FOR­EIGN IN­VESTORS POUR $1.6B INTO EA DEALS

The big­gest deals in­clude Vo­da­com IPO and the sale of Sadolin Paints

The East African - - NEWS - By AL­LAN OLINGO The Eastafrican

Kenya takes the bulk of the 55 deals recorded in the past eight months, fol­lowed closely by Tan­za­nia, Uganda and fi­nally Rwanda.

East Africa has re­ceived $1.6 bil­lion from for­eign in­vestors, Kenya tak­ing the bulk of the 55 deals recorded in the past eight months.

Data from I&M Bur­bidge Cap­i­tal shows that the ini­tial pub­lic of­fer­ing of Vo­da­com Tan­za­nia, and the pur­chase of Sadolin Paints by Ja­panese firm the Kan­sai Paint were some of the re­gion’s big­gest deals. The Vo­da­com IPO raised $213 mil­lion, with for­eign in­vestors buy­ing 40 per cent.

Tan­za­nia emerged as the sec­ond largest mar­ket for pri­vate equity deals, with most of the cap­i­tal go­ing into com­mu­ni­ca­tion, in­fra­struc­ture and re­sources sec­tors. It is fol­lowed by Uganda and Rwanda.

Ex­ec­u­tive di­rec­tor of the East Africa Pri­vate Equity & Ven­ture Cap­i­tal As­so­ci­a­tion (EAVCA) Eva Wai­ri­gia at­trib­uted the rise in pri­vate equity ac­tiv­ity in the re­gion over the past two years to both macro fac­tors and in­dus­try de­vel­op­ment.

“East Africa has tra­di­tion­ally been a mar­ket for small and medium-sized com­pa­nies growth cap­i­tal, where pri­vate equity firms de­ploy be­tween $1 mil­lion and $30 mil­lion per deal,” said Ms Wai­ri­gia. “This means that while the rest of the con­ti­nent catches up in SME in­vest­ment, play­ers in this re­gion have al­ready made sig­nif­i­cant in­roads in that seg­ment, thus mak­ing it eas­ier to con­duct busi­ness here.”

Mid this year, Fanisi Cap­i­tal an­nounced that it had re­ceived com­mit­ments worth $29 mil­lion in the first phase of its round two cap­i­tal rais­ing to fund SMES. The fundrais­ing had seen strong in­ter­est from lo­cal in­vestors — ac­count­ing for 45 per cent — with the rest com­ing from in­ter­na­tional in­vestors.

From a macro per­spec­tive, East Africa has also recorded pos­i­tive GDP growth per­for­mance for Kenya, Tan­za­nia, Ethiopia, Uganda and Rwanda, com­pared with the greater Africa, where com­mod­ity prices and re­ces­sion af­fected coun­tries in South­ern and West Africa. Cur­rency fluc­tu­a­tions, which rocked mar­kets such as Nige­ria, An­gola and Zam­bia, were com­pa­ra­bly sub­dued in East Africa.

Ac­cord­ing to the EAVCA/ KPMG Pri­vate Equity Sec­tor Sur­vey Re­port re­leased in June this year, Kenya at­tracted the bulk of pri­vate equity in­ter­est in East Africa both in terms of vol­umes of deals and value. Kenya saw PE funds carry out 23 deals last year, ac­count­ing for two-thirds of to­tal in the re­gion.

The re­port shows that PE firms raised $1.1 bil­lion for re­gional in­vest­ments in 2016, a 41 per cent in­crease on the amount raised in the pre­ced­ing seven years. The main source of in­vest­ment funds, ac­cord­ing to the sur­vey was Euro­pean de­vel­op­ment fi­nance in­sti­tu­tions, high net worth in­di­vid­u­als or fam­i­lies and sov­er­eign wealth funds.

“The sec­tor sur­vey shows that the 16 Africa fo­cused funds have al­ready re­leased $600 mil­lion from th­ese funds, with Kenya get­ting the lion’s share at $483.5 mil­lion,” said KPMG East Africa head of deal ad­vi­sory Sheel Gill. “There is in­creased fo­cus by PE funds on East Africa be­cause of the down­turn in com­modi­ties and cur­rency de­val­u­a­tion in south­ern Africa.”

The I&M Bur­bidge cap­i­tal re­ports shows that fi­nan­cial ser­vices has taken 29 per cent of this year’s deals fol­lowed by en­ergy, oil and gas at 17 per cent. Other no­table sec­tors are real es­tate at 10 per cent, ICT at eight per cent and hos­pi­tal­ity at six per cent.

In the fi­nan­cial sec­tor, Kenya’s Hous­ing Fi­nance last month raised $30 mil­lion from in­ter­na­tional in­vestors, with the com­pany plan­ning to use part of the debt to help re­pay its $70 mil­lion cor­po­rate bond which ma­tures on Oc­to­ber 2. San­lam Kenya also ac­quired an ad­di­tional 12 per cent stake in Gate­way In­sur­ance in July, rais­ing its in­vest­ment to $9.14 mil­lion.

In the min­ing sec­tor in Uganda, ver­mi­culite miner Black Moun­tain Re­sources in June raised $1 mil­lion, with the funds de­ployed to de­liv­er­ing op­er­a­tional im­prove­ments at its Namekara mine.

In Tan­za­nia, gold miner Shanta Gold agreed to buy listed ex­plorer He­lio Re­sources for $4.6 mil­lion. The ac­qui­si­tion will give Shanta con­trol of He­lios’ as­sets in Tan­za­nia.in the man­u­fac­tur­ing sec­tor, listed Ja­panese paint and coat­ing man­u­fac­turer Kan­sai Paints in June ac­quired a 90 per cent stake in Sadolin Group for $100 mil­lion. The ac­qui­si­tion in­cluded Rwanda, Tan­za­nia, Uganda and Kenya op­er­a­tions.

Rwanda saw the I&M trans­ac­tion as one of its big­gest deals this year, after Africafo­cused pri­vate equity fund man­ager, Kibo Cap­i­tal Part­ners an­nounced that it had ac­quired a stake whose size re­mains undis­closed, in the bank.

Pic: File

Kan­sai Plas­con East Africa pres­i­dent Gary Van Der Merwe and other com­pany bosses at a re­cent press brief­ing in Nairobi.

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