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: East African countries continue to power ahead and diversify their economies, as the IMF expects Ethiopia, Rwanda, Kenya and Tanzania to grow 6-7% in 2016 and 2017.

Most East African countries are setting their sights on natural resources to accelerate growth currently buoyed by large infrastructure projects, but Kenya continues to harbour its manufacturing ambitions. 80% of vehicles in East Africa’s biggest economy are second-hand, but the automobile production sector grew by 7% in 2015 suggesting a promising future.

In an attempt to replicate South Africa’s successes, where a multi-billion dollar industry was built on the 1995 Automotive Industry Development Program, the Kenyan Government exempts parts used in local assembly from a 25% import duty amongst other policies. As a result, the first locally manufactured vehicle hit the show rooms in 2014 and its original price of under US$10,000 has continued to fall, and Volkswagen recently announced its return to the country with the assembly of vehicles near Nairobi starting 2017.

Fact: The Masai remains the only tribe allowed to cross the border between Tanzania and Kenya without a passport.

Ethiopia is attracting increased interest

  • Ethiopia is using a range of incentives to woo investors to the country - already, large private equity groups KKR and Blackstone have set about investing in the country’s infrastructure and floriculture sectors
  • Dangote (Cement), Asian Paints (one of India’s largest paint-makers) and Chinese shoemaker Huajian have all expanded into the country; Unilever is currently building a new factory
  • Foreign direct investment (FDI) is set to increase by at least 20 per cent from last year, with China, South Korea, India and Turkey being the main drivers
  • This year, the country is anticipating FDI of US$1.7 billion (up from last year’s US$1.5 billion) compared with Kenya’s US$1.1 billion, Uganda US$856 million, Tanzania US$1.4 billion and Rwanda US$449 million
  • Key drivers of FDI include attractive land leasehold laws, low cost of labour, dependable energy and government incentives to attract investors

IDBZ says $50 million ZPC bond fully subscribed

  • The Infrastructure Development Bank of Zimbabwe (IDBZ) has announced the US$50 million Zimbabwe Power Company bond has been fully subscribed and that it also plans to raise about US$10 – US$15 million for a housing bond
  • The ZPC bond is earmarked to support the refurbishment of the Kariba hydro power station and the re-powering of the Harare thermal power station at a cost of US$38.8m and US$11.2m respectively
  • The five year bond pays a coupon rate of nine percent per cent

Oasis Capital Ghana has reached the first close of its second fund

  • Oasis Africa VC Fund (OAF) first close was US$27m, with commitments from local and international investors
  • Anchored by the Dutch Good Growth Fund (DGGF) at US$5m, the fund has secured commitments of US$7m from the International Finance Corporation (IFC) and over US$15m from a local investor base of five institutions and individuals
  • Oasis will invest in small and medium sized enterprises in Ghana and Cote d’Ivoire providing essential services including education, financial services, housing, healthcare, food services and hospitality
  • Investments are expected to be approximately 50% debt and 50% equity, depending on the industry and the country and Transaction sizes will vary between US$0.5m and US$5m