The weekly roundup of Africa's Private Capital news
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Here's the latest digest of the most noteworthy private equity, venture capital and infrastructure financing deals and investment insight and news stories related to Africa that were published over the last seven days. We'd be delighted if you shared it with interested colleagues and/or partners, so please feel free to forward the newsletter on to them. If they would like to receive their own weekly copy they're more than welcome to sign up here.
We're trying to make this as useful a tool as possible for Africa-focused private capital investment professionals and their advisers. Let us know what you think. Send tips, suggestions and feedback to me at [email protected].
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The week in brief...
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Permira joins the ranks of international private equity firms dipping their toes into Africa's private capital investment pool by making their maiden deal on the continent last week with the purchase of Teraco Data Environments. The acquisition of the 6-year old datacenter services provider gives Permira access to a rapidly expanding market, driven by increasing demand for fixed-line and mobile internet usage as well as significant upside from increasing levels of datacenter outsourcing. The deal is expected to close during the first quarter of next year.
Opportunities in the education sector warranted a couple of stories last week. On the deal front, Actis announced a "significant" investment in Universite Centrale Group, a private tertiary education provider in Tunisia. This deal is the latest in a string of emerging markets education investments that Actis has made. According to the press release on their website, the firm has invested over $400 million in a number of education firms over the last 5 years. Some of the reasons why the sector looks set to hold its appeal for investors are laid out in an article that appeared in the Financial Times. Focusing on private equity's interest in education deals in Kenya, the article outlines the yawning gap between the availability of education and the demand for it created by a rapidly expanding and aspirational middle class. As populations expand and education policy changes create more high school graduates, the opportunities to fill the gap show no signs of diminishing.
The big credit market news of the week was around Ethiopia's debut sovereign bond issue which priced last week. It seems that there's no let-up in investor demand for these higher yielding notes for the moment, since the issue was heavily oversubscribed, attracting over $2.6 billion in orders for the $1 billion note. That's all the more remarkable given the sale prospectus rather unusually made special mention of the country's risks of war, famine and political tensions, which on top of the more general concerns that surround the levels of debt being taken on by African countries might have given some a reason to pause before piling in. Apparently not.
If there was a prize for Africa's private capital man or woman of the week, we'd have to award it to Tony Elumelu this week. In deal news, his investment firm Heirs Holdings made an undisclosed seed investment in a Silicon Valley-based video social networking startup, Wanderloop. The firm provides users with the ability to create and distribute 10-15 second video clips of themselves, a sort of LinkedIn with video if you like. It's at a very early stage of its development, but seems to us a winning concept. Sticking with the entrepreneurial theme, he also launched the Tony Elumelu Foundation, a $100 million initiative to help 10,000 African entrepreneurs in the next 10 years turn their ideas into sustainable businesses. The foundation will provide financial and business-building support. And lastly, at completely the other end of the corporate scale, Heirs Holdings and GE announced an expansion to their power sector collaboration. They're teaming up to develop the very significant opportunities offered by the upstream oil and gas sectors.
And finally, data and information provider Prequin is tracking 29 private equity vehicles who are currently in market raising, in aggregate, $80 billion for investments in West Africa. If they're successful that'll blow Africa's fundraising records out of the water.
To read more about these and other stories in this active week, please scroll down and review the headlines, abstracts and links.
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Private Equity
In its maiden deal in Africa, European private equity firm Permira has acquired Teraco Data Environments, sub-Saharan Africa's largest carrier-neutral data center services provider for an undisclosed sum. The deal grants Permira exposure to Africa's fast-growing mobile internet markets. Reuters reports that the deal was made from Permira's $6.6 billion Fund V and the sellers were management, local VCs and private investors.
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Private Equity
Actis invests in Tunisia's Universite Centrale Group // act.is
According to a press release posted on their webste, Actis has made a "significant" investment in private Tunisian tertiary education provider Universite Centrale. Terms of the deal were not disclosed. Actis has invested over $400 million in a number of assets in the emerging markets education sector in recent years.
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Private Equity
As it prepared to debut on the Johannesburg Stock Exchange last week, South African online retailer HomeChoice International sold a minority stake to private equity firm Development Partners International. Terms of the deal were unreported. The investment was made through ADP II, DPI's $450 million Africa-focused fund.
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Private Equity
African Capital Alliance has bought out Sanlam Investment Management's stake in SIM Capital Alliance, the Nigerian asset management firm. The sale was motivated by Sanlam's desire to streamline its strategic interests in Nigeria. Deal terms were not reported.
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DFI
The IFC is providing $80 million in debt financing as part of the $890 million in equity and debt financing agreements for the Azura-Edo Power IPP which were signed last week. IFC is providing $50 million on its own account with a balance of $30 million in subordinated debt. The project, which is due to start construction in January 2015 is being developed by a consortium of investors led by Amaya Capital.
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Venture Capital
Wonderloop, the silicon valley-based mobile video profile startup has attracted an undisclosed investment from Heirs Holdings, Tony Elumelu's proprietary investment company. The social media firm provides users with a platform to create and connect through 10 to 15 second video profiles.
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With Teraco deal, Permira joins ranks of other international private equity firms investing in Africa
Image Credit: Permira
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Credit
Ethiopia's debut $1bln sovereign bond sale heavily oversubscribed // ft.com
Ethiopia priced its maiden sovereign bond issue last week, paying a relatively low yield of 6.625%. The issue was massively oversubscribed, with investors placing orders for more that $2.6 billion for a note of just $1 billion. The country becomes the latest of a number of countries in the region who have issued similar bonds in the last five years.
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Credit
The European Investment Bank is extending a $62 million Line of Credit facility to Kenya's Equity Bank. The facility will help the bank further boost its lending to small and medium-sized enterprises, a business which it has grown over the last few years. According to the report in Ventures Africa, Equity Bank made over 170,000 SME loans, totalling $412 million in 2013.
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Private Equity
Africa's largest private sector investor, The Old Mutual Investment Group, is raising $1 billion to increase its investments in sustainable projects on the continent. The company, which is already well-established in East and South Africa, will invest a large proportion of the new funds in West Africa.
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DFI
Eastern and Southern African Trade Bank, (known as PTA Bank), and London-based investment advisory and management firm GML Capital have announced plans to establish an Africa-focused trade finance investment firm. The fund, which will open for subscriptions next year, aims to provide investors with secure and stable returns and pursue societal and developmental goals to reduce poverty in the region.
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Projects & Portfolio Companies...
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Infrastructure
Ethiopia's government is reviewing the proposal to build a 550 km petroleum pipeline between the Port of Djibouti and Awash, in central Ethiopia. The proposal was submitted in June by Blackstone-backed Black Rhino Group and Mining Oil and Gas Services, a company owned by South African investment firm, Royal Bafokeng Holdings. The government of Djibouti has approved the project and once approvals are granted by Ethiopia's government, feasibility studies will begin. Once started, the project is expected to take two years to complete.
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Private Equity
Virgin Active, the fitness chain in which CVC Capital Partners owns a 51% stake, has replaced its chairman, fueling speculation that it is preparing to list on the Johannesburg Stock Exchange in 2015. The new chairman will be Simon Susman, a veteran South African executive and a non-executive director of Woolworths, one of the largest retailers in the southern hemisphere. Virgin Active derives 60% of its earnings from the South African market.
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Private Equity
CSH, the credit and information services group backed by Actis and Compuscan's management in June 2014, has acquired P:Cubed, the South African marketing services provider, for just under $30 million. The acquisition further strengthens CSH's position as a leading provider of credit bureau, credit risk, marketing data and analytics services to emerging markets.
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Private Equity
East African retailer Nakumatt expects to sell a stake to a "strategic investor" by the middle of 2015 as it looks to boost its expansion in the region. While declining to name potential investors or detail the amount of capital the company is looking to raise, the company's head of strategy and operations tells Bloomberg that the company has held talks with at least two "serious" investors.
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Private Equity Real Estate
Lekki Mall, the Nigerian real estate development backed by Novare Africa Property Funds, will bring 22,000 square metres of retail space to the market when it opens in April 2016. The $83 million project, once completed, will be the largest retail mall in Lagos. A number of high-profile international and local brands have already committed to tenancies, highlighting the appeal of Nigeria's growing middle class demographic to leading retail operators.
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Compliance & Regulation...
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Regulation
South Africa's taxation amendments to boost SME investment // cbn.co.za
Venture Capitalists in South Africa have welcomed the changes in the Taxation Amendment Bill which come into effect in January 2015. The amendments raising asset limit thresholds and investment holding periods are expected to boost investment in entrepreneurial businesses and increase the appeal of venture capital to investors.
Read more...
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Education
Private Equity investors eye education deals in Kenya // ft.com
As the spending power of Kenya's middle classes continues to grow along with the market's willingness to pay for private education, a number of private equity funds are reviewing the opportunity to back a sector that is relatively new to Africa. With demand for public university places double the number actually available, a huge expansion in the number of high school graduates expected and a belief in the importance of education, demand for products and services in the sector look set to be buoyant for years to come.
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Legal
A number of international law firms have set up shop in South Africa recently, having previously provided their services to clients from their offices in the USA and Europe. The moves have been driven by the development of Africa into a new global hub for growth, while economic activity in the developed market has sputtered following the 2008 financial crisis.
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Mining
October and November have seen approximately $700 million in investment announcements from chinese investors for marginal precious metals assets, giving some reason to pause as to whether this signals the bottom of the commodities cycle or whether the investments are simply "wrong-headed."
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Oil & Gas
Already collaborating in the power sector, specifically on the expansion of Nigeria's largest power station, Transcorp Ughelli, GE and Heirs Holdings announced last week that they are expanding their collaboration to projects in the oil and gas industry. The companies have identified significant opportunities in the upstream sector and the expanding domestic demand for oil and gas.
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Sovereign Wealth
Low interest rate environments in the West combined with shifting investment strategies and an increased appetite for the alternative investment asset class has seen the Middle East's sovereign wealth funds starting to assess investment opportunities in the emerging economies of Asia and Africa. Infrastructure, Real Estate and increasingly Private Equity are the asset classes sovereign wealth funds generally choose.
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Perspectives - Private Equity
An op-ed piece in Institutional Investor penned by Investec Asset Management's Nick Tims and Francois van der Spuy on the promise and the peril of private equity investing in Africa.
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Perspectives - Private Equity
As South Africa's share of the continent's market for private equity capital formation slowly shrinks, Steve Costabile talks to CNBC Africa about the current state of private equity in sub-Saharan Africa. He assesses the risks facing investors, indentifies promising sectors and discusses the outlook for returns.
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Perspectives - Private Equity
An interview with Dorothy Kelso, the African Venture Capital Association's Head of Research, on the changing private equity landscape in Africa. Recent research shows a growing sophistication among Africa's local, regional and pan-african private equity firms, an uptick in investments outside South Africa by South African private equity firms, a broader mix of private capital investment strategies and heightening interest among US pension funds, foundations and endowments in the opportunities for investment the continent offers.
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Perspectives - Private Equity
Private Equity deals help Africa's M&A market heat up // ft.com
According to Dealogic, there have been 631 M&A deals in Africa so far this year, the highest number for a comparable period since 1995, and a 10% increase on last year. One of the main drivers has been private equity activity, both investments and exits, and the arrival of global private equity firms like Carlyle, KKR and Permira on the African deal scene.
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Perspectives - Infrastructure
Following the release of PwC's research piece "Capital Project and Infrastructure Spending: Outlook to 2025" two weeks ago, Moneyweb gives us a brief summary of the main findings of the report. With access to funding being the top challenge to delivering large, complex infrastructure projects, having a strong balance sheet and showing a willingness to take equity in a project are a pre-requisite for participation in Private-Public Partnerships.
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Trends - Fundraising
According to Prequin's Funds in market service, there are currently 29 private equity vehicles in the market looking to raise an aggregate $80 billion in capital for investment in West Africa. One country, Cote D'Ivoire, in particular stands out with eight private equity vehicles looking to raise $14.8 billion for a mix of growth, venture capital and infrastructure investments.
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| Companies, People & Profiles... |
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Tony Elumelu's busy week; a seed deal, a foundation launch and a partnership with GE
Image Credit: Bloomberg
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Company News
Following the merger of Shanduka's assets with those of Pembani, the balance sheet of the combined entities now totals approximately $100 million. Shanduka brings along a sprawling portfolio of assets which some feel will be streamlined before too long as Pembani brings a sharpened focus to bear on its investment strategies.
Read more...
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People Moves
Jo Taylor has been appointed as Managing Director of EMEA Investments for Ontario Teacher's Pension Plan. This is a newly created position. Most recently, he was the Vice President for the pension fund's private capital investments, which he will continue to oversee along with the fund's investment activities across all other asset classes.
Read more...
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People Moves
Sheikh Abdullah appointed CEO of Qatar Investment Authority // zawya.com
The Emir of Qatar has appointed family member Sheikh Abdullah bin Mohamed bin Saud al-Thani as the new CEO of the kingdom's $170 billion sovereign wealth fund, the Qatar Investment Authority. He replaces Ahmed al Sayed who is becoming an adviser to the Emir.
Read more...
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People Moves
Dave Stadler, the founder of Paean Private Equity and a board member for SAVCA for the last 5 years has been appointed Chairman of the industry association, according to a press release on their website. He replaces Emile du Toit, the Head of Infrastructure Investments as Harith General Partners, who stepped down in October 2014.
Read more...
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People News
Elumelu spells out hopes for $100mln entrepreneurship program // wsj.com
Tony Elumelu, the Chairman of pan-African investment company Heirs Holdings has launched the Tony Elumelu Foundation, a "$100 million endowment to encourage the maturation of African entrepreneurs." The plan aims to provide 10,000 African entrepreneurs over the next 10 years with seed capital and support to turn their ideas into sustainable businesses.
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Chief Strategy Officer for the African Development Bank
Based in Abidjan, Cote d'Ivoire
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Partner, Africa Investments at LeapFrog Investments
Based in Johannesburg, South Africa
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Senior Legal Adviser for Old Mutual Investments
Based in Cape Town, South Africa
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Investment Director for Pan African Investment fund
Based in London, UK
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Director, LeapFrog Labs at LeapFrog Investments
Based in London, UK
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Director, Value Creation at LeapFrog Investments
Based in London, UK
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Infrastructure Investment Analyst for the IFC
Based in Lagos, Nigeria
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Junior Private Equity Research Analyst for AVCA
Based in London, UK
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Head, Institutional Distribution for International Investment Bank
Based in Johannesburg, South Africa
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Associate for Global Private Equity firm
Based in South Africa
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International Forum on Islamic Finance, Sudan
Khartoum, December 9th to December 10th, 2014
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FT Frontier Markets Summit
New York, December 10th, 2014
Read more...
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2015 SAVCA Annual Private Equity Conference
Stellenbosch, February 12th to February 13th, 2014
Read more...
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2nd Annual Infrastructure Project Financing Africa
Cape Town, March 2nd to March 4th, 2015
Read more...
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Global Private Equity Conference
Washington, DC, May 11th to May 14th, 2015
Read more...
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Africa Financial Services Investment Conference
Brighton, May 12th to May 15th, 2015
Read more...
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We hope you found the digest to be a useful summary of the major happenings in Africa's private capital markets last week. We'd love it if you shared it with colleagues and business partners. They can sign up for free here.
Best wishes for a productive week - if you have any tips, suggestions, questions or comments, please get in touch.
All the best,
- Allan
Allan Cunningham
Editor & Publisher
AfCD | Africa Capital Digest
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