South Africa’s renewal of the African Growth and Opportunity Act (AGOA) with the United States (US) a few months ago seemed to be about local poultry, when in fact negotiations were about a wider range of exports from 39 predominantly sub-Saharan African countries.
All had to meet the criteria of good governance, sound democratic values and protection of property rights. Countries such as Zimbabwe and Swaziland did not make the cut. It also did not go unnoticed that sub-Saharan Africa accounts for around $1.6 trillion of Africa’s $2.4 trillion GDP. AGOA therefore gives the US economic reach into countries where it would ordinarily have no influence.
AGOA is not a gift. As South Africa discovered, its economic strength on the continent does not guarantee its AGOA membership, and the accompanying eligibility to trade at preferential rates with the US. If South Africa did not loosen its stance on the anti-dumping tariffs imposed on chicken imports from the US, it would feel the costs in more lucrative areas, such as motor vehicles and parts, and wine and citrus exports. In the end, South Africa agreed to take 65,000 tons of bone-in chicken imports per annum, free of anti-dumping duties, from the US. Concessions could, however, have been as high as 300,000 tons, threatening an industry in which almost a billion chickens are slaughtered each year for local consumption.
The arrival of 16,000 tons of US chicken, a few weeks ahead of the deadline in mid-March this year, allowed South Africa to retain its preferential access to the world’s biggest market, and benefit from the latest version of AGOA, which was extended until 2025.
The arm wrestle between the US and South Africa may have been prompted by pressures the Americans were facing elsewhere. The dollar was strong at the time and the US needed to find export markets for its chicken. There was also the issue of a trade war looming with its neighbors, Mexico and Canada, over meat-labeling legislation, where the World Trade Organization ruled in favor of these countries being allowed to retaliate with $1 billion in punitive tariffs.
Another plausible reason was Russia imposing its own sanctions on the US in retaliation for economic sanctions it suffered while attempting to Balkanize the Ukraine. With threats to its industry coming in fast and furiously, pressuring South Africa to make the concessions must have seemed an easy option.
With the focus on what concessions the South African poultry industry had to make, it was easy to lose sight of the shortcomings in South Africa’s domestic trade policy. The concessions shed light on the lackluster performance of the manufacturing sector, caused by the political economy tilting left, protectionist trade policy, restrictive regulation, and labor disruption.
The pending Private Security Bill on the local security industry, which could see 51% of US-based companies, like Chubb, G4S and ADT, sold to South African participants, was also a worry, as were plans to limit foreign ownership of property. While the knee-jerk response may have been to assume that greater local ownership translated to black economic empowerment, a more significant interpretation is that no private foreign entity has an equity interest in South Africa’s state defense and protection services, and by extension, neither should they have controlling equity interest in private security establishments.
Land restitution may also fall short of AGOA legislation. The still-to-be promulgated Regulation of Land Holdings Bill will not affect foreign ownership of residential property, but will prohibit ownership of agricultural land, which could instead be leased for between 30 and 50 years. A ceiling on land ownership would be set at 12,000 hectares, regardless of nationality.
The potential overhaul of intellectual property laws, which could impact the pharmaceutical industry, is also concerning. While it makes socio-economic sense to roll out cheap generic drugs to as many South Africans as possible, foreign-owned multi-nationals may see this as an infringement of patents on their own more expensive medication.
Although the controversy surrounding the chicken industry seems to have settled, South Africa is still vulnerable to the vagaries in US trade policy. Should the US feel aggrieved by any of its preferential offerings, they may be withdrawn much quicker than what was allowed under the older version of the agreement. South African policymakers should be more cautious when making decisions, especially those that affect US interests.

Playing Chicken  With The US

Kenya’s attraction of foreign direct investment (FDI) has no doubt been impressive in the past few years, buoyed by demand in consumer and real estate sectors.
East Africa’s largest economy for instance received an estimated $1.9 billion in FDI in 2015, a 65% climb from 2014, data by the African Development Bank (AfDB) shows, cementing its unique position among countries with no significant natural resources that are receiving significant FDI inflows targeted at their consumer-oriented sectors.
In its medium-term economic framework, Kenya actually aims to tap FDI proceeds to help boost its economic performance amid wobbly returns from agriculture that has for decades been its mainstay in terms of GDP contribution.
A new regulation sneaked through the East Africa nation’s Parliament requiring foreign companies to allocate 30% shareholdings in their operations in Kenya to local investors. This threatens to reverse gains in FDI attraction.
“It may be very expensive, if not impossible, for Kenyan individuals to purchase or invest at least 30 percent in a foreign company. The process of carrying out due diligence in a company in another jurisdiction to effect the share sale or allotment would not only be time consuming, but also expensive,” says a lobby of United States investors, the American Chamber of Commerce, in Kenya.
Investors who fail to comply with the fresh ownership rules will be slapped with a fine of KSh5 million ($50,000), so states clause 975(2b) of the Companies Act 2015 that was adopted last November.
“This requirement may do more harm than good to the Kenyan economy. To start with, this 30 percent rule flies in the face of Kenya’s goal of being a regional business hub. A major concern is the conflict between this rule and the fact that Kenya is a liberalized market economy which embraces the free-market ideology. This rule is a form of protectionism,” says Lois Musikali, a legal expert at the Nairobi-based Centre for Applied Research in Law and Policy (CARLP).
Several leading foreign firms, including Vodafone, Coca-Cola, Diageo, General Electric (GE), and Bharti Airtel, have operations in Kenya and authorities should strive to maintain a friendly and predictable business profile that would attract more investors.
“There are concerns that foreign companies will look elsewhere for an investment partner. It is also true that many Kenyans will find it almost impossible, in terms of cost, to acquire a 30 percent stake in a foreign company that wants to register in Kenya,” says Musikali, noting that the absence of guidelines for foreign companies on how or where to find these Kenyan citizens creates a loophole for rent seeking, whereby corrupt public officials could acquire stakes in foreign firms seeking registration in Kenya using taxpayers money thereby advancing crony capitalism.
These resentments are weighty and Kenya has no option but to expunge the regulations from its laws to prevent polarizing investment.
Kenya’s Attorney General Githu Muigai says the regulation will be repealed through the Finance Bill 2016 that is currently before Parliament.
“The clause was unilaterally inserted and does not reflect the investment policy of the Kenyan government. The rule will be repealed through the Finance Bill 2016 that is at the committee stage in Parliament,” he says.
Nonetheless it is baffling that the regulations were allowed to see the light of day because Kenya has previously unsuccessfully tried to introduce a local ownership rule in its telecoms industry after it emerged hat foreign firms were facing difficulties in securing local partners with the right expertise and financial muscle to support the business.
Under this rule foreign companies investing in the telecom sector were required to reserve at least 30% of their shareholding for local partners. This shareholding was reduced to 20% and eventually reviewed for discouraging foreign capital flows in the country.
Kenyan authorities must pull off this path or risk causing ripples among foreign investors given the realities of other outlier factors such as the prevailing global economic slowdown.
The International Monetary Fund (IMF) projects that Kenya’s FDI will fall by nearly a quarter this year, thanks to declining inflows into hydrocarbons exploration and an adverse global economy. According to the latest IMF update on the Kenyan economy, FDI could fall by 23.7% to $981 million.

No Choice But To Drop Contentious Rule

Uncle Ebo Whyte is a six-foot-tall, unassuming looking man. You could mistake him for a steward of the theater rather than the father of it. He speaks in a soft but confident manner but has an attention to detail that is slightly intimidating as we sit down in his cosy office to discuss his journey as one of West Africa’s best known playwrights. Surprisingly, the love of his life arrived by accident.
“I didn’t have the confidence to join the drama society because it had all the popular boys and I suffered from inferiority complex in those days, so I couldn’t enter their circle. One day they needed someone to fill in during their rehearsals and I happened to be the only person standing in the window watching them. What the director didn’t realize was that I had memorized the lines. It took the director only five minutes to realize I would be able to give a better performance than the previous actor he had cast for the role,” says Whyte.
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In 1974, Whyte wrote his first play. It was called ‘Man Must Live’ and depicted the struggles of two sisters whose father died and left them penniless. The story had echoes of his life. As the first of five boys, Whyte grew up in a competitive household. When he was 15 years old, his father passed away and his family lost everything.
“I was devastated when he died, I think for a year or two I was totally lost. Those were the days before the Provisional National Defense Council (PNDC) law came into place, for when a man died intestate, which protects the widow and the children. So, all the extended family took everything from us apart from the house we were living in,” says Whyte.
After studying statistics at the University of Ghana, Whyte almost got chartered but decided last minute against accounting. He wanted a life of spinning stories into gold.
“Roverman Productions started in 2008. The problem was that there was no template for me to know how I could make theater production into a business. My first three attempts of making this work were financially disastrous because I came from the background where drama production was free, hence putting together plays you had to sell was difficult, thank God I learned how to do it,” says Whyte.
He began alone and now employs 15 permanent staff and an 80-man production team.
Getting an audience for the plays was the easy part. The difficulty for Whyte was securing money for the quality of production he wanted. Whyte wanted his production house to produce quarterly plays and to become big enough to be a name in Africa.
Tourists are a big market. According to the World Travel and Tourism Council, Ghana attracted 925,000 international tourists in 2015. In 10 years, international tourists are forecast to total 1.38 million. He reckons about 45% of the holidaymakers in Ghana come to his plays.
Then there was the tougher nut of corporate Ghana to crack.
“Gatekeepers in corporate Ghana could understand musical concerts but they could not understand how theater would work. We were the first company to pioneer theater in Ghana. When they saw how many people we were able to pull, they came easier and it became a much easier sell,” says Whyte.
“We have huge goodwill in the various boardrooms in Ghana. What is happening now is that a lot of the big companies are being controlled from outside Ghana and because the people pulling the strings are not in Ghana, they do not care about spending money here because they do not know about what is on the ground. So it is usually a budgetary issue with companies.”
Eight years on and there are still problems. Like the rest of Ghana, the theater is hampered by another drama – power cuts.
“One terrible moment was last quarter when the lights went out at the national theatre in the middle of the production. We were using a generator, which stopped an hour and half into the production. I think I died inside. Not because we couldn’t solve the situation because we got the power back in 30 minutes, but because of the excellence I look to achieve. I do not want my patrons to take certain things for granted. They should expect to pay for their tickets and nothing will go wrong. They do not need any excuses and I do not want to give them any. The fact that I could not deliver a production without a hiccup was very bad,” says Whyte.
George Ofori runs an art gallery in Accra. His family owned a theater business in the late 70s when stage productions were popular.
“The theater business died during the military rule where there were widespread curfews. My father and a lot of other production houses had to find new ways of making money back then. After that, the theater business has never really bounced back and a lot of people have struggled to make the business viable,” says Ofori.
“The theater business in Ghana is still very much at an evolving and developmental stage with a gradual effort towards audience cultivation. The potential for growth into a viable, consistent and highly rewarding industry is very high. Presently, Roverman Productions is the most identifiable theater entity owing to the consistent quality productions over the last eight years,” says Kabutey Ocansey, Head of Business Development for Roverman Productions.
For those closest to Whyte, his passion for the business is palpable.
“He is a perfectionist and passionate about theater and feels that Ghana has the talent to compare with any theater group in the world if we so desire and are willing to work diligently,” says Felicia Mensah, Customer Relations Coordinator at Roverman Productions.
For Whyte it is not just about business. It is about families dressing up and sharing in their cultural heritage. The golden tradition of families sitting by the fireside and sharing stories may be long gone in the world of the cell phone, but there is a renaissance of storytelling in Ghana and Whyte is responsible for this. As he recounts his journey, the quiet and reserved man is clearly in his element.

The Father Of Ghanaian Theater

The future is difficult to predict; perhaps the solution for entrepreneurs to stay afloat is to create it.
This is when high-growth asset classes, in the form of stocks, bonds and their cash equivalents, are something that entrepreneurs should enjoy having in their personal portfolios. They make it more comfortable for an entrepreneur to take risks. If an entrepreneur’s business venture fails, an asset class will act as a soft cushion for them to fall upon until they are able to rise again.
Real estate is a safe but overrated investment option. Even celebrities are given this clichéd investment option to safeguard their future. An advantage of real estate is you can choose whether to invest your money in commercial buildings, like office blocks, shopping centres and industrial buildings, or residential buildings, which includes apartments or houses, in the form of holiday houses or rental properties.
But, this is advice anyone can find on Google, or the first thing your financial adviser will tell you. The problem is some of these properties have an annual growth rate that is comparable to leaving your money in a savings account at the bank. Basically, any financial adviser who talks about property as a core investment is an amateur.
Successful African entrepreneurs need to spread their wings and invest in multiple asset classes.
Passive fund management is quickly taking over from active fund management, which charges high management fees, yet rarely outperforms the market. When you claim your money back, the money reflected on paper at the time of payment will be deducted to leave you an amount that will not make you smile.
Larry Fink, Founder of BlackRock, the largest global fund manager with $4.3 trillion in assets under management, noted an emerging trend of massive amounts of money that are flowing from active management to passive management.
Low-cost passive indexation fund managers are not yet popular, but they are the future, with undeniable value proposition. Entrepreneurs who want to secure their family’s future should consider passive asset managers, with guaranteed returns and the option to tailor your indices to those that are performing best in the market.
My advice is to consider becoming an angel investor of about 10 funds in start-ups, and small and medium-sized companies. They can be risky, hence the small percentage, but if you make it, the rewards are huge. This will also be an exciting experience for an entrepreneur to help other entrepreneurs grow, similar to what Peter Thiel did with Mark Zuckerberg and Facebook. It proved to be the best decision he made after co-founding PayPal with Elon Musk and Max Levchin.
Many billionaires become angel investors in start-ups around the world, from China to Germany, Kenya, the United States and India. They claim the experience is more rewarding than just trading on the stock exchange.
Jimmy Wales, Founder of Wikipedia, is a small angel investor in Quora, which has built an online community of intellectuals. Steve Case, Founder of AOL, funded dozens of start-ups through his investment firm Revolution LLC, where he focuses on growing them.
Depending on how big your bank balance is, you may consider investing in art, antiques and vintage cars, like Aston Martin, which is one of the few cars on the planet to appreciate with time.
However, paintings and other vintage items, is a game only the rich can play. If you have really made it as an entrepreneur, it will suit you to have these types of items in your portfolio. China’s millionaire art collector, Li Guochang, is preserving his wealth this way.
If you don’t have piles of cash, you need not worry. As an entrepreneur, you don’t need to be it to start participating in asset classes to secure your financial future.

Become An Angel  To Avoid  Investor Demons

I have taken a sabbatical from corporate life and as I write this I am experiencing, first hand, the cultures, history and architecture of the ancient world in Eastern Europe and Asia Minor.
Travelling through Turkey, the Balkans and the new countries born of the collapse of the Soviet Union, one cannot escape the striking diversity of the infrastructure that modern citizens of these countries have inherited. There are important lessons we should have learned from the past, but have we?
Roman engineering and construction techniques laid the foundation for our modern construction technology and methods – they created massive infrastructure across 5,000 kilometers of territory from northern Europe to northern Africa and the Black Sea in the east over a period of around 500 years from 27 BC. The Romans were dedicated master civil engineers and constructors using marble and hard rock, such as granite, transported from all corners of their empire to create cities comprising massive structures, water and transport systems, as well as public facilities that could accommodate thousands in stadiums. They invented concrete and the manufacture of kiln-fired red brick. They recycled materials and large building components as the empire expanded and contracted.
“Why did the Romans build so many ruins?” asked a tourist to our great amusement – fact is that their structures have outlasted most others, hence these are still with us. The Romans worked from a master plan, used detailed design techniques, the best materials, and skilled craftsmen. They mastered logistics, manpower and project management like the ancient Egyptians had done 3,000 years earlier.
The Ottoman Empire usurped the Romans in Eastern Europe and Asia Minor for the next 400 years into the 15th century before Eastern European communities started to win back their countries from the oppression of the Ottoman Turks and re-establish their own art, culture and architecture. During their reign, the Ottomans, while perfecting the construction of large domes in their places of worship, chose interlocking soft sandstone and used simpler construction methods. Their structures have not survived as well, with some notable exceptions, requiring regular restoration and preservation, at great cost.
In Istanbul there are two obelisks a hundred meters apart. One is sandstone from the Ottoman era around 1400 AD, but now a crumbling image of its former self. The second is an Egyptian granite obelisk still in almost pristine condition from around 2000 BC, situated upon a still substantial foundation of a Roman hippodrome built circa 330 AD of solid granite, marble and red brick and mortar (cement).
Fast forward to my visit to Romania and Bulgaria, where the fabulous granite and marble structures of the Renaissance period, through to the 18th century post the defeat of the Ottoman Turks, stand proudly while all around are the crumbling relics of Soviet Russia era multi-story mass housing blocks and public buildings – falling apart after only a few decades. The new democracies in these countries have massive restoration and rebuilding programs – substantially funded with EU contributions, which fuels the British, French and German taxpayer debate on who benefits from the EU.
The contrast with the structures of the ancient and antique world is remarkable.
Spotlight moves to Africa and what has been achieved in infrastructure delivery.
The crumbling RDP houses, the years of time and cost overruns on public sector power plants and pipelines, roads and railways. The lack of infrastructure planning and maintenance across our region is in stark contrast to the world class private sector delivery of mines, toll roads, World Cup stadiums, renewable energy plants, commercial and retail infrastructure and private hospitals delivered in recent years.
It would seem obvious, and history tells us, that infrastructure is best delivered by professionals using proven design processes, skilled craftsmen, the appropriate materials and technologies, effective planning and project management techniques.
Infrastructure delivery should not be controlled by politics, cadre deployment, state institutions that have limited technical capacity, tenderpreneurs, or cobbled-together contractors who may be well-networked.
By nature of their training, demonstrable skills and track record, infrastructure delivery is the domain of professional individuals and companies who should, but still wait patiently, be invited into the inner sanctum of government to discuss the master plan for both South Africa and the regional infrastructure backlog that will unlock the future.
The Romans had this sorted – why can’t we?

Where is caesar   when you need him

Across the globe, more nuclear power units are under construction today than at any other time in the last 25 years. This is happening despite the 2011 crisis in Japan at Fukushima. It is important to note the Fukushima crisis and resulting problems was not a result of a nuclear disaster, but rather a tsunami that laid waste to large parts of Japan and killed around 20,000 people.
At the start of 2015 there were 436 operating nuclear reactors across the globe. By year-end this had increased to 439, despite the closure of seven units during the year. The countries driving nuclear construction are largely in Asia, with China, at last count, building 30 new reactors to add to their fleet.
In South Africa, it’s clear that the government is intent on pressing ahead with a new nuclear build program. The Integrated Resource Plan calls for 9,600MW of nuclear power and this still seems to be the target for the new build. One reason seemingly being that since nuclear is an expensive and complicated industry; it would simply be more cost effective over the long term to invest in a fleet of reactors that can be supported by an underlying industry. If this should transpire, it will certainly lead to a boom in jobs across many sectors of industry.
The environment is another reason nuclear power is punted as an option for South Africa. At the United Nations Climate Change Conference in December, countries reached an agreement to hold the average global temperature increases to less than 2 degrees Celsius, compared to preindustrial levels. The targets agreed upon will require significant reductions in the global greenhouse gas emissions and one of the major areas targeted for reduction of carbon dioxide outputs would be energy generation. The bulk of the globe’s electricity is still generated by fossil fuels, with nuclear power supplying roughly 10% of global electricity. The use of nuclear power is recognized as being a means to achieve climate change targets.
Another serious question around South Africa’s energy future is the planned decommissioning of old power plants. By 2030, Eskom, by law, must close down 14,800MW of existing capacity, while Eskom’s new mega build projects will only add 10,932MW over the same period. These older plants are currently supplying a large part of South Africa’s baseload electricity. The country can ill afford to lose such a big part of its capacity and there is still no clear plan as to what will replace this baseload capacity. The role of renewables is limited; the availability of power output from renewable energy is still not comparable to that of fossil fuel or nuclear plants. Add into the mix the environmental considerations and there is only one option to replace old baseload with new baseload – nuclear.
The major constraint to a new nuclear build in South Africa is funding. Accurate estimates of what a 9,600MW fleet could cost are largely unavailable; they range between $45.4 billion and $68 billion. The only thing we know for sure is that is going to be very expensive. There are other concerns over safety, waste and the ability to run a corruption free and timeous build process.
However, there are also some benefits. The country cannot ignore the environmental issues and the need for a reliable baseload power system that can allow the economy to grow. The South African economy may be moving away from mining but there is no need to ignore the potential in the future of mining, as well as in added beneficiation. Reaching this potential would require a lot of electricity and of course, the more the economy grows, the greater the need for electricity.
Where will the first new plant be built? The Eastern Cape province still seems the most likely area. When will the first new reactor be built? The current economic downturn has given the country some breathing room and the pressure is off for now, but there can be little doubt that new construction could start within the next two years. Following that, the full fleet of 9,600MW could follow over the following 20 years. In addition, given government’s appetite for nuclear power, I would not be surprised if South Africa sees more than 9,600MW of nuclear power by 2050.
Is that a good thing? Time will tell.
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James-Brent Styan authored a book on the energy crisis called Blackout, The Eskom Crisis. It was published in 2015. He writes in his personal capacity.

The Good, Bad…  And expensive

Plans for Nairobi to enter the Global Financial Centre Index (GFCI) – a ranking of the competitiveness of financial centers around the word – finally appear to be on track, following the recent introduction of the Nairobi International Financial Centre (NIFC) Bill. Although the city is yet to be included in the global rank, it’s already among 16 associate centers expected to join the index in the near future.
One of the key roles of the NIFC will be to attract international financial services and multinational corporations to grow and develop the market for financial services in the region. It will help all NIFC-licensed firms to generate new and sustainable revenue streams. On this front, Nairobi is already playing host to several representative offices of global lenders, such as HDFC Bank, Nedbank, First Rand and Bank of Kigali. In addition, the NIFC will provide access to local and regional investment opportunities. Business can be transacted inside or outside Nairobi, in local or foreign currency. This is to allow businesses to operate both locally and internationally. For this reason, plans are already underway to make Nairobi Africa’s first clearing house for the Chinese yuan.
According to the GFCI ranking, for Nairobi to become an international financial center, it will need to enhance five key areas of competitiveness: financial sector development, business environment, infrastructure, human capital, and reputational and general factors. With this in mind, it was encouraging to hear the Cabinet Secretary for the National Treasury, Henry Rotich, propose changes for the local debt market during this year’s budget speech. To start with, market players will now see the introduction of electronic bond auctions which will spare investors from the current manual process of submitting paper bids, the separation of retail and wholesale components of the market and the introduction of primary dealers and market makers. It is likely to attract international portfolio funds looking to investment in the region.
Furthermore, Rotich, through the Financial Services Authority (FSA) Bill will set the stage for mergers across the existing non-banking regulators. The move is expected to address issues around consumer protection, existing regulatory gaps and issues of market conduct. Once enacted, Nairobi’s international status is expected to become even more essential. Some leading institutions have already taken notice. Ecobank Transnational is now planning to upgrade its Nairobi office to be the regional hub of operations for 18 countries. Similarly, global financial services firm, SWIFT, plans to open a regional hub in Nairobi.
A further indication of Nairobi’s increasing competitiveness is the improving business environment. In the 2016 FinAccess survey, Kenyan’s access to financial services stood at 75.3%, up from 66.7% in 2013. But, issues revolving around corruption and rule of law are also key. Kenya would not be an ideal international financial center if its people are corrupt, lazy and lawless. In view of the current financial scandals that have rocked some of the major financial centers, such as the Panama Papers scandal, it’s obvious that reputation is a vital asset that needs to be protected. In fact, reputation has become more important than reality. It is no surprise to see Athens and Moscow at the bottom of the global ranking.
While Nairobi gears up for a leap forward, its efforts so far have attracted attention. Kenya was ranked number 42 out of 140 countries by the World Economic Forum Global Competitiveness Report 2015/16 in financial market development. In 2015, the country was also ranked first in the world for leveraging technology to drive inclusion by the Brookings Financial and Digital Inclusion Project (FDIP).
Looking at this trend, it is safe to say that it’s only a matter of time before Nairobi catches up with the big boys.

Giant Leap Forward

The Dar es Salaam Stock Exchange (DSE) PLC was set to list on its own main board on July 12 after raising TZS10.1 billion ($4.6 million) in an IPO. It received bids totalling TZS35.8 billion, or 4.8 times oversubscription, for its TZS7.5 billion offer of 15 million shares at TZS500 each which closed on June 3. The DSE had a “green shoe” option to take up to 10% extra and applied to Tanzania’s Capital Markets and Securities Authority to boost this to 35% with the result that it was able to take an additional TZS2.6 billion. Staff took up their full allocation of 3% of the shares.
The Tanzanian bourse is set for a boost in activity after telecoms firms were ordered to list up to 25% of their shares within six months from July 1, in terms of the government’s Finance Bill 2016 and an amended Electronic and Postal Communications Act in June. DSE CEO, Moremi Marwa, said there would be enough liquidity: “The combined 25% of all telecommunications companies’ balance sheets is about $1 billion… Our current market capitalization is TZS22 trillion and annual market turnover is exceeding TZS750 billion. Treasury bonds and bills issued per annum at DSE normally exceeds TZS2.5 trillion and they are normally oversubscribed, meaning there is more liquidity to invest in less risky assets than instruments available.”
The DSE plans to use IPO proceeds to enhance its core operating system, introduce new products and services and for “strategic and operational purposes”. One in two Tanzanians have learned to use mobile financial services, according to a FinScope survey, and investors can use phones to apply for some DSE share offers.
In May, the Botswana Stock Exchange issued a tender for its valuation as it becomes demutualized, for-profit company, BSE Ltd, and works out how to convert the proprietary rights owned by stockbrokers and its government subvention. The Casablanca Stock Exchange is also demutualizing and mulling an IPO – its shareholders include banks 39%, brokers 20% and the Caisse de dépôt et de gestion (CDG) 25%. Johannesburg and Nairobi were Africa’s first securities exchanges to complete the steps through demutualization, IPO and self-listing.
Enko Capital runs the $83-million Enko Africa Private Equity Fund, which focuses on pre-IPO investments, and says Kenyan IT company, The Copy Cat, which operates in four East African countries, and Nigerian interior design company DO.II Designs are considering IPOs. Nigeria’s government is working on privatization of eight state-owned companies: Port Harcourt Refining Company, Peugeot Automobile Nigeria, Nigerian Ports Authority, Nigerian Telecommunications, Nigerian Railway Corporation, Bank of Agriculture, Federal Airports Authority of Nigeria and the Bank of Industry.
Innscor Africa Holdings spun off and listed Axia Corporation on the Zimbabwe Stock Exchange (ZSE) in May. Axia has three operating subsidiaries – logistics and warehousing Distribution Group Africa, furniture and appliance retailer TV Sales &amp; Home, and auto spares retailer Transerv – and $40.6 million market capitalization. Innscor’s previous unbundlings and listings were Simbisa Brands in November and Padenga Holdings in 2010 as the conglomerate focuses on light manufacturing. It was the ZSE’s second listing in 2016 after GetBucks in January.
West African utility group, Eranove, postponed its IPO and listing on the Paris-based Euronext exchange. Its owners include private equity firm Emerging Capital Partners (56%) and insurer AXA (19%) and its four core subsidiaries which supply water and generate and distribute power in Côte d’Ivoire, and distribute water in Senegal.
Miguel Azevedo, Citigroup’s Head of Investment Banking Africa, says the IPO drive will continue in 2017 as capital-raising moves from debt to equity. Bond sales have been hit by rising yields and declining local currencies.
“Sometimes entrepreneurs, all they want is debt, no equity, just debt. This crisis showed them that this can be very expensive. It makes sense to bring in some more equity,” says Azevedo.
His tips for exciting industries include consumer goods, banking, power and infrastructure.
“I see the growth profile of the continent, and in the blocs, is still there. The opportunity in Africa is still there.”
He forecast that multinationals expanding in Africa would aim to take significant positions in companies, rather than outright purchases.
“The base case is buying around 50% with an agreement to buy the remainder.”
Private equity will remain very active and there could be more consolidation among leading firms.

Entrepreneurs Move  From Debt To Equity

It was a usual Friday evening on July 1; I had just knocked off at work. Jersey City, in New York, was covered with American flags of all sizes, flying from car roofs, apartments and the front gardens of homes. Barely in sight in the morning, the red, white and blue flags suddenly mushroomed in my host city.
In the corridors of Forbes’ office, I overheard colleagues talking about their grand plans for the coming Independence Day long weekend – it meant nothing to me as a South African, I was just excited for the day off on Monday. I don’t hate my job, it’s just in a South African’s DNA to halt the capitalist machinery.
The South African public holiday on April 27, which marks the country’s first democratic elections in 1994, doesn’t have much significance to me nor my friends. We are happy to be duty free, unlike the careerist politicians who never miss the opportunity to sell empty dreams at rallies. While the voting fodder flocks into stadiums for a political party’s t-shirt or a small food pack, we catch up on household chores and a little fun later in the day. In the 22 years of this so-called freedom, I haven’t witnessed anything like the patriotism of the Americans.
Since 1776, without fail, over 300 million Americans still commemorate the Fourth of July, with pomp. On July 4, 1776, the Declaration of Independence was adopted, and the British Empire lost control of the 13 colonies that now make up part of the United States (US). Now, many countries were once colonized by the British Empire, but none come as close to celebrating their independence as the US. Sadly, independence didn’t apply to everyone; the US continued exploiting African slaves for a century. The country had now elevated itself to the colonizer until 1865, when slavery was abolished. Even this didn’t put an end to the lynching of African Americans. As a matter of fact, the brutality experienced by blacks is still pervasive today.
The longevity of the US independence can be attributed to John Adams, the lawyer and politician who would become president. While pleading with the larcenous British Empire, Adams penned a letter to his wife, Abigail, expressing his wish for independence.
“I am apt to believe that it will be celebrated, by succeeding generations, as the great anniversary festival. It ought to be commemorated, as the day of deliverance by solemn acts of devotion to God Almighty. It ought to be solemnized with pomp and parade, with shews, games, sports, guns, bells, bonfires and illuminations from one end of this continent to the other, from this time forward forever more,” wrote Adams.
To this day, his wish lives on, Americans commemorate the day with barbeques, parades, and fireworks.
As I drew near to my apartment on that hot Friday’s night, looking forward to sundowners at Guillo’s Place, the local Mexican bar, there was a strange activity in the yard. My neighbors were out on the stoep having drinks.
They warmly invited me to their small soiree, but the sudden friendliness took me by surprise. I waited for two months to be invited for tea, but I was always the invisible African. I went up to my studio to grab the dusty bottle of South African dry red that was on top of my fridge.
From then, the long weekend was taken care of, with copious food and drink consumed, like the millions of other Americans. As America is going to the polls later this year, it was inevitable that politics was discussed. Despite voting in the New Jersey primaries, none of my new acquaintances were happy with Hilary Clinton nor Donald Trump. Who cares? At least they know who they are voting for. I am envious of their freedom to choose who can stand for president. I don’t see that happening in my homeland.
The long weekend culminated to the mother of all parties at 9PM on Monday. Even the rain couldn’t put a damper on the revellers that had gathered on Coles Street, in downtown Jersey City, nor the fireworks on the other side of the Hudson River in Manhattan.
Thanks to my neighbors, I didn’t miss Guillo’s tequila.

The Night African Wine Trumped Tequila

Africa’s biggest platinum industry faces one of the most bruising years in its history. Unions and management have drawn battle lines for pay talks and a cloud of question marks hangs over the mining laws – dual uncertainty that could deter foreign investors from putting money in a country that produces 70% of the world’s platinum.
In July, pay talks for a new one-year deal began. Unions for 130,000 workers in South African platinum mines, sat down with the big three: AngloPlats, Implats and Lonmin. They are likely to prove tricky and drag on for weeks. The majority union, the Association of Mineworkers and Construction Union (Amcu), wants a 15% pay rise; the second largest, the National Union of Mineworkers (NUM), wants 20% across the board. Both unions are eyeing the recovering platinum price nosing above $1,000 an ounce for the first time in years. In August 2011, it was over $1,900.
<div id="attachment_5133" style="width: 210px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-5133" class="size-medium wp-image-5133" src="/wp-content/uploads/2017/05/Peter-Leon-017-200x300.jpg" alt="" width="200" height="300" />Peter Leon</div>
Demand for platinum, thanks to jewellery and automotive manufacturers, rose 10% in the first quarter of this year, according to the World Platinum Investment Council, while supply dropped 11%. It promises profit for South African mines if they can keep costs down; wages make up almost half of costs.
Amcu has 61% of the membership at AngloPlats, 62% at Implats and 82% at Lonmin. It holds the aces and will play a mean game for a minimum wage of R12,500 (around $860) a month. This wage has been the rallying call from Amcu ever since the bitter Marikana strike of August 2012. At the announcement of its demands in July, FORBES AFRICA questioned R12,500, saying it should be more like R20,000, taking into account four years of inflation.
“If we say R20,000 for the lowest paid, the employers are going to run away so we will go for R12,500 and work up from there,” says, the president of Amcu and part-time preacher, who appeared bullish and ready for action.
“We are applying for a pay rise here, not a strike. If the employers apply for a strike we will give it to them.”
The platinum employers are likely to be a tough nut to crack; inflation, at around 6%, is on their side. They are also struggling against years of falling commodity prices and productivity. On the Johannesburg Stock Exchange, AngloPlats shares lost two thirds of their value last year and Lonmin, kept afloat by a shareholders’ bailout in 2015, lost 99%.
Aside from the industrial problems, South Africa faces many more months of uncertainty over the country’s mining laws. Amendments to the Minerals and Petroleum Resources Development Act – which governs mining – have spent four years going back and forth through Parliament; questions have been raised over the constitutionality of the amendments. Investors take a dim view of plans to make resources – like iron and coal for the steel industry – designated minerals under the law. That would mean miners accepting government prices and maybe having to ask permission to export. This could lead to a trade law complaint at the World Trade Organization (WTO). China suffered a WTO ruling against it recently in a similar case concerning rare earth.
Then there are concerns about the discretion the law hands to the minister, giving him the power to cancel mining licences and prosecute.
“It is open to discretion, with unclear rules, which makes it very difficult to invest with that level of uncertainty and that is the long and short of it,” says Peter Leon, a mining lawyer with Herbert Smith Freehills, at a briefing in Johannesburg in June.
“We are going to a third rewrite without solving the problems of the first two.”
The bill is on its way back through the legislature and a number of bodies, including the Congress of Traditional Leaders of South Africa. Leon and his colleagues say the chiefs came up with one of the best ideas yet – an independent body to allocate the state-owned mineral rights.
With Parliament adjourned for the August 3 municipal elections, mining experts fear it could be well into next year before South Africa’s mining code is fixed. Investors seek stability and regulatory certainty; with every passing month there is a risk more of them will turn away.

Platinum Blues

It’s bad news when a commercial bank collapses; it’s frightening when three of them go under within just eight months in a single market.
The back-to-back collapse of mid-tier Chase Bank, Imperial Bank and Dubai Bank sent chills across the Kenyan financial sector – eliciting a scramble for remedial measures, including consolidation and review of capitalization requirements for banks.
Chase Bank’s operations were taken over by the Central Bank of Kenya (CBK) in April after its management failed to declare KES8 million ($80,500) in insider loans, causing panic withdrawals and a run on the bank.
Imperial Bank was taken over in October after fraud was uncovered. Two months earlier, smaller lender, Dubai Bank, was put into receivership.
This state of affairs triggered anxiety on the health of the banking sector in Kenya even though regulators and the National Treasury have gone all-out to downplay the concerns, calling the bank closures “isolated cases”.
“I want to assure my fellow Kenyans that our financial sector remains strong and stable. The recent placing under receivership of three banks was due to specific factors related to these banks and not the whole banking sector,” says Finance Cabinet Secretary Henry Rotich, as he sought to calm nerves over the health of the East African nation’s financial sector.
But even with the assurance, Rotich and his team at the Treasury are not resting. They are planning a raft of strategies, including consolidation, in an attempt to clear weak lenders from the Kenya’s banking sector and help restore confidence through larger and better capitalized outfits.
Rotich plans to re-introduce higher capital levels for banks to guarantee their financial health.
“Last year, I did table in this house specific measures to increase the capitalization of banks in order to ensure we have a strong and stable banking system but our efforts were not successful,” Rotich told the Kenyan Parliament in June when he presented his budget speech.
In 2015, Kenya’s legislators shot down Rotich’s proposal to raise commercial banks’ minimum capital fivefold to KES5 billion ($50 million) within three years, after CBK Governor Patrick Njoroge said such a move would strangle smaller lenders.
Rotich, however, is keen to push through the higher capital requirements this time round and by extension trigger consolidation of weak lenders in an attempt to prevent further financial glitches among the 42 licensed commercial banks.
“I am seeking to introduce the proposals and I am hopeful that members will look at them more favorably in light of the recent developments in our banking industry,” says Rotich.
The impending changes in bank capitalization requirements have already triggered action among small lenders that are keen on complying.
Midsized lenders, presently feeling the pressure to consolidate to capitalize on economies of scale and remain relevant, have already taken to mergers or pacts with private equities to boost the asset position.
I&amp;M Holdings, which has stakes in banks in Kenya, Tanzania, Rwanda and Mauritius, is set to finalize a KES5 billion ($50 million) deal to merge Giro Commercial Bank with its subsidiary I&amp;M Bank.
“In our view, the acquisition will have minimal strategy disruption given similarities of the two banks – both have conservative balance sheets and mainly target middle- to high-income customers as well as SMEs (small and medium enterprises),” the listed lender said in a statement in June.
Small-sized Kenyan lender Oriental Commercial Bank formally rebranded to M-Oriental Bank in June following the acquisition of a 51% stake in the shareholding of Oriental by Bank M Tanzania.
The Kenyan banking industry has also witnessed several other acquisitions recently, including the 75% purchase of Spire Bank (formerly Equatorial Commercial Bank) by Mwalimu Sacco and Nigeria’s Guaranty Trust Bank acquiring Fina Bank.
In 2014, investment group Centum also completed the acquisition of K-Rep Bank (now Sidian Bank) in a deal that raised Centum’s shareholding from 7.54% to 67.54%, having been a minority shareholder in the bank since 2004.
Centum’s acquisition was effected through Bakko Holdco Ltd, a non-operating holding company, to conform to CBK guidelines.
Kenya’s largest bank by asset base, KCB Group, is also looking at medium-sized lenders to buy as part of an expansion plan and is building up capital to boost its acquisition war chest.
“We will look for businesses where there can be synergy, where there can be ability for us to scale up, so medium-sized banks will be areas that we are focusing on today,” KCB CEO Joshua Oigara told Reuters.
In May, KCB Group shareholders gave a nod to the lender’s plan to raise KES10 billion ($100 million) through a rights issue later this year to boost its capital levels. KCB’s total capital stood at KES79 billion ($795 million) at the end of 2015.
KCB Group is expected to acquire a majority stake in Chase Bank after it was recently appointed to manage the mid-tier bank that only re-opened after a brief closure due to liquidity problems following a run by panicked depositors.
The government is also considering merging National Bank of Kenya (NBK), Development Bank of Kenya and Consolidated Bank, which it owns, in a bid to take advantage of having a large lender.
“We are making progress on the issue of consolidation because we now have a consultant who will soon be advising us on how to move. We expect to consolidate the state banks into one or two banks very soon,” Rotich said in April.
The changes in bank capitalization have also seen an inflow of private equity to try and boost the books of Kenyan banks.
In March, Fidelity Commercial Bank announced British private equity and asset management firm Duet Group had acquired a significant stake in the small lender. In the deal, Fidelity Bank will receive KES1.9 billion ($19 million) from the sale and boost its capital position, which was narrowly above mandatory requirements following an increase in adequacy ratios in 2015.
Furthermore, Norway’s investment fund for developing countries, known as Norfund, in partnership with NorFinance, an investment firm created by Norfund and private investors, purchased a 12.22% stake in Kenya’s Equity Group Holdings for an estimated KES26 billion ($261 million) from private equity group Helios Investment Partners.

Hoping For More  To Bank On

Brexit was a sharp shock for the United Kingdom (UK) – Africa will feel its shockwaves in time.
According to Irmgard Erasmus, Senior Financial Economist, NKC African Economics, the biggest impact will be on forex and financial markets.
“This will primarily filter through to the real economy via the indirect impact of global risk sentiment on commodity prices, impacting the balance of payments and the monetary system, and implying that the upside risks to inflation have increased on account of exchange rate pass-through,” says Erasmus.
According to Erasmus, the African currencies most at risk from external headwinds are the Zambian kwacha, the Angolan kwanza, and the Ghanaian cedi.
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“In turn, the CFA franc zone, under the two common monetary unions (the Central African Economic and Monetary Community, CEMAC, and the West African Economic and Monetary Union, WAEMU) is implicitly vulnerable to EU developments via the impact on the euro exchange rate. CEMAC and WAEMU peg their currencies to the euro at the same rate.”
On the markets, Brexit has been felt with share prices falling and investors rushing into safe-haven assets.
According to Rian le Roux, Chief Economist at Old Mutual Investment Group, South Africa is likely to be caught in the crossfire.
“South Africa will not escape the market or economic fallout of Brexit, although the full impact will likely only become clear over time. While our financial markets will pretty much echo global markets in the short term, the medium-term impact on South Africa will be determined by the extent to which commodity prices, South Africa’s export volumes, and capital flows to South Africa, are affected,” he says.
According to Le Roux, South Africa’s already poor growth prospects will be further undermined.
As far as the direct impact of a likely recession in the UK will have on South Africa, Le Roux estimates it would be relatively small, as the UK buys only about 4% of South Africa’s exports.
“However, one area that might be negatively affected is tourism, as the UK is responsible for about 18 percent of tourist arrivals from outside Africa,” he says.
However, Old Mutual Balanced Fund portfolio manager, Graham Tucker, says they expect their clients’ portfolios to be somewhat protected.
“Within our asset allocation funds, we have been positioned lighter than usual in South African equity and listed property (collectively known as growth assets), holding significantly more cash than normal in this volatile environment,” says Tucker.
While Old Mutual has been defensively positioned, they have holdings in counters that are attractively priced and have good fundamentals, but are exposed to Brexit risk. Within the Old Mutual Balanced Fund, these include Old Mutual, Investec and, more recently, UK property company, Intu.
“We remain comfortable with these positions on a longer-term view, but there is clearly downside risk in the short term as investors grapple with the implications of the Brexit referendum outcome.”
This fund holds about 12% in South African government bonds.
“These offer an attractive real yield and in our view should provide good medium-term returns. However, they could be impacted by a selloff in emerging market assets and currencies. The initial reaction of the bond market has however been relatively muted,” says Tucker.
According to Neil Wilson, market analyst at ETX Capital, fears that Brexit would kill off deals in the UK seems to have been overblown.
“Britain is very much open for business and the weak pound is key. A lot more British firms could become foreign-owned quite soon,” says Wilson.
Steven Gamble, a banking and finance lawyer at Norton Rose Fulbright, says given its historical trade relations with Africa, he is worried about the European Union’s (EU) instability after Brexit.
“Britain is the fifth largest economy in the world. Africa is not going to be immune to this. The UK is South Africa’s fourth largest export destination so it is important. The UK is also the largest investor in the South African economy which makes it critical,” says Gamble.
According to Gamble, Ghana is looking at short-term upsides in terms of gold and Kenya is stable.
“Every year, $21 billion is remitted from the UK to Nigeria. I am interested as to why there is a lot of anxiety there because the fact that the UK has come out of the EU shouldn’t have a direct impact on remittances,” he says.
Maybe we should take Old Mutual’s advice and take Brexit as an opportunity to put cash to work and gain exposure to quality assets that are indiscriminately sold off in the panic.

Brexit Wrecks It

It is sad how our minds have been conditioned a certain way towards debt. We are told that debt is bad, but there is good debt that can work for an entrepreneur.
There are cases for and against debt. It was the Holy Grail that allowed the automobile, housing, banking and furniture sectors to become successful; it was also the curse that ushered the world into the economic meltdown in 2008.
So, what is good debt and how has it benefited those who know how to play the game?
In real estate, people use debt in innovative ways, like going to the bank to apply for finance for a new house. Once the bank approves, a tenant is brought in and their monthly rental is used to repay the loan. Then they go back to the bank as they still qualify for another property as their income at the time of application still remains the same. This qualifies them for another property, and the model is replicated while tenants service the loan, and their balance sheet increases.
Property developers use this model with a cluster of residential buildings, apartment blocks, and major developments. Developers identify the land, get the correct approvals and compliant paperwork in order, then they hire architects to draw the building plans. Once this is done, the properties are sold off-plan and this money is used to construct the infrastructure.
Another sector where people use debt, with less risk, to become successful is franchising. Firstly, franchises have a proven business model with high probability to succeed. Secondly, banks are more willing to finance new sites or buy an existing branch if the franchise has an established brand. With good management, the debt will be settled.
As entrepreneurs in Africa, we need to be savvy in gearing debt to work for us, and understand the power of leverage.
The recession hit when the US economy was over leveraged in real estate asset class. This is the same asset that many entrepreneurs use as their capital base. They approach banks to take another bond on their house to start a business, or grow it, at the risk of losing their primary residence should things not go according to plan.
Leverage is crucial when you are dealing with financial institutions, particularly banks. However, there is another avenue where leverage is not necessarily a physical asset; there are venture capitalists that fund a company on the perceived current or future value of the company. Others go further by focusing on the team behind the company, credibility and successful track records.
Above all, entrepreneurs need to be careful not to over-leverage themselves. When under-leveraged, the risk is manageable.
Start-up entrepreneurs are famous for bootstrapping their companies, until they produce a viable prototype or penetrate the market. An example of this is Fuseware, a successful African tech company founded by Mike Wronski before he sold it to Ornico.
This presents a challenge between two funding models: debt versus equity financing. Well-structured debt is preferable, provided the company can service the debt in the short term. This is best option for expansion purposes.
Equity is best for start-ups and growth-stage businesses. In this regard, an investor buys a stake in the company and takes on the same risk as you. The downside is that that the entrepreneur loses some control the moment an investor comes into a company.
Sooner or later, it is going to be necessary to approach capital markets to raise money. The fundamental reason for listing on a stock exchange is to raise money. Today, there are other reasons, but raising capital is the main one. A company’s share price is based on perceived value that might be influenced by its income, assets or track record. At the end of the day, the company is worth what the market is prepared to pay for and what investors agree to sell shares for.
There are many times when an entrepreneur’s personal debt overlaps with his company’s debt, predominantly in small to medium sized companies. If able, entrepreneurs should only deal in debt held by the company, rather than their personal accounts.
While debt is not entirely encouraged, any company that is going to be of global significance needs to be familiar with it.

How To Make Debt  Work For You

Economic gurus say Africa needs to industrialize, but Africa seems two jumps into the future and most of the initial public offerings (IPOs) for 2016-2017 will be technology, healthcare, telecoms and even securities exchanges.
Word on the streets of Tanzania’s coastal city is that the IPO of the Dar es Salaam Stock Exchange is oversubscribed. The bourse aimed to raise TZS7.5 billion ($3.49 million) in the IPO which closed on June 3 and results were not available as we went to press. It is Africa’s third securities exchange to go through demutualization and self-listing – target date is July 12 for the listing. The stock exchanges in Nigeria and Ghana are among others in the process.
Ben Nice, editor of TMT Finance, says the high-tech rush continues: “Despite global volatility, regional macroeconomic uncertainty, and a rout on commodity prices, recent forecasts are predicting that the next 12 months could see a rebound with IPOs set to reach their highest levels in Africa since 2010, and several TMT (technology, media and telecommunications) companies looking likely to float in 2016 and 2017.”
Africa Internet Group (AIG) is said to be planning an IPO by 2017. It is parent of the Jumia e-commerce brand, present in 11 countries and linked to online and mobile consumer services such as Kaymu (shopping), hellofood (food delivery), Jovago (hotel booking), Vendito (classified ads), Lamudi (real estate), Everjobs (jobs) and Carmudi (vehicles). In April, AIG announced $85.4million equity investment from phone company Orange and in March $341.5 million from Goldman Sachs, MTN, AXA and Rocket Internet.
IHS Towers, based in Lagos and owner of over 23,300 mobile phone towers in Nigeria, Cameroon, Côte d’Ivoire, Zambia and Rwanda, is expected to float shares within 12 to 24 months. In December, Chief Executive and Founder, Issam Darwish,  a FORBES AFRICA cover in March 2014, said it would be “the biggest IPO ever in Africa”.
Orange Egypt, rebranded from Mobinil in March, is preparing an IPO for the Egyptian Exchange, with an offering of up to 20% of the shares. It has 33.4 million customers and is Egypt’s second biggest operator after Vodafone. In March, it announced Orange intended to invest $281.5 million into upgrading networks and services.
In May, private equity giant The Abraaj Group exited Tunisian pharmaceutical company Unité de fabrication de médicaments (UNIMED) via an IPO on the Bourse de Tunis, the first this year. The IPO valued UNIMED at $150 million and was 32.6 times over-subscribed, a bourse record. Since 2010, Abraaj has helped the group expand and in 2015 exports to more than 17 countries contributed 35% of sales.
“We recognized the healthcare opportunity in North Africa early on, in a market with a growing middle class, rising healthcare expenditure and expanding life expectancy,” says The Abraaj Group’s Managing Director Adel Goucha.
Shares in Cleopatra Hospital Company started trading on the Egyptian Exchange on June 2 after raising $40.5 million through an IPO which closed on May 30. The group, which owns four hospitals, had offered 40 million shares or 25% of the capital. The public offer was 28.6 times oversubscribed and the institutional offer 6.7 times, after roadshows programmed for Dubai, South Africa, Britain and the United States. It remains majority-owned by Care Healthcare, which includes Abraaj, European Bank for Reconstruction and Development, Germany’s DEG and France’s Proparco as shareholders. Abraaj, which invested in 2014, said the IPO would fund more growth.
Things were not going so well in Ghana, where Agricultural Development Bank (previously owned 52% by government and 48% by the Bank of Ghana) held an IPO between December and March and raised $115.5 million. Four unnamed investors snapped up 72% of the 75.5 million shares in the new offer but the bank’s board rejected all bids at GHS2 per share and the bank failed to raise the GHS100 million ($26 million) required. It was due to return money to applicants and ask Ghana’s Securities and Exchange Commission for permission to reopen the IPO.
In May, Barclays raised $876 million from selling a 12.2% stake in Barclays Africa Group (103 million shares at R126 each, a 6.5% discount to the market) in an oversubscribed offer with the Public Investment Corporation said to be a big buyer. Barclays is considering selling its remaining 50.1% stake to a strategic investor. Former Barclays CEO Bob Diamond and his Atlas Mara group may be a buyer.

Industrialization  Ditched For Tech

It is a warm winter’s day in Johannesburg, South Africa. Nkosana Mazibisa is a long way from home but he is eager to make his mark; here and abroad.
Mazibisa was born in the heart of what used to be Zimbabwe’s industrial town, Bulawayo, in 1988. They call it KoNtuthu Ziyathunqa, the place that exudes smoke, in isiNdebele, because of its industry. The harsh economic conditions in Zimbabwe took the smoke from the air.
“There is so much potential in my country. When I was young, I remember the town was full of smoke from industries making many homemade products. Many of these industries have closed down and it is up to us to revive them and create jobs,” says Mazibisa.
Mazibisa wants to be the Bulawayo reviver. The idea of fixing the city dawned on him in his high school debate team in Bulawayo.
“The country was collapsing and we had a debate at school about these issues and how to solve them.”
When it was over, everyone went home and continued with their lives, but not Mazibisa. He started thinking about the role he could play. He graduated and worked hard but that debate haunted him. The smell from Bulawayo factories he was accustomed to growing up was a distant memory.  Home-grown brands he had loved were off the shelves and replaced by international and South African brands, so he swapped his well-paid job for entrepreneurship.
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“My family was shocked. They didn’t understand what I was doing because there are no jobs in Zimbabwe and I here I was resigning. That didn’t scare me. I knew that I had to do my bit to make a difference. That’s why I decided to start a business to solve the unemployment problems we have and revive our industries,” says Mazibisa.
He founded a food retail brand, Swaad “The Taste of India” and Mazibisa Inc., a brand strategy consultancy firm in Bulawayo Zimbabwe.
“I could have gone to Harare but we need to resuscitate Bulawayo and I am playing my role in its revival. Most countries have a brand that represents their nationality. In Zimbabwe we used to have such brands like Willards but now there is nothing. My country at one point was the breadbasket of Africa. Seeing all the big brands we had disappear from the shelves gave me a challenge. I realized Zimbabwe is in a way an extension of South Africa. We have South African shops and brands now, but very few of our own, those brands don’t necessarily resonate with Zimbabwean consumers,” he says.
Swaad makes snacks such as biscuits, potato crisps and dried fruits in a small factory in Bulawayo.
“I want to one day see the smoke from factories cover the blue sky like I used to when I was child. It would mean the country is healing and we are making our own products again instead of importing.”
Mazibisa’s ambitions to make a difference are far and near. He chairs Mawaba School Development Committee (SDC) in Bulawayo as the youngest SDC chair in Zimbabwe’s history. He built a state-of-the-art computer science laboratory which has been adopted for all city council and government schools. He is currently working on a $2-million double-storey lecture theater block and multi-purpose swimming pool project which is due before end of 2017. He is also one of FORBES AFRICA’s 30 under 30s for 2016 and a Mandela Washington Fellow.
These accolades were born of struggle.
“When I decided to start a business, I applied for the government youth fund twice but I didn’t get it. I saw this failure as a stepping stone and not a stumbling block,” he says.
With Zimbabwe’s harsh economic turmoil, dreams are often bleak. He used the little savings from his job to start a brand strategy consulting firm to raise funds for Swaad.
“Lines of credit are slim but the fact that we have a crisis means we have an opportunity to create a new order. Crisis means opportunities for entrepreneurs to rise and create opportunities. Sometimes it feels like I am fighting a losing battle but I always remind myself of the bigger picture. This is my purpose and I am ready to see it through. And this is more than about making money but also creating national pride and valuing local brands, ” says Mazibisa.
He says each of their products have a message from the CEO to ensure the clients feel valued.
“People also fill in their names and birthday details at the till when they buy our products. On their birthday, I send them birthday wishes. Buying local is more than just the brand but a story of national pride and I am hopeful that Zimbabwe will rise again.”
In Mazibisa’s eyes, where there is smoke there is pride.

Category: Investment Guide

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