Opportunities and risks in Africa's cement market

The cement industry in sub-Saharan Africa is experiencing the strongest growth ever, with multiple investments planned across the region to boost production.

The region produced 116 million metric tons of cement in 2013, led by Nigeria, South Africa and Ethiopia, while Angola is fast-emerging as a big hub for production.

A new analysis by Ecobank Research says the outlook for the sector is promising, but there are risks for investors and companies.

Courtesy of Ecobank Research, Frontier brings you a complimentary copy of the analysis to keep you upto date on trends in the sector.

Get the report now and learn:

• Why cement output is surging
• Who are buying cement
• Which countries have opportunities for cement exporters

 @EcobankResearch  

Click on this link to get the cement report

Ecobank Research is the research team of pan-African Ecobank Group, and has been the recipient of the Best African Research Team award for three consecutive years – 2011, 2012 & 2013 – under the Africa Investor Index Series Awards. Ecobank Research is dedicated to providing the highest quality research for our clients to help them navigate the complex African marketplace. Our research team is probably the largest in any private financial institution that is dedicated purely to research on ‘Middle Africa’ and comprises a dozen analysts based in Ecobank’s affiliates in London, Paris, Abidjan, Accra, Lagos, Nairobi and Harare. We are passionate about Africa, and our team of seasoned analysts based across Ecobank’s 34-country footprint draws on its extensive local knowledge to provide insights for clients and identify investment opportunities and strategies. Our focus is on Middle Africa – the region between North Africa and the Rand Zone, which has the richest potential for growth but is poorly understood. We produce regular market updates, briefing notes and detailed studies on the region’s macroeconomics, currencies, fixed income, equities, commodities and trade. We also have a research hub co-ordinating LocalKnowledgeAfrica™ the research team’s bespoke advisory and research initiative serving corporate clients in Africa and world-wide.

To 5 growth sectors in Nigeria's economy

As global investors look to Africa for growth opportunities, the focus on Nigeria (Africa's largest and most populous economy) is increasing, and for good reason. Data released this year shows the West African nation's is far more diverse than previously understood. Sectors such as agriculture and trade are actually quite large and fast-growing, and could soon near the worth of the oil sector.

But there are deep-seated and well-known challenges in Nigeria that can potentially stifle government's ambition for inclusive growth. Latest concerns about terrorism and poverty are worrying and overshadowing the other side of Nigeria that brims with opportunities and promise.

A new report by McKinsey Global Institute examines the country's economic potential and finds that with the right reforms and investments, it can become one of the world’s leading economies by 2030.  

“What people overlook is Nigeria’s extraordinary advantages for future growth, including a large consumer market, a strategic geographic location, and a young and highly entrepreneurial population,” says Reinaldo Fiorini, director and location manager of McKinsey’s Lagos office.

The results of Nigeria’s progress have not been spread evenly across its economy. More than 40% of the population live below the nation’s official poverty line and 130 million (74% of the population) live below the MGI Empowerment Line - a level of income and access to vital services that provides a decent standard of living.

The reasons for Nigeria’s persistent poverty include low farm productivity due to limited access to fertilizer and mechanized tools, and inefficient markets. At the same time, urbanization has not raised incomes the way it has in other developing economies.

According to the McKinsey report, Nigeria has the potential to expand its economy by roughly 7.1% per year through 2030, raising GDP to more than $1.6-trillion. This could make it a top-20 global economy - with higher GDP than the Netherlands, Thailand, or Malaysia in 2030. What’s more a large consuming class is developing in Nigeria, with potentially as many as 160 million members by 2030, more than the current populations of France and Germany combined.

This upside scenario is based on a bottom-up analysis of the potential for five major sectors of the Nigerian economy:

Trade

Given the expansion of the consumer class, we project that consumption could more than triple, rising to almost $1.4-trillion a year in 2030, an annual increase of about 8%. This would make trade the largest sector of the economy and provide a particularly good opportunity for makers of packaged foods and fast-moving consumer items such as paper goods, categories that could grow by more than 10 percent a year.

Agriculture

Improvements on several fronts could help raise both the volume and the value of Nigeria’s agricultural production in the next 15 years. The economic value of agriculture, already the largest sector of the economy, at 22% of GDP, could more than double, from $112 billion a year in 2013 to $263 billion by 2030

Infrastructure

On average, the value of a nation’s core infrastructure—roads, railways, ports, airports, and the electrical system—represents about 68 % of GDP, but in Nigeria it is only about 39%. Between core infrastructure and real estate, total infrastructure investments in Nigeria could reach $1.5-trillion from 2014 to 2030. This would make building infrastructure not only a major contributor to GDP but also an enabler of growth across the economy.

Manufacturing

Though growing rapidly, manufacturing in Nigeria contributed just $35-billion to the economy in 2013, or about 7% of GDP. If Nigeria could match the performance of nations such as Malaysia and Thailand when their manufacturing sectors were expanding rapidly, output could reach $144-billion a year in 2030.

Oil and gas

While the oil-and-gas sector is expected to grow by 2.3% a year at best, its success is still vital to Nigeria’s economy. With the right reforms, we estimate that liquids production could increase from an estimated 2.35 million barrels a day, on average, in 2013 to a new high of 3.13 million by 2030. Oil and gas would then contribute $108-billion annually to the economy, compared with $73-billion in 2013. However, this estimate of potential output assumes renewed investment to reverse the production declines of recent years.

Nigeria’s government has put in place clear strategies and plans for various sectors, and the most important step that it can take now is to improve its ability to deliver its programs and services. The country can also capitalise on several favorable trends such as rising demand from emerging economies, growing global demand for resources, and the spread of the digital economy.

“By capitalising on its strengths and positioning itself to take advantage of emerging global trends, Nigeria could potentially triple its GDP by 2030,” says Acha Leke, a director in McKinsey’s Nigeria office. “This adds up to a huge opportunity for inclusive growth that should not be missed.”

5 steps to planning a business trip to China

By Fredrik Grönkvist

So, you’ve found a couple of suppliers online and want to find out if they are everything they claim to be. That’s a good first step.

But, boarding the next flight to China, with a list of three random suppliers you found online, is most often a complete waste of both time and money.

In this article, I explain how you need to prepare yourself before your business trip to China, and what to should look for while you’re there.

#1: Is the supplier able to show compliance with product regulations in your country?

In most industries, less than 5% of the suppliers are able to show previous compliance with American, European and Australian product regulations and standards. Assuming you don’t verify their compliance prior to your visit, you’ll waste a lot of time visiting suppliers that are neither willing nor technically capable of complying with the relevant standards.

Besides, compliant suppliers tend to be above average in other aspects. Apart from the obvious legal requirements, I also consider compliance a strong indication of the supplier’s technical expertise.

#2: Schedule meetings with as many suppliers as possible

All manufacturers are not equal. Expect at least 50% of them to not be what you expect. It’s bad out there. I’ve been taken to factories that have not been operational for months. Factories that would barely pass for junkyards.

I can even recall one really weird situation a couple of years ago, in Xuzhou, when I was taken to the same factory twice in the same day. First in the morning, when a representative of a Trading Company took me there. The second time in the afternoon, when the actual owner of the factory picked me up.

It felt quite awkward to tell the boss that I had already visited their factory earlier that day. Not to mention that I wasted my entire afternoon. Not that there’s much else to do in Xuzhou…

The lesson here is that you’ll return home empty handed if you visit one or two random suppliers. It’s not enough. Schedule visits with at least five or six suppliers, and list a handful of backup suppliers – in case the first round fails to live up to expectations.

#3: Make yourself familiar with the geography

China is a big country, with hundreds of industrial clusters on the east coast. If you’re lucky, you can limit your visit to a single city. Certain industries are in fact concentrated to single cities, such as Shenzhen. However, in other industries, suppliers are scattered all over a province – or even the entire east coast.

First of all, you need to make a traveling plan. Getting to China is easy, and there are direct flights to major cities such as Shanghai, Hong Kong, Shenzhen, Guangzhou and Beijing. But most suppliers are not located in these cities (with the exception of Shenzhen). Instead, you are likely to find yourself spending time provisional cities like Taizhou, Foshan, Dongguan and Changzhou.

Getting there is not that much of a hassle though, thanks to China’s high speed train network. You can get to basically any city on the east coast by train. And that’s about as far as you need to get on your own. Any supplier worthwhile visiting will take you from there to their factory by car.

#4: Confirm the suppliers factory address

It’s common that suppliers, even those who are manufacturers, trade products supplied by subcontractors. It’s not always a bad thing though, but I prefer to be aware of such arrangements before I make my way to whatever village the supplier is located in.

All Chinese companies have a registered address. If the supplier is actually manufacturing the products, the factory should be located at the same address as specified on their Business License. There are exceptions, but this is the general rule.

If the supplier brings you to another address, they are probably taking you to a factory that’s not theirs. But then again, sub-contracting is not always a bad thing. What’s important is that you make your supplier understand that they are going to be held liable for defective products. This is a relatively small issue when dealing with qualified and organized manufacturers, that are in turn outsourcing certain products to sub-contractors. They have assets, and it’s not so easy for them to “disappear” in case things turn out bad.

But that doesn’t apply to smaller trading companies, that consist of little more than an a small office and a few employees. Apart from old laptops and dusty product samples, these companies have no assets. They can’t afford to compensate you if they would run into quality issues. It may also be in their interest to align with the manufacturer, rather than you, in case of a dispute. Stay away from these companies.

That being said, there are also reputable Trading Companies that act as exporting platforms for tens, sometimes hundreds, of manufacturers.

#5: Prepare product related questions

When communicating with a supplier on the internet, you rarely get further up their organization than the sales agents. However, you can expect a lot more attention when you show up in person at the suppliers factory. This means that you’ll get access to their managers and engineers - the people who are actually qualified to talk about their products and manufacturing capabilities.

Whenever I go out to visit suppliers and sit down with their engineers, I get to hear things the sales agents never told me. Probably because they are more concerned with making the sale, rather than telling me the truth. But also because sales agents are not engineers, they spend their days drinking tea and gossiping with their friends on WeChat -  apart from a few occasional conversations with potential customers. The engineers, on the other hand, are qualified to tell you what they can do, and what they can’t. I can recall plenty of times when the sales agents had promised things the supplier was simply not able to deliver on.

While you got the manager’s attention, it’s also a golden opportunity to make them understand that you’re not a gullible idiot. Make them aware of planned quality inspections and lab tests. It’s always good to put pressure on a supplier to comply with your quality requirements and product specifications.

Chinese companies are top heavy, and the only way to make things run smoothly on the production line is by applying pressure on the people in charge.

Inspecting the factory

The production line tells a lot more about a supplier than their brand of instant coffee or what car the owner is driving. Perhaps his new Audit was (involuntarily) financed by the last customer who didn’t bother to hire a quality inspector. The first thing to look at is how well they monitor product quality during the different stages of production. This is what you need to take a closer look at:

#1: Incoming materials

Manufacturers are not “Santa Claus workshops” that make every single material and component in house. They purchase components and materials from tens, sometimes hundreds, of domestic and foreign subcontractors. When quality issues occur, these subcontractors are often to blame (and many suppliers try to use that card).

What really matters to you is that the supplier checks the quality of the incoming materials and components. They shall also separate components and materials that are compliant with certain standards (such as REACH), from those that are non compliant. A supplier that’s not able to manage such separation is a major liability.

#2: Production lines

Manufacturing is not a science, there are always quality issues. What differentiates a good supplier from a bad supplier, is that the former monitors quality during the production process – and minimizes the number of defect units that slips through unnoticed.

A supplier that cares about maintaining a high quality standard has several checkpoints throughout the assembly line. They shall also be able to show how they define and manage defective units. A supplier claiming to have a zero defect rate during production is simply not monitoring their production well enough – if at all.

#3: Assembled products

Products coming off the assembly line shall also go through a final check. While a supplier is not necessarily testing every single unit, a final quality check shall include 2-5% of the batch. Finally, the supplier shall also maintain quality control records. If they claim to be ISO certified, they are even required to maintain records.

Is the supplier’s production lines busy?

It speaks for itself. A supplier with empty warehouses and dozing workers is obviously not doing that well. There’s a lot of overcapacity in China. Plenty of suppliers barely get enough orders to make ends meet. Doing business with such manufacturers is a liability. Even if they have the best intentions, suppliers operating on the edge of bankruptcy are not liquid enough to compensate buyers in case serious quality issues occur.

Before you leave, check out the factory warehouse

Not all manufacturers in China are geared towards Western markets. Many, of not most, are primarily made products for the domestic Chinese market, and developing markets in Asia, Africa and Latin America. That’s not saying that these suppliers are “bad”, but it may indicate that the supplier is not that knowledgeable about Western quality requirements and product certification requirements.

That’s why spending some time in the factory warehouse is a wise decision. This is where the suppliers stack hundreds of cartons, before being loaded into containers and shipped to buyers around the world. There’s only one thing that’s better than a warehouse full of goods about to be delivered, and that’s a warehouse full of goods addressed to buyers in your country.

These are strong indications that the supplier is not only kept busy with regular reorders, but also that they are well aware of product regulations and quality expectations in your market. And that is something you shall never take for granted when doing business in China.

This article was first published here

Fredrik works at ChinaImportal, an e-commerce platform that assists businesses looking to import products from China.

Growing a footwear brand in Africa

Nigerian footwear company, Maducho Luchi, saw a lucrative opportunity to supply luxury fashion products to the country's increasingly affluent middle class.

Africa's growth story is encouraging more people to start their own businesses, with the aim of taking advantage of the huge opportunities especially in consumer-facing sectors.

In Nigeria, footwear manufacturer Maducho Luchi successfully tapped the country's vibrant fashion industry to produce footwear for local and international markets. 

In this interview, Graham Chike, sales and business development director at Maducho Luchi, narrates the company's challenging but rewarding journey of starting a contemporary African shoe line.

Tell us about Maducho Luchi

Maducho Luchi is a brand that is focused on designing and creating fashion products that are fused with a touch of African culture and a modern appeal. We kicked off the brand with men shoes and have plans to diversify in to other products in the near future. Our target is to create a system whereby fashion products from sub-Saharan African are appreciated overseas, thereby creating growth in several sectors of the economy on the continent. 

It all started in September 2012, when I met with my first creative director. Then there was no name to the brand. We just wanted people in the United Kingdom to experience shoes designed and made in Nigeria. They loved them, and in February 2013 when I returned home after completing my MSc degree, we started Maducho Luchi. The name Maducho Luchi came from a fusion of some African names. We had to think of something easy to pronounce, yet outstanding. Marketing brands today is different from what it was in the past. So one has to think of how a brand name can sell now and also in the future. It has been many ups and downs since then. We are over a year old now and I can say that we now have some good level of acknowledgement by users and celebrities. We have also managed to ship luxury shoes to many parts of the world and generated revenue that has kept the brand running smoothly. 

Why are most of your marketing campaigns focused on Europe and the Middle East? 

A lot of companies and brand facilitators really appreciate talent in these markets, so yes, we are deliberately focusing there. The fashion industries in Europe and Middle East are very keen to see new products. Smart designers take advantage and use that as a good path to success overseas which triggers success back home. 

How has the brand being received locally?

Brand appreciation in Nigeria has been wonderful. Some people love good craftsmanship here. And with little or no marketing, we have been able to grab a fair market share.

What strategies have you used to brand and market within Africa?

We have a big model waiting for good investors to buy in. We won’t let the cat out of the bag now. But once the investors come on board. It would spread like wildfire. A strong campaign that anyone who wants to copy would key into. But for now we only take on social media campaigns which is a growing trend in Africa. It has also done us well.

What challenges have you faced locally since starting Maducho Luchi?

Starting a brand in Nigeria is hard. We need more support but get less. The system doesn’t encourage good export trends. We don’t have a good market structure to engineer products so as to generate more jobs locally. You don’t get investors at the right time. And many others challenges.

How has Maducho Luchi managed to maneuver such challenges so far?

We have always set a goal and a target. The team has many technocrats, and most of us have schooled and worked in Nigeria and overseas - this has worked to our advantage. We leverage on this combined experience and education to overcome the challenges. We have firm goals - to produce and deliver an excellent product that will make our local and international customers happy. 

Is the market for luxury shoes sustainable in Africa? 

There is supporting data on the increasing demand for luxury products in Africa, and many international brands have already moved in to exploit the opportunities in countries like South Africa, Kenya, Angola, Ghana and Nigeria. So, there is definitely a big market for the shoes - we have done so well with very little marketing push. This is a profitable venture, and we really encourage investors to come on board. 

What advice would you offer potential startups in Africa?

A lot of fashion brands have come up in Africa and are now successful. In this line of business, it is possible to create a sustainable brand and profits. But one must have a firm plan, great passion and drive, and be ready to build a strong team because, as we say here, two brains are better than one. Find reliable and talented people who believe in your dream and you can make a fortune together. 

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

5 new laws that will impact business in South Africa

Whether your business is big or small, it would be wise to keep track of new laws that can potentially affect your operations. Below are some new business-related laws that President Jacob Zuma recently signed into law.
Special Economic Zones Act       

Sectors concerned: Manufacturing, import and export
Overseeing department: Trade and Industry

Key provisions

• The Act seeks to boost industrialisation in South Africa through the establishment of Special Economic Zones (SEZs) that are envisioned as “one-stop shops”. The zones will provide enhanced infrastructure, bureaucracy support and incentives to attract domestic and foreign investment.
• The Act allows private companies to operate and manage SEZs through public private partnerships.
• There was broad consensus by members of parliament that the special economic zones were a key reform measure for South Africa, and a necessity for the country to achieve its economic growth targets under the National Development Plan.

Legal Metrology Act

Sector concerned: Manufacturing and retail
Overseeing department: Trade and Industry

Key provisions

• The Act regulates the measurement of products and services, and the use of the instruments that measure them.
• Historically, measurements were of concern in the sale of goods such as maize, milk and petrol. Today, with advancements in technology, accurate and standardized measurements are critical in new fields: e.g. energy (electricity meters), communication (data usage) safety (breathalyzers), transport (road overload) and medicine (blood pressure analysis).
• The Act allows for authorized market surveillance inspectors and verification officers to enter public and private premised to ensure that measurement instruments, goods and services comply with the Act.
• Non-compliance may result in a fine (not prescribed) or imprisonment of up to 10 years, or both.

National environmental management: Air quality Act amendment

Sector concerned: Industries whose operations result in atmospheric emissions
Overseeing department: Water and Environment

Key provisions

• Under the Air Quality Act of 2004, an atmospheric emission licensing system was set up to regulate emissions and protect the environment while allowing for socio-economic development. The Amendment Act of 2014 seeks to resolve problems within the licensing system that have been detected over the last decade.
• The Amendment establishes an Air Quality Advisory Committee to advise the minister on air quality issues.
• A R5-million penalty is prescribed in the Amendment Act for unlawful activities resulting in atmospheric emissions

Marine Living Resources Amendment Act

Sector concerned: Small-scale fisheries
Overseeing department: Agriculture, Forestry and Fisheries

Key provisions

• The Amendment allows the minister to give official recognition to fishing communities, and to put in place measures to support their livelihoods.
• Protection afforded to communities will include prohibiting non-community members from fishing on waters allocated to the community.

Language Practitioners’ Council Act

Sector concerned: Language practitioners (translators, interpreters, language planners, terminologists, lexicographers, text editors and related fields)
Overseeing department: Arts and Culture

Key provisions

• The Act establishes the South African Language Practitioners’ Council (SALPC) whose core functions will be to regulate the training of language practitioners and control their accreditation.
• The SALPC will prescribe rules governing the conduct of language professionals and set procedures for compliance, monitoring and enforcement.

Prospects for cement companies in Africa

Free download report: Outlook for the cement industry in Africa

Cement companies are expanding their footprints and investing in more capacity to meet the rising demand for cement in Africa.

In East Africa, old and new players are jostling for a share of the booming market, with Kenya and Tanzania attracting the most interest from investors.

In Southern Africa, cement companies are expanding to take capture growth opportunities in the region's massive pipeline of infrastructure and housing projects.

In West Africa, companies in Nigeria are taking advantage of government incentives to increase cement production.

Imara Securities looked at the sector recently and compiled the cement outlook report that we are now sharing with you.

Download the report  to get comprehensive information on:

• Regional consumption and production trends
• Drivers of consumption
• Opportunities for investment
• Risks for investors
• Top industry players and other Pan African companies to watch

To access this report you must be a Frontier member. Click on this link to sign up and get immediate access.

Visit www.frontiermarketnetwork.com to read some country-specific articles on cement production.

Top 9 private equity deals in Africa

The month of March saw an abundance of activity in the private equity sector in Africa. Below are some of the transactions realised.

1. Citadel Capital Subsidiary acquires additional stake of Rift Valley Railways (Kenya, Uganda)

Africa Railways, a core subsidiary of investment company Citadel Capital, has acquired a 34% stake in the national rail operator of Kenya and Uganda. The US$ 37.8m transaction brings Africa Railways’ total ownership of Rift Valley Railways (RVR) to 85%.

The selling party is TransCentury, a Nairobi-listed infrastructure company.

As part of this transaction, Africa Railways shareholders including Citadel Capital have together committed US$80m to increase Africa Railways’ capital to US$200m. Of that USD$80m in fresh capital, US$37.8m has been used to finance the acquisition of shares from TransCentury, while the balance will be injected into RVR to support the ongoing five-year turnaround program.

Citadel Capital first acquired a minority stake in RVR in 2010, eventually becoming lead shareholder via Africa Railways. The firm has since led the creation and full financing of a five-year, US$287m turnaround program for what was then an ailing railway at risk of defaulting on its concession agreements with the governments of Kenya and Uganda.

The first phase of the rehabilitation of 500 kilometers of track that links Kenya with Tororo in Eastern Uganda and Gulu in the north has been completed. The railway is now more efficient and is supported by world-class technology.

2. AfricInvest Group achieves third closing of its AfricInvest Financial Sector Fund (Africa)

The AfricInvest Financial Sector fund, which garnered €60.6m in commitments, will focus on financial inclusion in Africa through investments in financial institutions that service, amongst others, micro, small and medium-sized enterprises (SMMEs). It is one of the first funds to focus on these market segments.

New commitments came from KfW,BIO, Desjardins Group, and the Adolf H. Lundin Charitable Foundation and other private investors.

The AFS was initially launched in June 2007 with a capital commitment of EUR 20m by FMO5, the Dutch development bank, and was then increased to EUR 31m in April 2010 with additional capital commitments by PROPARCO through its FISEA fund6, and by Développement international Desjardins.

The AFS fund has made 13 investments and has realized two full exits and one partial exit. Given the track-record, opportunities and the high impact of the Fund, the shareholders and the Manager of the Fund decided to increase its size and term in order to create a real pan-African Financial Sector Portfolio. The Fund now has the ability to both increase its exposure to promising and fast-growing portfolio companies and to execute a pipeline of new investments.  It makes investments in the range of EUR 1 to 5-million.

This closing comes at a time when many African Central Banks are increasing minimum capital requirements and tightening regulations across the financial sector.

3. AIIM’s IHS Holding Ltd secures $490m to fund expansion in Africa (Africa)

IHS Holding Ltd., Africa’s largest independent telecommunications infrastructure company by number of towers managed, has secured US$490m of equity and debt in its latest financing round.

Existing shareholders contributing alongside new investors are Goldman Sachs, the IFC Global Infrastructure Fund (GIF) and African Infrastructure Investment Managers. Standard Chartered Bank is providing senior debt, for expansion of IHS’ business in Zambia.

This funding round brings the total amount of capital raised by IHS to more than $1.5bn over the last 12 months.

IHS will utilise the proceeds of the round to finance acquisitions, help its customers expand coverage and capacity by building new towers and continue investing in alternative energy and green solutions.  

IHS Towers currently owns and manages over 10,500 towers and has built over 3,500 for its clients in Nigeria, Cameroon and Côte d’Ivoire. In Q4 2013, IHS signed agreements with MTN in Zambia and Rwanda to acquire over 1,200 sites in Zambia and Rwanda.

4. Emerging Capital Partners invests in bottling business, Atlas Bottling Corporation (Algeria)

Pan-African private equity firm Emerging Capital Partners (ECP), has announced a 33% stake in Atlas Bottling Corporation (ABC), the exclusive PepsiCo bottler of carbonated soft drinks (CSD) in Algeria, as part of an $80m investment plan.

Founded in 1995, ABC signed an Exclusive Bottling Agreement with PepsiCo in 1998, and has grown to become one of Algeria’s leading beverage players with a portfolio of global brands including, Pepsi Cola, Pepsi Max, Mirinda and Seven-up.

A mix of growth equity, provided by ECP, and debt, from commercial banks, will be used to increase bottling capacity, build a new production site and give the company flexibility to develop new product categories. ECP will also provide technical assistance to the management team, supporting them in professionalizing business functions such as governance and compliance.

Algeria is Africa’s third largest soft drinks market

5. Fusion Capital acquires stake in REMU Microfinance Bank (Kenya)

Private equity firm, Fusion Capital, has completed buying a 25% stake in REMU Microfinance Bank, in a move that will see it inject working capital and divest its ‘debt only’ portfolio to focus on providing pure equity and real estate financing to mid market companies in East Africa.

This is in line with Fusion’s current strategy to invest only in private equity deals between US$1million to 5 million targeting this segment.

REMU is a Microfinance Bank that offers deposits and credit services to small and medium size enterprises. Presently, there are eight regulated microfinance banks in Kenya.

The partnership will see the bank implement its new strategic plan to grow and expand its branch network and widen its product offering to include mortgage and housing products and electronic banking.

The banking sector in Kenya has seen more than a decade of rapid growth, as institutions aggressively moved to bring people who were previously excluded to using banking services. It is estimated that over 30% of the population remains unbanked, offering opportunities for further growth, according to FinScope Survey report 2012.

6. PIC invests €19m in Phoenix Capital Management’s West Africa Emerging Markets Growth Fund (Cote d’Ivoire)

South Africa’s Public Investment Corporation (PIC), the largest asset manager in Africa with assets under management of about US$150bn, entered into a strategic alliance with Cote d’Ivoire-based financial services group, Phoenix Capital Management (PCM) S.A.

PIC will, on behalf of the Government Employees Pension Fund (GEPF), invest an initial investment of US$30m in the West Africa Emerging Markets Growth Fund (WAEMGF), the Private Equity (PE) fund sponsored by PCM. PIC will take a 30% shareholding in PCM Capital Partners (PCP), the Fund Manager.

This dual investment reflects the group’s developmental strategy for sub-Saharan Africa, which revolves around investing some 5% of its assets under management on the continent.

The partnership envisages potential co-investment opportunities between the two groups and will give PIC a solid channel for any investments in the ECOWAS region.

7. PROPARCO extends US$10m Loan to Central Africa Building Society (Zimbabwe)

PROPARCO signed a 5-year loan agreement of US$10m with Central African Building Society (CABS) to support its growth in Zimbabwe.

With total assets over US$575m, a strong mortgage asset base and a range of financial service offerings, CABS ranks in the top three of Zimbabwean banks.

PROPARCO’s loan will allow CABS to finance the development of its credit portfolio and extend the maturity of its financing for Zimbabwean businesses as funding is only available on a very a short term basis.

8. Swicorp lists paper producer, Sotipapier, on the Tunis Stock Exchange (Tunisia)

Swicorp, a leading investment banking and asset management firm focused on the MENA region, listed Sotipapier on the Tunis Stock Exchange.

Sotipapier manufacturers paper for industrial use in North Africa.

Swicorp acquired a strategic stake in Sotipapier in May 2012 through Intaj Capital II (Intaj II), a private equity investment vehicle managed by Swicorp.

The listing, which covered 9.5 million shares representing 40% of the company’s shares, was oversubscribed nearly 10 times, with demand for the shares exceeding TND400m  (US$ 250m) for a total expected market capitalization of TND120m (US$76m).

Sotipapier is poised to drive further growth in the coming years, by investing in expanding its production capacity and geographic footprint, while continuously improving the quality and performance of the products it manufactures.

The deal demonstrates the compelling investment opportunities that the MENA region, specifically Tunisia and Egypt, provides to private equity investors with in-depth insights into the region.

9. Anjarwalla & Khanna enters into a strategic relationship with ATZ Law Chambers (Tanzania)

Anjarwalla & Khanna (A&K) has entered into a strategic relationship with ATZ Law Chambers (ATZ), a law firm in Tanzania. Shamiza Ratansi and Amish Shah (both formerly of Adept Chambers) set up the new firm in March, shortly after Fred Ringo of Adept Chambers was appointed Head of the Fair Competition Commission in Tanzania. Shamiza and Amish are joined by substantially all of the other Adept staff members.

The increasing number of Tanzania-Kenya cross border deals makes a tightly knit strategic alliance between A&K and ATZ valuable to each firm. The new connection will allow for seamless interaction on deals, sharing of know-how and the exchange of lawyers between the firms.

Tanzania has a rapidly evolving market with exciting developments across multiple sectors. The relationship will allow the firms to help clients to take advantage of the new economic opportunities in Tanzania.

Guide to doing business in Nigeria

Download Frontier's complimentary eBook and learn how business is conducted in Nigeria.

Nigeria is one of Africa’s powerhouses with the potential to be a key player on the global platform, thanks to its huge population, a fast-growing economy (the second largest in Africa), an expanding middle-class that wants to spend money, substantial natural resources, and diplomatic influence.

As one of the largest producers of oil in Africa, it has attracted significant investment into the sector. Current policy initiatives indicate government’s commitment to overcome existing challenges and to diversify the economy. Diversification, for example transforming the agriculture sector, can bring double-digit growth rates by next year, which would put Nigeria’s growth rate ahead that of Brazil and Russia, and slightly behind India and China.

The explosion of sectors such as mobile telecommunications and construction drove growth in the past decade, with many non-oil foreign businesses making profitable investments and often in partnership with reputable indigenous companies. Rapid economic growth is expected to continue; Nigeria aims to be one of the 20 largest economies of the world by 2020.

Crude oil exports dominate the economy and account for about 90% foreign exchange earnings and 70% of budgetary revenues. Other exports are rubber, cotton, cocoa, timber, palm oil, groundnuts and ginger. Major imported goods include machinery, chemicals, equipment, food and live animals. China is the largest import partner followed by the U.S., India, The Netherlands and South Korea. The top three largest exporters to Nigeria are the U.S, India and Brazil.

The country has many investment and business opportunities available to companies seeking growth in fast-growing frontier markets. There are generally no restrictions on foreign investment. However, a few areas are strictly regulated, for example, defence, supply of uniforms for officials of the executive arm of government, and narcotics. Various sectors, for instance, oil and gas, may have specific investment.

Download a complimentary Frontier Market Network eBook on Nigeria and learn:

• How to set up a business 
• Taxation
• Investment climate
• Legal system
• Intellectual property
• Incentives
• Human resources
• Employment law
• Useful facts