECTURE AS A SERVICE CIOs today are faced with a dizzying array of enterprise technology services, and while it's never been easier to purchase new tools, it's also never been so important to guide these purchases with a bigger architectural strategy. At its heart, Enterprise Architecture (EA) involves taking a structured approach to integrating diverse sets of skills, methods, systems, tools and applications, to create an efficient and productive enterprise. By mapping a complete view of the organisation, leaders can detect inefficiencies or weak spots, or find those oppor tunities for business transformation, automation, or digitisation. Ultimately, EA provides firms with optimised processes that enable the delivery of business strategy while also responding to change and embracing new technologies. BRINGING EA WINTHIN REACH Traditionally, EA was a capability that was only deemed necessary or even possible for the large enterprises with complex IT landscape. Being a niche skill in high demand, salaries for qualified, certified senior architects have ballooned in recent years. The Harvey Nash/KPMG 2017 CIO Survey showed a 26% surge in demand for EA skills in the past year. For many organisations, it's simply not viable to stock a large in-house team of seasoned architects, especially considering that these skills are rarely utilised at full capacity. However, a new model of delivering EA is emerging, one which follows the current trend of 'everything as a service'. The concept of EA-as-a-Service involves outsourcing the strategic and operational architecture work to a trusted partner. This way, firms can access EA skills and resources as and when they need them – paying for only the
capacity that they need. This ensures high-quality EA models and artefacts are generated, but with none of the costs and risks of carrying a permanent team of architects. The organisation benefits from a permanent EA practice that offers enduring value, and which can be picked up and evolved by in-house teams or outsourced consultants at any time. Of course, this model also extends EA down to smaller organisations (where previously it may have been out-of-reach), as they can now access EA specialists whenever they need. In fact, it's often in smaller but rapidly-growing companies that we find the greatest need for EA: as their technology landscape expands and new tools, applications and systems are continually added. TRUST AND COMMITMENT Without EA to bring it all together into a cohesive whole, it's easy to end up with a sprawling, chaotic IT estate – full of systems that don't fluidly integrate with one another. And as data within the organisation grows in volume and complexity, having the models to underpin your use of that data becomes ever more important. By taking an EA-focused approach, organisations can take a step back, and design frameworks and architectures that better handle the volatile change that we're witnessing in so many industries today, as digital technology continues to reshape business ecosystems. Nevertheless, the EA-as-a-Service model can certainly only succeed when there is a high level of trustworthiness and commitment from both the organisation and the EA partner. With every business having its own unique personality and characteristics, your EA partner needs to deeply immerse themselves into your business and create the architecture frameworks that work best for you.
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COUNTRY OF FOCUS:
GHANA
T
he Ghanaian economy recovered in 2017. GDP growth of 8.5% was spurred by recovery in the non-oil economy and lower inflation, and by new hydrocarbon wells coming on stream in Tweneboa, Enyenra, Ntomme (TEN) as well as the Sankofa oil and gas fields. This performance followed five years of sluggish growth when growth fell at the onset of oil production from 14% in 2011 to 3.5% in 2016, the lowest growth in two decades. GDP growth is expected to moderate and average 6.4% over the next two years as hydrocarbon production peaks amidst declining inflation and interest rates. This is expected to lead to favourable business and consumer sentiments, which would boost growth of the non-oil economy. The structure of the economy remains broadly unchanged with a continued dominance of the services sector, although its contribution to GDP fell slightly from 56.8% to 56.2% between 2016 and 2017 as higher oil production led to an increase in the contribution of the industrial sector to GDP. The industrial sector's contribution to growth increased slightly from 24.3% in 2016 to 25.5% in 2017. The sector grew by 16.7%, which was largely driven by the mining and quarrying sub-sector, on the
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back of improved performance in the oil and gas subsectors (5.7%). Services grew by 4.7% in 2017 with transport, storage and communication that contributed 17.1% to GDP, followed by the retail sector (12.1%), construction (14.3%) and financial sector (9.1%). The agriculture sector grew by 8.4%, but its contribution to growth remained fairly stable at 19.1% in 2017 from 18.9% in 2016. Sub-sectoral growth included fishing (11.7%), crops 9.4% (the cocoa sub-sector grew by 17.3%), forestry and logging (1.6%), and livestock (1.1%). The landmark ruling of the International Tribunal for the Law of the Sea (ITLOS) in September 2017, on the 2015 boundary dispute between Cote d'Ivoire and Ghana, paves the way for additional exploration and drilling of oil and gas. Ghana sustained and achieved some positive gains from its ongoing fiscal consolidation under the international Monetary Fund (IMF) extended credit facility (ECF) programme. Ghana completed its 4th review of the IMF ECF programme on 30 August 2017 and also extended the programme to end 2018. On April 30, 2018, the country successfully completed the 6th review of the IMF ECF programme with 2017 end year fiscal deficit
performance of 6.7% of GDP, which was better than the deficit of 8.9% in 2016. Despite this progress, revenue mobilization is key to achieving the country's plans to find a sustainable fiscal consolidation path while managing debt sustainability and funding 1D1F policy and the “Ghana beyond Aid” agenda. This calls for an increase in Ghana's tax base which is relatively low with a tax to GDP ratio of about to 15.1% in 2017. For the financial sector, it is crucial to address non-performing loans (NPLs) and
Ghana's GDP Growth in % 12
11.1
10 8.7 7.4
5.2
2.9
7.4
5.6
5.5
5.4
5.4
8 6 4
3.1
2 0
a deposit protection scheme to protect small depositors. Long one of the continent's success stories, Ghana is the birthplace of pan-Africanism and was one of the biggest advocates for independence during the colonial period. It has since developed one of the region's largest and most advanced markets and has become a diplomatic and economic force in West Africa. The country benefits from a wealth of natural resources, including cocoa, gold and – more recently – oil and gas. While economic growth has slowed in the last several years on the back of external pressures and low commodity prices, Ghana's upstream resources give it a strong foundation from which to bounce back as conditions improve. It has a population of just over 28m and is the 33rd-largest countr y in Africa. Life expectancy, school enrolment and GDP growth are all above the sub-Saharan average.
-0.2 Jan. 2016
Jul. 2016
Jal. 2017
Jul. 2017
Jal. 2018
Jul. 2018
-2
SOURCE: TRADINGECONOMICS.COM | GHANA STATISTICAL SERVICE
undercapitalisation in the banking sector. As of April 2018, the Bank of Ghana (BoG) had approved the takeover of UT Bank Ltd. and Capital Bank Ltd., and appointed an administrator for UniBank Ltd. and an advisor to Sovereign Bank Ltd. These banks suffered from severe capital impairment among other things, including inefficient corporate governance. To restore the stability of the financial sector, the BoG introduced recapitalization plans for banks with inadequate capital, imposed the implementation of collateral requirements, and made provision for emergency liquidity assistance. The BoG also increased the minimum capital requirement of banks from Ghanaian cedi (GHS) 120 m to GHS 400 m, ordered bank recapitalization and established
As in many West African countries, Ghana's economy is strongly correlated with global commodities. Oil, gold, and cocoa are the three main sources of foreign currency and income; however, price swings over 2015 and 2 0 1 6 f o r th e s e th re e re s o u rce s , a strengthening US dollar, as well as domestic issues such as fiscal slippage, growing debt and mounting inflation have combined to slow the pace of development, leading to a depreciating currency and a budget shortfall. Despite this, Ghana's economic prospects for 2018 appear strong. Following a belttightening process, the government has both brought down the problematic fiscal deficit and channelled capital spending towards priority projects by capping budget transfers to statutory funds. The government also has plans to industrialise rural regions, improve the business environment, harness the financial sector and improve access to credit for private actors.
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INVESTORS DIARY
9 T H N O RT H A F R I C A P E T R O L E U M EXHIBITION AND CONFERENCE (NAPEC) North Africa Petroleum Exhibition and Conference coming in March 10 – March 18 is the largest oil and gas exhibition & conference in Africa focusing on the North Africa Market. dedicated to the Upstream, Midstream and Downstream activities. NAPEC is the place to develop, grow and meet the oil & gas professionals coming from all over the world, governments representatives, shareholders and service & technology providers to do business in the hydrocarbons and energy sector in north Africa region. A unique mix of 570 Operators, technology & service companies from 40 Countries.
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2ND PROJECT EAST AFRCA(PEA) Taking place at Uganda, Kampala Serena Hotel on 20th -21st March 2019. Held under the patronage of The Republic of Uganda, Office of The Prime Minister, with the endorsement of the Ministry of Trade, Industry and Cooperatives and co-hosted by the East African Chamber of Commerce, Industry and Agriculture (EACCIA), the 2nd Project East Africa Summit returns to the region, as the platform for leading decision makers to engage with international and local investors and showcase the abundance of infrastructure opportunities available throughout East Africa. BLOCKCHAIN AFRICA CONFERENCE The African continent has massive challenges with transactions and doing business that, with the help of blockchain technology, can be transformed into simpler and more efficient ways of working. The Blockchain Africa Conference 2019 will focus on moving Africa forward with the technology. It will discuss how the blockchain can simplify systems and processes to lower costs, reduce fraud, become highly secure and transparent, and remove human error and inefficiencies.
The AIDF Africa Summit presents an opportunity to explore best practice, policy and project updates, innovation and partnerships in ICT, data and mobile solutions for humanitarian and development programmes.
AFRICA INVESTMENT EXCHANGE: GAS AIX: Gas brings upstream and LNG players together with investors, senior officials, and power sector and downstream developers to help form and strengthen partnerships along the African gas value chain. The event coming up by May 2-3, 2019 in RSA House, London. Coproduced by CbI's African Energy, the meeting is structured round panel-led sessions and held under the Chatham House Rule to facilitate open discussion.
Participants will gain first hand insights from development banks, donors and government agencies into their financing priorities and funding guidelines as well as benefit from networking opportunities. The Summit agenda includes keynote presentations, interactive sessions, themed roundtables, speaker panels, Innovator of the Year Award and an evening drinks reception to engage with decision makers and key stakeholders in Africa's aid and development sectors. Save the date and reserve your place here to be part of the most influential aid and development conference in Africa.
Now in its fifth year, the programme responds to Africa's growing gas demand, new discoveries and opportunities to commercialise gas resources shaped by technology, innovative financing structures and significant power demand. Africa's evolving utility-scale and small-scale LNG market will also feature in the agenda.
In 2019 the African Petroleum Producers Organization, APPO, will present its seventh edition of the African Petroleum Congress and Exhibition in Malabo, Equatorial Guinea.
AIDF AFRICA SUMMIT Now in its 4th year, the AIDF Africa Summit returns to Nairobi, Kenya on 26-27 February 2019, once again uniting 300+ humanitarian and development leaders, decision makers and advisors committed to achieving the Sustainable Development Goals (SDGs) in the region.
This conference organized by Africa Oil & Power entails a first-level meeting of oil ministers, toplevel executives and opinion leaders. In a time of growth for Africa's oil and gas sector, APPO offers the members of the African energy industry this exceptional platform. For the continent's oil producers this represents an opportunity to guarantee the prosperity and stability by gathering and jointly generate ideas.
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