Atta Africa Financial Update

Key commercial and political activity in Africa for private equity investors by DCE Partners, UK Private Equity advisors to Atta

Executive summary: Happy holidays!

How a Fed rate hike will impact Africa.

Thousands of miles and a vast ocean separate Africa from the United States. But the distance will not shield African nations from the U.S. Federal Reserve’s decision to raise its benchmark interest rate.

Countries with ballooning debt and high exposure to global markets, such as Ghana and Angola, will be most vulnerable, while others, including Ethiopia and Ivory Coast, have buffers that may help them cope.

Ghana may be the hardest-hit African nation in the aftermath of a rate hike. The West African country’s debt-to-GDP level was 71 percent in June, and much of its debt is in the form of short-term, dollar-denominated bonds acquired over the past few years, which means Ghana will soon have to repay its debt in dollars.

With oil revenue down 56 percent and the Ghana cedi currency losing value against the U.S. dollar this year, the country may find it difficult to come up with the money for interest payments on its own.

Some nations might also not be as vulnerable to the Fed's decision. Ethiopia’s economy grew by 10.3 percent from 2013 to 2014 and has been ranked by the International Monetary Fund as one of the five fastest-growing economies in the world. This strong economic growth is expected to continue in 2015 and 2016.

Virgin Active plans gentle Africa expansion

  • Virgin Active, the gym group majority owned by Brait, is targeting Ghana and Zambia
  • Firms continue to make inroads into the continent’s fast-growing economies in the hope of cashing in on a burgeoning middle class whose rising disposable income and lifestyle changes are creating a need for services and goods
  • Last week, Virgin Active opened its first health club in Botswana
  • It has also begun construction on a club in Kenya that is due to open late next year

Nigeria awards new crude swap deals

  • Nigerian state oil firm NNPC will award new crude for oil products swap agreements to Total, Varo Energy, Cepsa and ENI
  • Despite exporting 2 million barrels per day of crude oil, Nigeria is almost wholly reliant on imported gasoline, kerosene and other petroleum products
  • The deals differ from the former "offshore processing" agreements as they are directly with refineries who can use the crude to produce the oil products the country needs