Weekly Wrap, March 2nd, 2015; LeapFrog, Amethis, 8 Miles and more make private capital news

The Week in brief…March 2nd, 2015

Two private equity deals involving Mauritius-based companies made the headlines in Africa last week.  In the first, LeapFrog Investments wrote a $25 million check from their recently raised, $400 million second fund to take a stake in AFB Mauritius, a financial technology company.  Operating under the brand afb, the company offers consumers mobile-phone access to insurance, credit and savings products and by partnering with mobile operators and over 400 retail outlets, it services over one million people in several countries including Kenya, Ghana and Zambia.  Mobile and retail telephony is exploding across sub-Saharan Africa and rapidly outstripping traditional banking channels, making a compelling rationale for the deal.

In the second financial services sector deal, Amethis Finance announced that it is investing approximately $19 million for a 17% stake in Ciel Finance, the newly-created banking and financial services arm of Ciel Group, one of Mauritius’s leading diversified family businesses.  According to the press release, the two companies expect Amethis’s stake to increase to 24.9% later in 2015, following the planned transfer of Madagascar’s second largest bank, BNI, from Ciel Group to Ciel Finance once regulatory approval has been granted.

In another financial services sector deal, private equity firm 8 Miles has acquired Keystone Bank’s 42% stake in Orient Bank, a medium-sized commercial bank in Uganda.   Deal valuation and terms were not reported.  According to 8 Miles Partner Hemen Shah, the country’s growing economy and underbanked population made for an attractive investment opportunity.  Meanwhile across the border in Kenya, Phatisa’s Pan African Housing Fund, (PAHF), is partnering with Africa Reit and investing $3 million in a residential housing development in the Karen-Langa’ta suburb of Nairobi.  The development will help satisfy demand for affordable housing from young adults in an area of acute residential shortage.

Former Egyptian private equity firm-turned-investment holding company Qalaa Holdings continues its process of reorganization.  Last week it announced that it is planning to raise $222.4 million through a rights issue to allow it to further expand its stakes in the subsidiaries it plans to retain.  Over the last few weeks it has either mulled the disposal of some portfolio assets or exited others as it implements its plan to refocus on this core activities.  The company says it expects to return to profitability later this year.

Ascent Capital Africa announced a new investor for their Rift Valley Fund last week.  Kenya’s Nation Media Group’s staff pension fund is committing $1 million to the projected $60 million fund.  What’s notable about the news is that it marks one of the rare occasions where local pension funds make an allocation to the private equity asset class.  The Rift Valley Fund which targets investments in the East African region held its first close at $50 million in 2014.

Investor interest in sub-Saharan sovereign debt is still showing significant strength.  Last week’s $1 billion bond issue from Cote d’Ivoire received $4 billion in orders.  The bonds will have an average maturity of 12 years and yield 6.625%.  The issue is the country’s second dollar-denominated bond since it defaulted on its debt in 2011 as it became embroiled in civil war.  As we mentioned last week, a number of other African countries are lining up to tap the international debt markets.  With all the warnings for both country governments and investors about the risks around rising indebtedness, Cote d’Ivoire’s success will be encouraging to them.

There were a number of other interesting articles and opinion pieces last week.  One of the world’s largest Free Trade Areas looks set to get its start in 2017 with the proposed combination of four sub-Saharan regional trading blocs.  The area will integrate a market of 26 countries with more than 600 million people, representing some 58% of Africa’s total GDP.  In other news, the oil price slump is crimping Africa’s sovereign wealth fund development and forcing them to look at diversifying their asset base to boost returns.  And finally, some interesting content from a couple of regional private equity and venture capital associations; AVCA’s published a private equity data tracker providing us with a snapshot of private equity activity in Africa from 2007 to 2014.  It showcases the volume and value of deals continent-wide, as well as by individual sector. And SAVCA has posted some video content from its annual conference held in Stellenbosch in mid-February. It’s a good opportunity to get some insight into the investment thoughts and directions of some of the delegates who were in attendance.

As always, you can review these and other stories by clicking through to this week’s issue of Africa Capital Digest.

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