12 May

Nigeria Parliament Approves 21% Budget Hike to Boost Economy

Nigeria’s lawmakers approved to boost spending by 21 percent this year’s budget to help the West African economy recover from its worst slump in 25 years.

The Senate, led by its President Bukola Saraki, agreed on Thursday in the capital, Abuja, to increase spending this year to 7.4 trillion naira ($23 billion). That compares to a budget of 7.3 trillion naira that President Muhammadu Buhari proposed on Dec. 14. The House of Representatives, the National Assembly’s lower chamber, approved it earlier Thursday.

Nigeria’s economy, which vies with South Africa’s to be the largest on the continent, shrunk by 1.5 percent last year, the first contraction since 1991, after revenue from oil, its biggest export, fell by almost half. About 30 percent of the budget will be spent on roads, rail, ports and power to help stimulate business activity.

The government should implement the budget quickly “to boost the economy and take it out of recession,” Michael Famoroti, an economist at Lagos-based Vetiva Capital Management, said by phone. Spending on capital projects to promote exports and in the oil-producing Niger delta region, is expected in the second half of the year, he said.

The spending plans assume daily production of 2.2 million barrels of crude oil sold at $42.5 per barrel, and an exchange rate of 305 naira per dollar, according to budget documents. This was unchanged from Buhari’s proposal, the chairman of the Senate’s Committee on Appropriations, Danjuma Goje, told lawmakers.

The government’s oil-production target may be reached in the second half of the year as “oil revenue is expected to be strong,” according to Famoroti. If non-oil revenue doesn’t increase, Nigeria might face “another under-performance of the budget.”

Foreign-currency shortages in the country forced the central bank to introduce multiple exchange rates, with the main rate at 315 naira per dollar, more than 20 percent cheaper than the street price.

The two chambers of Parliament debate and approve spending plans separately before harmonizing their proposals into a single document sent to the president to sign into law.

 

Read more: Nigeria Parliament Approves 21% Budget Hike to Boost Economy

11 May

African private equity exits hit record high in 2016 (Report): EY & AVCA

The number of exits achieved by private equity firms in Africa is trending upwards, evidenced by a record number of exits in 2016.

According to the EY and African Private Equity and Venture Capital Association’s fifth annual study, 48 exits were achieved in 2016, continuing the consistent year-on-year increase over the last 5 years. In terms of the exit route, a significant uptick in sales to PE and other financial buyers took place, indicating a maturing and more competitive African PE industry.

While the bulk of PE exits continue to be concentrated in South Africa, exits in North Africa soared to new highs in 2016 and exits in West Africa also recovered.

The number of PE firms achieving exits in 2016 increased slightly to a new high of 31, indicating that the African PE sector continues to develop despite recent economic headwinds impacting a number of African economies.

Financial services, industrials, consumer goods and services continued to attract the highest number of PE exits between 2007 and 2016. Exits from the healthcare and industrials sectors continued to increase.

Overall, the study emphasises fintech, consumer goods and services, education, healthcare and energy as some of the key sectors of interest to investors. It also sets out ten key considerations for delivering better exits and enhancing value creation. These include more rigorous portfolio reviews; more time and focus on exit planning; using an independent exit committee; timing in light of macro and other market uncertainties; and developing scale that is interesting to strategic investors.

Commenting on the study, Enitan Obasanjo-Adeleye, Director of Research at AVCA, noted: “The fifth Annual EY AVCA Exit Study once again provides crucial information for PE firms when considering exits. The PE exits record high illustrates the continued success of the industry and signals its resilience in spite of opposing macroeconomic issues facing some African countries.”

Read more: African private equity exits hit record high in 2016 (Report): EY & AVCA

10 May

Nigeria Seeks $5.2 Billion From World Bank for Electricity

Nigeria is seeking $5.2 billion from the World Bank to expand electricity generation and help the economy recover from its first contraction in 25 years.

The bank’s private-sector lending arm, the International Finance Corporation, may invest about $1.3 billion in power projects and electricity distribution companies. Its political-risk insurer, the Multilateral Investment Guarantee Agency, could provide equity and debt of $1.4 billion for gas and solar power programs, according to Power, Works and Housing Minister Babatunde Fashola.

That’s in addition to loans of $2.5 billion Nigeria is seeking from the lender to help improve the distribution of power, expand transmission-capacity and increase access to electricity in rural areas, Fashola, 53, said.

“Disbursements with the World Bank are being worked out to start from around June, July this year,” Fashola said in an interview from his office in the capital, Abuja on May 4. Nigeria is asking the lender to bring forward the timetables “because next year we want to see results,” he said.

Africa’s most populous nation produces about 4,000 megawatts of power compared with a average peak generation of about 35,000 megawatts in South Africa, with a population that’s less than a third of the size of Nigeria’s 180 million people. The lack of supply increases production costs for many businesses forced to provide their own electricity, mostly using diesel-run generators. The Nigerian economy shrank 1.5 percent last year, the first full-year contraction since 1991 because of a fall in oil prices and production and dollar shortages. Gross domestic product could expand 0.8 percent this year and 1.9 percent in 2018, according to the International Monetary Fund.

Fashola, who presided over several infrastructure projects in Nigeria’s commercial hub of Lagos as its governor, was appointed last year by Buhari to boost the power industry, one of the biggest impediments to growth in the country.

Read More: Nigeria Seeks $5.2 Billion From World Bank for Electricity

09 May

Oil prices seem to be ignoring OPEC’s efforts to cut global supply

OPEC a non-member oil producers have announced plans to extend a global supply cut deal agreed in December until at least the end of 2017.

This comes after brent crude hit a six-month low of $46.64 last week amid a persistent glut driven by booming US shale oil production. Seeking to calm market Saudi energy minister Khalid al-Falih has said the coalition is ready to do “whatever it takes” to return stocks to levels five years ago.

The extension encapsulates the deal’s failure to meet is core objective of boosting depressed prices. Despite an initial uptick seeing Brent crude breach the mid-fifties in January they have remained volatile, and are now effectively back to where they were before the agreement.

All of this is bad news for big African producers like Nigeria and Angola, which have seen growth and investment hit hard and their reform efforts stifled by the commodities slump.

The International Energy Agency’s monthly outlook on oil demand is due on Tuesday. Oil exporters will be watching closely, hoping it could signal an end to the supply glut. Any reprieve looks likely to be temporary.

Read more: Oil prices seem to be ignoring OPEC’s efforts to cut global supply

08 May

Morocco’s Attijariwafa Plans Africa Expansions This Year

Attijariwafa Bank, Morocco’s biggest lender, is planning to complete expansions in East and West Africa this year as it focuses on consolidating its new acquisitions to spur growth.

The Casablanca-based bank aims to finalize a deal to buy Rwanda’s Cie Generale de Banque, known as Cogebanque, start commercial banking operations in Chad and apply for a banking license in Ghana in 2017, General Manager Ismail Douiri said in an interview in Cairo on Sunday.

The lender has halted its plans to enter Nigeria and Algeria as it prioritizes the consolidation of its purchase of 100 percent of Barclays Plc’s Egypt, which was completed this month as part of plans to boost growth. Attijariwafa started its first wave of acquisitions in 2005 as it was faced with fewer opportunities to expand in Morocco. It now operates in 26 countries including Tunisia, Niger, Gabon and Cameroon, as well as France, Germany and Italy.

The bank forecasts loans and deposits will increase 5 percent to 7 percent and profits to expand between 5 percent and 10 percent in 2017. It plans to sell as much as 1.5 billion Moroccan dirhams ($152 million) of perpetual bonds to meet Basel 3 requirements.

Read more: Morocco’s Attijariwafa Plans Africa Expansions This Year

05 May

Top & bottom 10 investment destinations in Africa, according to Quantum Global

Top 10 and Bottom 10 investment destination in Africa. Credit: Quantum Global

Botswana is the most attractive economy for investments flowing into the African continent, according to the latest Africa Investment Index 2016 by Quantum Global’s independent research arm, Quantum Global Research Lab.According to the Index, Botswana, scores highly based on a range of factors that include improved credit rating, current account ratio, import cover and ease of doing business.

Commenting on the Index, Professor Mthuli Ncube, Head of Quantum Global Research Lab stated: “Despite considerable external challenges and the fall in oil prices, many of the African nations are demonstrating an increased willingness to achieve sustainable growth by diversifying their economies and introducing favorable policies to attract inward investments. Botswana is a case in example – its strategic location, skilled workforce and a politically stable environment have attracted the attention of international investors leading to a significant influx of FDI.”

Read more: Botswana Most Attractive Investment Destination in Africa

04 May

South Africa’s rand weakens as U.S. Fed leaves door open for June rate hike

JOHANNESBURG May 4 (Reuters) – South Africa’s rand weakened against the dollar in early trade on Thursday as the greenback rallied on the back of the hawkish U.S. Federal Reserve statement, pushing emerging market currencies lower.

* At 0707 GMT, the rand traded at 13.5250 per dollar, 0.63 percent weaker from its New York close on Wednesday.

* The Fed kept interest rates unchanged on Wednesday while emphasising the strength of the labour market – a sign it was still on track for two more rate rises this year.

* With the Fed keeping rates unchanged, the rand needed fresh catalysts to strengthen it, analysts said.

* “It really has been a really slow week as the rand treads water waiting. It needs something to jump start it back into life,” said Standard Bank trader Warrick Butler in a note.

* The rand also continued to lose ground against many of its trading partners as investors moved their money offshore in search for higher yields and political stability.

* “(The rand) looks set to weaken further today even as Finance Minister Malusi Gigaba emphasized his predecessor’s policies yesterday. This shows that markets are looking for action rather than lip service as far as local economic policy is concerned,” said Rand Bank Merchant economist Isaah Mhlanga.

* Gigaba said on Wednesday South Africa can regain its investment-grade rating without compromising on promises to transform the economy for the benefit of its black majority.

* The yield for the benchmark government bond due in 2026 rose 4.5 basis points to 8.715 percent.

* The All-share index inched up 0.03 percent to 53,602 points, while the Blue-Chip Top-40 index rose 0.15 percent to 46,988 at 0706 GMT. (Reporting by Nqobile Dludla; Editing by Toby Chopra)

 

 

 

03 May

EY Africa Attractiveness report

Egypt, Kenya, Morocco, Nigeria and South Africa (the key hub economies) collectively attracted 58% of the continent’s total FDI projects in 2016.

  • South Africa remains the largest FDI hub in Africa
  • Egypt, Kenya, Morocco, Nigeria and South Africa (the key hub economies) collectively attracted 58% of the continent’s total FDI projects in 2016
  • Investment from the Asia-Pacific region into Africa hit an all-time high in 2016

According to EY’s  latest Africa Attractiveness report, heightened geopolitical uncertainty and “multispeed” growth across Africa present a mixed FDI picture for the continent.

Download the report: APO.af/EYAfrica

The report provides an analysis of FDI investment into Africa over the past ten years. The 2016 data shows Africa attracted 676 FDI projects, a 12.3% decline from the previous year, and FDI job creation numbers declined 13.1%. However, capital investment rose 31.9%.

The surge in capital investment was primarily driven by capital intensive projects in two sectors, namely real estate, hospitality and construction (RHC), and transport and logistics. The continent’s share of global FDI capital flows increased to 11.4% from 9.4% in 2015. This made Africa the second-fastest growing FDI destination by capital.

Ajen Sita, Africa CEO at EY says:

“This somewhat mixed picture is not surprising to us. Investor sentiment toward Africa is likely to remain somewhat softer over the next few years. This has far less to do with Africa’s fundamentals than it does with a world characterised by heightened geopolitical uncertainty and greater risk aversion. Investors with an existing presence in Africa remain positive about the continent’s longer-term investment attractiveness, but they are also cautious and discerning.”

In a sign of ongoing diversification of Africa’s FDI investors, more than one fifth of FDI projects and more than half of capital investment into Africa came from Asia-Pacific in 2016, an all-time record. Most notably, Chinese FDI into Africa increased dramatically, making the country the single largest contributor of FDI capital and jobs in Africa in 2016.

In a sign of ongoing diversification of Africa’s FDI investors, more than one fifth of FDI projects and more than half of capital investment into Africa came from Asia-Pacific in 2016, an all-time record. Most notably, Chinese FDI into Africa increased dramatically, making the country the single largest contributor of FDI capital and jobs in Africa in 2016.

Read more: EY Africa Attractiveness report

02 May

World Bank launches program, XL Africa, to support Africa’s top tech entrepreneurs

The World Bank Group has launched XL Africa, a five-month business acceleration program designed to support the 20 most promising digital startups from Sub-Saharan Africa.

Startups will receive mentoring from global and local experts, learn through a tailor-made curriculum, increase their regional visibility, and get access to potential corporate partners and investors. With support from prominent African investment groups, XL Africa will help the 20 selected startups attract early stage capital of between $250,000 and $1.5 million.

“Digital startups are important drivers of innovation in Africa,” says Makhtar Diop, Vice President for the Africa Region at the World Bank. “To scale and spread new technologies and services beyond borders, they need an integrated ecosystem that provides access to regional markets and global finance. Pan-African initiatives like XL Africa play a critical role by linking local startups with corporations and investors across the continent.”

The program comes at a time of increasing interest in the African digital sector. According to a recent report by Disrupt Africa, in 2016, the number of tech startups that secured funding increased by 16.8% compared to 2015.

“XL Africa aims to put a spotlight on the continent’s growing digital economy by scouting for and supporting the most innovative tech startups,” said Klaus Tilmes, Director of the Trade & Competitiveness Global Practice at the World Bank Group. “The success of these ventures will create a demonstration effect that can attract much-needed growth investment in the sector and catalyze scaling of transnational businesses in the region.”

The program’s flagship activity includes a two-week residency in Cape Town, South Africa, where the ventures will have the opportunity to interact with and learn from their mentors, peers, and local partners. The Cape Town residency will conclude with the Venture Showcase, a regional event in which the entrepreneurs will present their business models to a select audience of corporations and investors.

Read more: World Bank launches program, XL Africa, to support Africa’s top tech entrepreneurs