Archive for December 2013 | Monthly archive page

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Africa can expect increased competition in its banking sector as new players are attracted by the continent’s economic potential, Ecobank’s chief executive said, but governments must do their part to lower perceived risk.

Interest has grown in Africa, home to some of the world’s fastest growing economies, as investors seek new frontier market opportunities.

Thierry Tanoh, CEO of the pan-African lender, said he expected banks in South Africa and North Africa tobecome increasingly aggressive in the battle for market share. Meanwhile, large global banking groups will seekto break in.

However, in order to fully harness the new momentum, he said Africa must shake off a bad, and largely undeserved, reputation as a minefield of risk.

“There’s a perception of risk in Africa that is way above the reality,” Tanoh told Reuters in an interview on the sidelines of a stock markets conference in Ivory Coast this week. “Information is key.”

He said underdeveloped regulation of the sector and a shortage of credit bureaux and information sharing in many countries has left banks struggling to separate credit worthy clients from a handful with histories of default.

As a result they have been forced to spread risk broadly, driving up borrowing costs and ultimately hampering economic growth.

“You don’t want a minority penalising the majority. And if you don’t have access to good information, that’s generally what happens,” Tanoh said.

“Governments and regulators have a role to play to ensure that the environment in which we are evolving is conducive to business,” he said, citing Mauritius, Cape Verde and Rwanda as examples of countries on the right track.

Ecobank is headquartered in Togo, listed in Nigeria and Ghana and has operations in 35 African countries.

With more than 1,200 branches and assets that nearly doubled to almost $20 billion between 2010 and the end of 2012, it has been held up as a pan-African success story due to its strong growth and aggressive expansion strategy.

Its nine-month pre-tax profit rose 56 percent year-on-year to $299 million. In March, it announced a record annual profit of $348 million.

Tanoh said that the bank remained open to expansion into Africa’s Portuguese-speaking countries, but would concentrate on building upon its current platform with capital injections probably required to bolster its position in some markets.

“If you look at the level of capital in East Africa and if we compare to the banks over there, I think at some point we will have to look at providing more resources in this region to better compete. That is an aspect that we are looking into,” he said.

Ecobank’s rapid growth has made it attractive to foreign investors.

South African lender Nedbank said earlier this year that it planned to exercise its option to acquire up to a 20 percent stake in Ecobank under the terms of a $285 million loan which it has the right to convert into equity.

Tanoh said Ecobank was not actively seeking to partner with a larger bank as a potential strategy to finance further expansion.

“Ecobank has always prided itself on being independent and pan-African. I think we should continue this,” he said. “Our focus is Middle Africa. This is a market with a lot of potential. We’re not number one in every country and that’s what we want.”


Source: Money Web

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The recently released Deal Drivers Africa report, published by media company Mergermarket in collaboration with law firm ENSafrica and South African-based bank Nedbank Capital, indicated that African cross-border deal making will be on the rise in 2014.

The report’s research is based on interviews with 100 merger and acquisition (M&A) practitioners operating in Africa, including corporate executives, private equity investors, investment bankers and legal advisers.

Of those surveyed, 88% indicated that they expect cross-border deal making between companies in different African countries to increase in the next 12 months.

South Africa was identified by 89% of respondents as the African country that is expected to be the busiest cross-border acquirer over the next year.

“South Africa is the gateway to sub-Saharan Africa and is the region’s most developed economy,” said one director of a private equity firm in Togo. “South African outbound M&A is expected to rise as South African companies continue to pursue the continent’s rich natural resources and seek to diversify capital away from the domestic market.”

After South Africa, Nigeria and Ghana were expected to be the next most active cross-border acquirers over the next 12 months in Africa, followed by KenyaTanzania and Angola respectively.

Two reasons are offered for this expected increase in cross-border activity. First are the positive growth trends on the continent, and second is the relatively weak economic growth of global developed markets, that offer less attractive opportunities.

“The growth numbers in Africa are very good when compared with the rest of the world,” said the director of a private equity firm in Togo. “Developed world countries are generally flat or negative at the moment, while emerging markets in Africa offer more opportunity.”

However, the large majority of respondents (96%) indicated that they expect acquisitions in the continent from international bidders to rise in 2014.

Asia-Pacific was identified by 94% of respondents as one of the most active regions in terms of the source of in-bound buyers in M&A.

“China has a big interest in Africa, particularly its vast natural resources. But its interest is more complex than that,” according to a partner at a South African-based private equity firm. “Chinese companies increasingly see the African market as having great potential for increasing their sales and revenue. Chinese products are already a big hit in Africa and now Chinese companies are looking to set up their own plants and facilities in the region by acquiring African companies.”


Source: How we made it in Africa

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Angola’s capital, Luanda, remains Africa’s most expensive city and is the 2nd most expensive for expatriates globally, according to the findings of the latest Cost of Living survey by ECA International.

While Luanda topped the list between 2007 and 2009, the top spot since then has been filled by Tokyo and now Caracas.

Among African cities Luanda is followed by Juba (4), Brazzaville (13) and Libreville (17) – all of which also feature in the global top 20. The cost of goods typically purchased by international assignees in these locations are likely to be high due to export and transportation costs. In addition, the commodity boom in recent years has led to currency appreciations in commodity-exporting markets like Angola.

However, many more African cities are positioned towards the bottom of the ranking. Maseru in Lesotho is the cheapest location not only in Africa but worldwide. The significant depreciation of the South African rand has contributed to the lower positions of South African cities and locations in countries where the currency is tied to the rand, including Lesotho. Johannesburg has fallen 13 places over the year and is now in 249th position followed by Cape Town (254) and Durban (255). Kenya’s capital, Nairobi, is in 183rd position.

To ensure that their employees’ spending power is not compromised while on international assignment, multinational companies will often include a cost of living allowance in their pay package. Living costs for assignees are affected by inflation, availability of goods and exchange rates, all of which can have a significant impact on assignee remuneration packages. To assist companies with their calculations ECA carries out two Cost of Living surveys per year, comparing a basket of like-for-like consumer goods and services commonly purchased by assignees in 440 locations worldwide.

How we made it in Africa source who has been working in Luanda for several years stressed that some costs depend on where you shop in the area, with retailers such as Shoprite and Kero offering considerably cheaper products compared to other retailers typically known by foreigners and expats.


Source: How we made it in Africa

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Three African business giants, Jospong Group, Scaw Metals Group and Guma Group, on Wednesday announced investing US$40 million in the Ghanaian economy.

The investment is tailored at stimulating growth in the local steel industry to produce metals to service companies in the West African region, especially those in the mining sector.

Jospong Group, a wholly Ghanaian firm, has a 30% stake in the deal, with the remaining 70% going to the South African firms. The three would now operate under the business name Guma Jospong Consortium.

The consortium has been given first preference to supply products and services during and after the facility’s construction, and is also expected to bring additional investment to Ghana by increasing the steel products range, through a company which will produce other steel-related products, including rolled products; long steel products, reinforcing bars, low and high-carbon wired rods, reinforcing coils, etc.

As part of the deal, South African steel products manufacturer, Scaw Metals Group, would construct a new grinding media plant with a 5,000 tonnes per annum roller-former production facility at Tema, which would produce media in the sizes ranging from 38mm to 76mm in diameter.

Construction of the facility, which would commence early 2014, is expected to be commissioned eighteen months later.

More than a hundred people are expected to be employed during the initial phase of the project, with forty-two direct jobs expected to be created once the plant comes into operation.

The deal would also see South African experts train and transfer the process knowledge to their Ghanaian locals, leading to the eventual handover of the facility under their care.

Scaw Metals Group is the largest producer of cast high chrome grinding media in the southern hemisphere, with more than 80 years of experience. It is the leading integrated producer of specialty steel products for the mining, construction, industrial, power and rail sectors.


Source: All Africa

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Wealthy Nigerians are living it up in London, playing polo with royalty, frequenting the capital’s top restaurants and bars, snapping up luxury properties and driving sports cars.

This according to a colourful article, titled The Nigerians have arrived, in the December issue of British lifestyle and fashion glossy magazineTatler that describes the lavish lives of rich Nigerian businesspeople and their children.

Many of those mentioned in the article travel between Nigeria and the UK. Some even fly in their favourite British food when visiting the West African country.

According to the article, Nigerians are the UK’s sixth-highest foreign spenders, and spend £300m annually at British universities and schools.

While many of the families featured in the article made their money in Nigeria’s oil and energy sectors, some of the younger generation are establishing themselves in industries such as music.

“Though oil and gas is still the usual career path for the ambitious and connected, it’s notable that several of the younger generation are trying to make it in the entertainment business,” notes the magazine.

In the article, CEO of Shoreline Energy Kola Karim tells the story where a woman assumed he was a professional football player after seeing his yellow Ferrari parked in London’s affluent Chelsea neighbourhood. “The automatic assumption was that a prosperous black man could only be a footballer or a rap star.”

A number of recent reports have highlighted Africa’s super wealthy. According to a recent Bain & Company research report, Africa’s market for luxury goods will grow by 11% in 2013 compared to 2012. A recent study by Wealth-X and UBS bank reveals that Africa as 42 dollar-billionaires, seven of whom are from Nigeria.

Nigeria’s Aliko Dangote is generally considered to be Africa’s richest person with an estimated fortune of $17bn. Dangote started a small trading firm in 1977 that grew to become the Dangote Group, one of the most diversified business conglomerates in Africa and a major supplier to Nigeria’s soft drink companies, breweries and confectionaries.

The lifestyles described in Tatler article are however, the preserve of a tiny proportion of Nigerians. It is estimated that at least around 50% of Nigeria’s 170m strong population live in poverty.

A recent survey by Afrobarometer found that African poverty levels have barely improved in the past decade despite an average annual 5% growth in GDP in the same period.


Source: How we made it in Africa

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