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Global Business Forum on Africa 2017 calls for an investment boost in Trade, Finance, Logistics and Tourism

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The 4th Global Business Forum on Africa, organised by the Dubai Chamber of Commerce and Industry, has called for increase in investment flows between the UAE and Africa in several key sectors, including trade, financial services, logistics, and tourism.

A poll conducted during the two-day forum revealed that 48% of delegates considered trade to be the most promising sector for investment, followed by financial services (24%), and 14% for both logistics and tourism sectors.
Participants labeled the above sectors as key areas where Dubai can offer its expertise and investment to boost African economies.

Over the last five years, Dubai Chamber of Commerce and Industry has stepped up its efforts aimed at strengthening economic ties between Dubai and Africa by opening four representative offices on the continent and organising the Global Business Forum on Africa in Dubai.

There are different sectors that investor from different part of the world look at in Africa and infrastructure is one of the very important sector.

The Chamber recently announced that it has invested about $27.7 million to raise awareness of trade and investment opportunities in Africa, and promote Dubai as an attractive business hub for companies on the continent.

Other activities carried out by the Chamber in recent years include organising frequent trade missions to African countries, conducting specialised research and studies, and developing the Africa Gateway app to expand is members’ access to opportunities opening up in the fast-growing market.

President and CEO of Dubai Chamber, Hamad Buamim explained that these efforts have given a major boost to UAE-Africa trade ties by facilitating cooperation between businesses and investors on both sides.

He noted that the Global Business Forum on Africa was launched in 2013 with the intention of establishing an ideal platform to explore business potential in Africa, adding that participation in the forum has increased significantly in recent years.

He revealed that Dubai’s non-oil trade with Africa has grown to exceed AED 700 billion in the last five years, while 10,000 African companies have joined Dubai Chamber over the same period, bring the total number of African businesses registered with the Chamber to over 17,000 today.

“There are different sectors that investor from different part of the world look at in Africa and infrastructure is one of the very important sector, we see construction as an opportunity for businesses in our part of the world because of the experience we have in developing infrastructure in Dubai and the Gulf region,” he said.

According to a number of Africa-based entrepreneurs, African countries have come a long way in terms of connectivity, by expanding digital infrastructure and opening up their economies to new growth opportunities.

Emirate the world’s fourth largest airline and the largest in the Gulf with a 6 percent passenger growth in Africa in 2017 recently announced an increase of more destinations in Africa as a means of improving business integration with the continent.

The Senior Vice president, commercial operations for Africa, Emirates, Orhan Abbas said they have a hub in Dubai that caters to all the connectivities in each point in Africa”

“As you know the African continent is large and huge from the north to the south, many hours of flying and off course any flight you take on Emirate stop at the hub in Dubai. We operate in 22 countries in Africa, if a passenger is coming out from Morocco, and stop over at Dubai, they have a choice of four flights a day from Johannesburg or three flights a day to Cape Town or Durban,” he added.

The Chief executive officer, Dubia Corporation for Tourism, Issam Kazim noted that they are leveraging on the social media and the digital spaces as well to hit the mass audience within Africa.

“I think for us, it was important, we had a very good experience working with one of the movie stars in Nigeria and Africa as well, which is the wedding party. We participated in the award ceremony, and we had an amazing reaction from the market, so that gave us the incentive to actually work with the same producers to shoot their sequence in Dubai. It encourages people to really get an experience of these celebrities that they are familiar with what they are doing in Dubai and how they experience Dubai as well,” Kazim said.

The Global Business Forum on Africa, organised by Dubai Chamber, is the largest event of its kind that is hosted outside of the continent, while it remains one of the most high-profile international forums dedicated to exploring investment opportunities in fast-growing African markets.

This year’s forum, held under the theme “Next Generation Africa”, examined the role of young African entrepreneurs who are stimulating economic growth, and building relationships and partnerships with companies around the world. In addition, sessions focused on how technology and digitalisation are reshaping African economies and meeting the demand of a growing middle class.

Kenyan-based Private Equity Firm Fusion Capital Urges the African States to Invest in Modernizing their Agriculture Sectors

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Fusion Capital, a Kenyan-based private equity firm with a focus on property and real estate, has urged African governments and private sector stakeholders to invest in modernizing agriculture in order to ensure economic growth across the region.

The company has noted that in the last few years, African economies have registered unprecedented economic growth as well as rapid urbanization.

“However unlike a few Asian countries, this growth hasn’t led to a shift of occupations from agriculture to urban-based industries such as manufacturing,” Fusion Capital said in one of its latest reports.

The report, which was compiled by Fusion Investment Management, one of the firm’s subsidiaries, indicates that the agrarian nature of African economies has held out real hope of getting rid of poverty, unemployment, and hunger, and driving economic growth.

“Urbanization and globalization have changed the dietary habits of people, who are now shifting to a more urban-based diet that meet quality and food safety criteria,” said the company’s researchers.

This kind of urbanization without industrialization limits sustainability and economic growth. Fusion Capital’s analysts argue that it is therefore important to modernize agriculture so as to benefit from its significant contribution to the economy. The experts say these changes have created an opportunity for African economies to grow not just in agribusinesses, but in the entire food system.

Africa spends $35 billion annually on food imports. This number is expected to rise to $110 billion by 2025.

In September 2017, agribusiness deals, amounting to more than $6 million, were signed across the region. Fusion Capital notes that new partnerships are emerging, including a deal known as the multi-million dollar Partnership for Inclusive Agricultural Transformation in Africa (PIATA), which aims to increase income and improve food security for 30 million smallholder farm households across Africa by 2021.

Fusion Capital believes that a boost to smallholder farmers and SMEs will help in alleviating poverty and hunger in the region. The firm’s research team states that public-private partnerships can be formed to provide aid with financial services, insurance, and marketing to smallholder farmers. Setting up of training institutions for entrepreneurship and agribusiness can help in the establishment and operations of SMEs.

Michael Kimondo Head of Treasury Operations at Fusion Capital, warns, however, that country’s like Kenya will need fiscal reforms in order to maintain economic growth.

“Agriculture is the road to alleviating poverty and hunger, and establishing robust economic growth will give a boost to agriculture,” stated the report.

Secure, trusted internet critical to advancing African economy – Internet Society

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Many African countries have made significant progress towards creating an Internet sector, with broad reforms that focus on increasing broadband availability. There have been further successes within countries in developing online platforms, fostering growth of local companies and increasing the incentive to go online– says a new report launched today by the Internet Society, a global non-profit dedicated to ensuring the open development, evolution and use of the Internet.

Promoting the African Internet Economy highlights how greater use of the Internet and digitization of the traditional economy will spur economic growth in Africa.

The report further examines Internet adoption and use by companies and governments throughout the region, identifying barriers that must be overcome in order to create an Internet economy that delivers innovative services, job opportunities and income growth across the continent.

Both businesses and citizens can benefit from an Internet economy. Businesses across all sectors gain access to a global marketplace of billions of people, and citizens in both rural and urban areas benefit from enhanced educational and training opportunities and access to new job possibilities.

The report also outlines what needs to be done for Africa to take full advantage of the digital opportunity offered by the Internet. It highlights local successes as well as broader challenges, offering recommendations for policymakers in Africa to adopt.

The Internet economy presents a major opportunity for Africa. However, Africa needs a secure and reliable Internet infrastructure that users trust in order to bringing large and small businesses online, along with governments and other social services,” explains Dawit Bekele, Africa Region Bureau Director for the Internet Society.

The Internet Society in collaboration with the African Union recently introduced Internet Infrastructure Security Guidelines for Africa to help AU member states strengthen the security of their local Internet infrastructure through actions at a regional, national, ISP/operator and organizational level.

In Kenya, the Internet economy already represents 3.6% of the country’s GDP and in other developing countries 1.3% of GDP comes from the Internet economy. The McKinsey Global Institute predicts that in addition to contributions to GDP, the Internet will deliver productivity gains across Africa. These productivity gains across six key sectors:  financial services, education, health, retail, agriculture and government are projected to be valued at between US$148 billion and $318 billion by 2025.

However, a thriving Internet economy in Africa could be put at risk by the increasing number of Internet shutdowns in the region. In 2016 alone, there were at least 56 shutdowns of the Internet around the world. These shutdowns affect individuals and organizations that depend on the Internet for their daily lives and have negative effects on the economy.

In addition to the economic costs, Internet shutdowns also affect trust. If people don’t know whether they will have connectivity, they can no longer rely on that connectivity to build Internet-based businesses. This will affect entrepreneurs in greatest need of digital-led innovation for their own future, and the future of the Internet economy in Africa added Bekele.

FMO launches fintech platform

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A new platform designed to match financial institutions with disruptive fintech firms aims to make access to basic financial services easier for underserved communities within Africa.

Dutch development bank FMO and Miami-based digital strategies firm above&beyond have launched FinForward to bring traditional banks and micro-finance lenders into collaborative partnerships with companies that unbundle their services and make them accessible to the modern consumer market.

According to FMO, the platform will increase the pace at which African banks reach full digitisation, which it says will reduce costs and allow lenders to add services that complement existing digital infrastructure such as mobile payments.

Andrew Shaw, FMO’s senior fintech specialist, said fintech firms are becoming seen less as challengers to traditional banks, and more as potential banking allies. He said the bank aims to encourage collaboration, “where it makes commercial sense”, though did not say whether FMO’s mandate to ensure impact sustainable development was a draw for fintechs seeking to work with development banks and other institutions.

Communities in the most rural parts of the continent struggle most with access to finance services. According to the initiative Making Finance Work for Africa, where such services are available, low-income individuals and SMEs still lack the eligibility to apply for deposits, credit, payments and insurance, due to lack of collateral including real estate.

Lonneke Noteboom, fintech analyst at FMO, explained that the objective of FinForward is to reach down to those that at the bottom of the pyramid, such as smallholder farmers, female entrepreneurs and general owners of small to medium-sized enterprises (SMEs).

“Traditional providers, often called incumbent banks and micro-finance institutions, have failed to innovate quickly enough in order to meet the needs of the majority and fintechs are now stepping up to fill this gap,” she said. “It is FMO’s role to bring these two worlds together and create an enabling environment where fintechs and incumbent banks can co-create and co-innovate.”

AfDB approves US$200 million to IDC to support industrialisation projects in Africa.

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The Board of Directors of the African Development Bank Group (AfDB) has approved a private sector multi-currency line of credit of US$ 100 million and 1.3 billion South African Rands to Industrial Development Corporation Plc (IDC) of South Africa. The operation will support industrialization projects in both South Africa and other Regional Member Countries (RMCs).

IDC is South Africa’s pre-eminent development finance institution (DFI), owned by the South African government. Its mandate is to promote industrialization in Africa by investing in, and developing the industrial base of South Africa and other RMS, thereby helping to scale-up the AfDB’ s High 5 agenda, particularly “Industrialize Africa”. Fifty percent of the funding (the rand tranche) will be used for projects in South Africa and the balance (the USD tranche) will be directed to regional projects in Mozambique, Malawi, Ghana, Kenya, Namibia, Mauritius, Swaziland and Sudan.

IDC is managed as an independent DFI, operating in a sustainable and self-financing manner with a strong governance structure. The Bank has a good and long-standing relationship with IDC. The current operation is the 3rd non-sovereign guaranteed Line of Credit from the Bank. The recently concluded extended supervision of the previous facility (US$ 200 million) indicated that the Bank’s support resulted in creation and retention of over 15,000 jobs by supporting agro-industries, logistics, transport and other industry infrastructure in Senegal, Zimbabwe, Mozambique, and Swaziland.

This project is timely considering current economic challenges in South Africa as AfDB and IDC together can play a countercyclical role. The support is much needed as raising funds is becoming more difficult for South Africa and government owned entities such as IDC due to the country sovereign downgrade. The project will address the IDC’s funding gap and reduce asset-liability mismatch.

The LOC is intended to support IDC’s 5-year Corporate Plan for the period 2016/17–2020/21. Specifically, it will be on-lent to IDC’s clients in key focus areas, including (i) priority industrial value chains such as chemical and pharmaceuticals, metals and mining, agro-processing and agriculture value chains. It will also support (ii) industrial infrastructure, including energy, logistics, water, and telecommunications; (iii) new industries that derive from innovation, science and technology. The LOC will also significant opportunities in high impact labour intensive sectors and assist businesses in distress.

Kenya Seeks Proposals for $2 Billion Eurobond Sale

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Kenya’s government is seeking proposals from banks about a possible $2 billion Eurobond offering in the first quarter of 2018, according to two people familiar with the matter.

The East African nation’s Treasury asked banks for pitches on how to structure the sale, said the people, who asked not to be identified because they aren’t authorized to speak publicly about the matter. The deadline for proposals is Nov. 29, they said.

Kenya’s return to international capital markets would mark its first sale of foreign debt since a debut Eurobond in 2014. The Treasury is seeking to plug a budget deficit that’s forecast to narrow to 6.4 percent of gross domestic product in the fiscal year through June from 8.5 percent last year.

The government plans to re-enter the Eurobond market before the end of the current budget year, though a placement is likely from February onward as funds are required for spending purposes, the people said.

Proposals from banks must outline the costs of either a five- to 10-year issue to be repaid in bullet form, or 12- to 15-year securities amortizing in the final three years, the people said. A government roadshow is expected to start in January, said one of the people.

Treasury Principal Secretary Kamau Thugge didn’t respond to two text messages and four calls to his mobile phone seeking comment.

New Government

Treasury Secretary Henry Rotich said earlier this month Kenya will return to international debt markets once a new government is in place. President Uhuru Kenyatta is scheduled to be sworn in for a second term on Tuesday after the country held a repeat election in October following the annulment of an August vote.

Yields on Kenya’s existing $2 billion of Eurobonds due June 2024 traded three basis points lower at 5.74 percent by 3:52 p.m. in the capital, Nairobi, on Monday.

Rotich said in May the government intended to use part of the proceeds of the Eurobond sale to repay a $750 million syndicated loan owed to banks including Citigroup Inc., Standard Bank Ltd. and Standard Chartered Plc. The government earlier this month asked for an extension on the repayment of the bulk of the loan until April. In 2014, Kenya extended the maturity of another syndicated loan by three months as it awaited better conditions to issue its debut Eurobond.

Bidvest Unit Buys FinGlobal to Expand Portfolio

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JOHANNESBURG (Capital Markets in Africa) – A unit of Bidvest Group Ltd. agreed to buy FinGlobal, a provider of financial services to South Africans living outside the country, as part of an acquisition drive to expand and diversify its business.

Bidvest Financial Services will fund the purchase out of its 2 billion rand ($142 million) in cash reserves, Managing Director Japie van Niekerk said by phone on Tuesday, without disclosing the value of the deal. The acquisition gives the division access to Hermanus, South Africa-based FinGlobal’s more than 15,000 customers in 80 countries, offering services such as tax refunds, foreign-exchange services and retirement annuities.

The transaction marks Bidvest Financial Services’ second deal in three months after buying First Data Corp.’s South African e-commerce payment unit, First Data Resources, through its banking unit for an undisclosed sum in August. Bidvest Financial Services is seeking to broaden its customer base in an effort to take market share from South Africa’s four largest lenders.

“We are looking to add and diversify our revenue streams,” Van Niekerk said. “We also have the ability to do one or two bigger acquisitions with the group.”

The company’s parent is looking for its next phase of growth after spinning off its food-services unit last year, with all businesses in Bidvest looking for large strategic acquisitions to bolster the group’s portfolio, he said. Bidvest has as much as $1 billion to spend on acquisitions, Chief Executive Officer Lindsay Ralphs said earlier this year.

Moody’s Investors Service in June upgraded Bidvest Bank’s long-term national scale rating to Aa2 even as South Africa’s local-currency debt faces the risk of a downgrade to junk by the end of this year due to the country’s slow economic growth, climbing debt levels and political wrangling. Bidvest Bank, which is a division within Bidvest Financial Services, was born out a foreign-exchange company Bidvest bought in 1998.

“There is some risk in terms of the sovereign rating, but usually in tough economic operating environments there are also opportunities,” said Van Niekerk.

MTN set to list on Nigeria Stock Exchange in 6 months

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The MTN Group says its commitment to list its Nigerian subsidiary on the Nigerian Stock Exchange in the next six months. Lami Adekola, co-founder of Hamilton and George joins CNBC Africa to discuss the impact this move could have on the NSE.

Moody’s cuts GT Bank, UBA parent firms’ credit ratings

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Global agency Moody’s has downgraded credit ratings of Guaranty Trust Bank Plc and United Bank for Africa Plc, which own subsidiaries in Kenya and other African countries upon downgrade of Nigeria.

The firms operate as GTBank and UBA in Kenya.

Moody’s downgraded to B2 from B1 the long-term local currency deposit and issuer ratings of the two banks, as well as B3 from B2 the long-term foreign currency deposit ratings. It also demoted the baseline credit assessments of GTBank to b2 from b1.

“Today’s rating action follows Moody’s downgrade of Nigeria’s government bond ratings to B2, with a stable outlook from B1, and reflects the government’s reduced capacity to provide support to Nigerian banks in times of stress …”

It is not obvious what the downgrade implies for the local banks, but an answer could be in the cost of any on-lending to the subsidiaries as stated during the Sh50 billion eurobond borrowing by UBA that was 240 per cent oversubscribed in June.

“We see our subsidiary taking advantage of this significant fundraising to support some of the large tickets we have in our pipeline,” said managing director UBA Kenya Isaac Mwige of the borrowing.

NSE halts Kenya Airways trading amid ownership restructure

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Kenya Airways’ shares were suspended from trading at the Nairobi Securities Exchange (NSE) for the next two weeks after the government announced last week that it was moving to restructure ownership at the State-owned airline.

On Monday, Treasury and 10 local banks said they had converted their debt, worth more than Sh44 billion, in the struggling Kenyan carrier into equity effectively making them the majority owners with an 87 per cent stake.

The government’s stake under the plan will rise to 48.9 per cent from 29.8 per cent, while the banks’ stake – acquired under a special purpose vehicle known as KQ Lenders Co. – will stand at 38.1 per cent.

A note from the NSE sent out early on Wednesday said trading in the airline’s shares will be suspended between November 15 and November 28.

“The suspension is to facilitate the share split and simultaneous consolidation of the company’s shares which forms part of the Kenya Airways PLC capital transaction,” the note stated Wednesday.

Kenya Airways’ shares are down 10.6 per cent so far this year to Sh5.30 each.

Shareholder % holding Board seats
National Treasury 48.90 3
Local Banks 38.1 2
KLM 7.80 1
Other shareholders 5.2 –
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