Top 6 private equity deals in Africa

Consumer-facing sectors are proving to be the most compelling for private equity in Africa, as demonstrated by the type of deals in July.

The Abraaj Group invests in Tunisian private hospital

The Abraaj Group announced its funds had acquired a majority stake in Polyclinique Taoufik S.A., the second-largest private hospital in Tunisia with 164 beds.

The investment will help the hospital to consolidate it’s strong position in the market by further increasing patient capacity and adding new services, upgrading and renovating the hospital, and investing in human resources and training.

To implement its growth strategy for Clinique Taoufik, Abraaj will draw on its extensive experience in the healthcare sector, gained from investing in businesses across the Middle East, North Africa and Turkey.

Population growth in North Africa is expected to reach 190 million by 2020, and with life expectancy also on the rise there is potential for further demand for quality healthcare services.

Tunisian healthcare sector made up almost 7% of GDP in 2013.

The investment is the sixth by Abraaj in Tunisia. It’s portfolio includes baked goods company Moulin d’Or; Unimed, a leading player in sterile form pharmaceutical products; and Plastic Electromechanic Company (PEC), which specializes in plastic injection, the assembly of electrical equipment and harnesses, and medical products.

AfricInvest Group and FMO form SFC Finance

AfricInvest Group and FMO (The Netherlands Development Finance Company) are part of a consortium which created SFC Finance, a senior secured lender providing funding for growth or expansion to small and medium enterprises (SMEs) in Africa.
SFC Finance will structure its loans with tenors adapted to the cash generation capabilities of its customers. Shareholders committed equity of US$20-million, alongside an initial US$50-million debt facility extended by the Overseas Private Investment Corporation. 

Debt financing for SMEs in Africa is poor, particularly the lack of credit facilities with repayment schedules that reflect company cash flows, a factor which has inhibited their growth. SFC Finance will address these needs, and also SME governance and environmental and social responsibility.

Amethis Finance announces final closing at US$530m

Private investment fund, Amethis Finance, saw final close of their first fund at US$530-million, which included institutional investors from Europe, US and Africa, together with close to 40 European and US entrepreneurs and family offices. 

Amethis has already made five investments since announcing their first close 18 months ago, in fast -performing companies in Kenya, Ghana, Cote d’Ivoire and Mauritius - in the banking, oil and gas, retail distribution, and logistics sectors. 

The Fund's shareholding structure mixes classical institutional investors (banks, insurance companies, fund of funds) with successful private entrepreneurs from the manufacturing and services sectors who are investing often for the first time in Africa and are looking to know better the continent. It assists its investors in their expansion, notably through co-investments.

Economic models are rapidly changing in Africa, with consumer and retail oriented companies taking advantage of those evolutions. This rapid growth is creating significant capital needs for local companies, and Amethis’ strategy is to foster long-term ties with well-established, high-growth African businesses that need long-term capital. 

Private European and US entrepreneurs and family offices are increasingly investing in Africa, and see the continent as the next world frontier for growth.

DPI and PIC in consortium acquisition of RTT

Development Partners International (DPI), through African Development Partners II, and the Government Employees Pension Fund (GEPF), represented by the Public Investment Corporation (PIC), acquired 80% of the RTT Group, Africa’s largest privately owned parcel distribution company, for an undisclosed sum. Ethos Private Equity leads this consortium.

The investment will expand RTT's offerings, and help to tailor services to specific customer needs.

RTT is a market leader in third-party logistics and distribution, and a forerunner in break bulk and express distribution. The company operates across sub-Saharan Africa, comprising over 120,000m2 of warehousing and cross docking facilities. RTT has a combined fleet in excess of 1,200 vehicles and employs close to 5,000 people. Revenues exceed R2.5-million per annum.

Fusion Capital buys equity stake in Kenya’s first free newspaper

Fusion Capital acquired a 40% equity stake in Xtra Publishing Limited, a free newspaper and digital content company in Kenya. 

Xtra will leverage free print and digital services in an attractive new media hybrid model. The company launched the region’s first free newspaper in March and is already the third-largest newspaper in Kenya. The newspaper will be supported by online and mobile services targeted at the young professional demographic. IPSOS/Synovate readership surveys confirm that the newspaper has secured the young, urban professional readership, providing near zero wastage for advertisers.

The investment by Fusion will be utilized in advancing IT and editorial systems, and for working capital requirements.

Kenya and East Africa is showing encouraging trends in digital news and entertainment dissemination. The statistics show impressive growth with Internet usage having doubled between January 2010 and 2011, from 3 million to 7.5 million users. Usage further increased by another 65% between October 2010 and October 2011, rising to 14.3 million users.

That figure corresponds to over 36%of the population having access to the Internet (WAN-IFRA 2012).

Helios Investment Partners and IFC in US$630-million equity fundraising round for Helios Towers Africa

Telecommunications towers company, Helios Investment Partners, and the International Finance Corporation (IFC) participated in Helios Towers Africa’s latest equity fundraising round, which raised US$630-million in new equity resources from existing and new shareholders.

Existing shareholders including Quantum Strategic Partners, Helios Investment Partners, Albright Capital Management, RIT Capital Partners and IFC, added to their current stakes and are now joined by new shareholders, Providence Equity Partners and IFC African, Latin American, and Caribbean Fund.

Helios also expects to complete negotiations shortly on new and extended debt facilities of over $350-million with a strong syndicate of international and local lending institutions.

Following this latest injection of capital, Helios will have raised over $1.8-billion in external financing since inception in late 2009 to fund acquisitions and organic growth.

The telecommunications towers industry in Africa has huge potential. There is need for 100,000 Points of Service (PoS) to merely satisfy demand for 2G coverage and associated capacity demand over the next five years. This PoS requirement is underpinned further by the growing demand for 3G and 4G data, which is driving the need for significant additional infrastructure capacity and in-fill across the continent.

Helios owns over 7,800 towers in Africa.

Top 5 infrastructure investment opportunities in Africa

By Kurt Davis

The 'Top 5 public private partnership opportunities in Africa' highlighted the best countries for PPPs in Africa. This article examines the best countries for infrastructure investment, if we assume all things to be equal in each country’s PPP system. 

Only one country - Nigeria - makes both top 5 lists, largely because it's government has made great strides in recent years to match its enthusiasm to develop infrastructure with the demand for infrastructure investment in the country. Over time, all political indicators point to a greater PPP environment in the other four countries on this list, and greater growth in PPPs across the continent. Still, in the short term, private investors should not be deterred by the challenges in the PPP markets, as officials in these countries have indicated that they are keen to bolster the PPP market, especially from a legal perspective, and participate with investors.

Angola

More than ten years after a 27-year civil war that left nearly 1.5 million people dead, Angola is taking off like no other country. Situated on the western cost of southern Africa, the country is home to a wealth of natural resources, most notably oil (making Angola the second largest oil producer in sub-Saharan Africa). A boom in real estate construction (including hotels) and financial services unsurprisingly accompanies the oil boom, making Luanda unrecognisable from 10 years ago.

On the surface, it is a perfect turnaround. But, as it goes in any other country, every boom has its challenges. The all-encompassing challenge in Angola’s growth story is infrastructure. New buildings, more people, and a deficit in power sums it up, says a major Lusophone private investor. Hydropower is an obvious solution and the government is making great strides in restoring its capabilities. Still the hydropower facilities and greater distribution systems for power remain a shell of themselves after their decimation in the civil war.

Fundo Soberano de Angola, the US$5-billion sovereign wealth fund for Angola, is targeting infrastructure investments across the country. Yet, despite the government’s pledge to transfer annual surpluses from the oil reserves account (with annual receipts as high as US$3.5-billion), greater investment will be required from foreign investors. The quality of the transport network, including airports and ports, is sub-par to support the country’s growth. Private investors will find an interested government partner and a lucrative return in connecting the resource-rich Democratic Republic of Congo with the Atlantic Ocean and partners in the transport-capable country of Namibia.

Mozambique

As the other big Lusophone country in southern Africa, Mozambique shares a similar story of civil war and decimation. Booming with gas reserves and the accompanying real estate sector, the country is in great need of a transport upgrade. Recent estimates by professional services firm, PwC, values transport projects in the pipeline at US$17-billion, including increased rail links to the ports and expanding port capacities. Yet, by all accounts and estimates, more money will be required to ensure that major ports, including Nacala, Beira and Macuse, reach full potential. Equally, transport networks from those ports to neighboring Zimbabwe, Malawi and Zambia require financing currently not available in the market.

A recent announcement by the Minister of Public Works Cadmiel Muthemba indicates an openness on the government’s side to erect more toll roads. The country currently has only one toll road - the N4 toll road connecting Maputo to South Africa - which is operated by South Africa’s Trans Africa Concessions (TRAC). Private operators see enormous return potential in several routes, including highways between Manica and Tete, between Nampula and the port of Nacala, and between Marracuene and Inhambane.

Speaking at the ‘Africa Rising’ conference back in May, hosted by the International Monetary Fund (IMF) in Mozambique, the Minister of Planning and Development Aiuba Cuereneia stated the country’s notable gains in paved roads and the projects in the pipelines. Equally, during Q&A, he conceded that more financing was required, specifically from foreign investors, to match the plans envisioned by the government.

A power deficit is also quite noticeable in the country. A changing environment for public private partnerships should breathe life into this sector in the near term.

Cote D’Ivoire

Talk of a country booming under the public radar. Cote d’Ivoire has made amazing strides since the assumption of power by President Alassane Ouattara in 2011. The economy expanded 9.8% in 2012 and 8.7%  in 2013, with an estimated 8.0% predicted in 2014, according to the IMF. Yet it remains a fragile state, especially with elections around the corner in 2015.

The country is the largest producer of cocoa as well a global player in the palm oil and cashew nuts markets. Cargill, Cadbury and Hershey’s among many others call the country an agriculture hub - yet the country is nowhere near its potential. Infrastructural upgrades in the transport sector, specifically ports and road infrastructure, will greatly boost the country’s capacity for moving agricultural products and growing its position as a food basket and trading partner to neighboring Sierra Leone, Liberia, and Ghana.

The arrival of energy companies, following the discovery of oil reserves, will help fill government coffers for spending on infrastructure. But the boost in cash, particularly in the short term, is not sufficient to jump the infrastructural hurdle left by years of civil war. The power necessary to buoy the energy, agriculture (including agri-processing) and manufacturing sectors going forward is simply not there, creating big opportunities for investors. But it cannot be ignored that Cote d’Ivoire did not make our list for public partnerships in sub-Saharan Africa, as the government will have to do more to appease investor concerns and mediate risk. More details around regulation should appear after next year’s election.

Nigeria

As mentioned before, Nigeria is the only country to appear on both the top five list for public private partnerships and top five list for greatest infrastructural opportunity. Nigeria has one of the greatest infrastructural needs on the continent, particularly due to its size and population, and its politicians recognize this grave infrastructural challenge, consequently enacting laws to promote public private partnerships across the country.

The estimated cost of infrastructure investment required over next 10 years hovers between $8-billion and $10-billion. The newly-established sovereign wealth fund for the country cannot pay the bill for everything. Thus private investors will have a wealth of opportunities to keep picking from in the near future, especially in Nigeria’s power and accompanying transport sectors. Recent laws and change in government approach has numerous private operators waiting at the gates to make a deal. Some parties do complain that the due diligence process is absurdly arduous but this should gradually change over time.

Ethiopia

Ethiopia has the highest spending on infrastructure as a percentage of GDP in Africa. The government is dedicated to delivering high quality infrastructure to the country as the impetus for investment in the country’s other business sectors, particularly manufacturing/industrial and agriculture. For a country with 90 million people and relatively un-urbanized compared to its peers, improved transport - specifically roads and rails - is critical to moving goods to disperse populations.

The country’s leadership currently envisions an energy surplus following the completion of its latest dam project. But this should not lead investors to think the investment opportunities are limited for the power sector. Power purchased at the borders with Djibouti and Somalia can go north of US$0.75 per kWh depending on the time of the year. Thus, Ethiopia's vast land mass - ripe with energy opportunities from geothermal to gas to wind - offers boundless potential for growth.

Power generation could solely justify Ethiopia’s ranking in the top five. But, it would be a failure to ignore the demand for increased investment in power distribution. Any opening to foreign investment in the telecommunication sector will offer investors access to a country desperate for improved telecom infrastructure. Creative operators are already considering opportunities in water and sewage treatment which will become a graver concern to the country’s population as it approaches and surpasses 100 million persons.

It is not about the potential return with Ethiopia, in the eyes of those investors currently looking at the country, but rather all about timing (as to when a sector is more liberalized or the project gets approved). Whether today or in a year, the country will remain very attractive for infrastructure investment.

This article is re-published with permission from Frontier's content partner, Ventures Africa.