Massive increase in M&A deal value in Sub-Saharan Africa in the first half of 2021

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Massive increase in M&A deal value in Sub-Saharan Africa in the first half of 2021

By Mike van Rensburg, Partner, Corporate/M&A Practice, Baker McKenzie Johannesburg

There were 333 M&A deals announced in sub-Saharan Africa (SSA) in the first six months of 2021 (H1 2021), valued at USD 57.7 billion, according to Baker McKenzie’s analysis of Refinitiv data. When compared to the same period last year (H1 2020) this amounted to a 14% increase in deal volume and an astounding 576% increase in deal value. H1 2020 recorded 293 M&A deals with a deal value of USD 8.5 billion.

Last year was a relatively difficult year for investors in Africa, with considerable uncertainty. Pandemic impacts had a limiting effect on numerous sectors and many deals had to be postponed as a result. The boost in M&A deal value in 2021 is, in part, due to a post-COVID boom, where last year’s postponed and delayed transactions were able to proceed in the first half of 2021. The African Continental Free Trade Area (AfCFTA) has also led to increasing investor interest in SSA as new markets open and cross border transactions become more streamlined and efficient. Further, China’s ongoing interest in Africa, a commitment from the European Union to strengthen partnerships with Africa, the United Kingdom’s new trade agreements with numerous African jurisdictions, and a renewed Africa focus from the United States under President Biden, have all contributed to improved investor sentiment across the region.

Sectors

The highest volume of transactions in H1 2021 were in the materials (33 deals), financials (26 deals), energy and power (24 deals), high technology (14 deals) and telecommunications (nine deals) sectors. The sector with the biggest increase in deal volume was telecommunications, which reported an 800% increase from one deal announced in H1 2020 to nine deals in H1 2021. Deals in the energy and power sector increased from 10 in H1 2020 to 24 in H1 2021, an increase of 140%, and transactions in the financial sector increased by 136% from 11 in H1 2020 to 26 in H1 2021.

Materials

The pandemic impacted all aspects of the materials sector, including the minerals and mining industry, which saw disruption to all parts of the mining value chain. However, the increase in commodity prices, rising demand as a result of supply issues caused by pandemic bottlenecks, as well as the growing reliance on certain metals used in green products, have all contributed to good growth in the sector in H1 2021. Overall, the industry appears to have proven resilient to COVID-19, with many mining houses back in full production quicker than expected. The sector’s already strong commitment to Environmental Social and Governance (ESG) also appears to have been reinforced, most notably by ongoing environmental concerns and the social challenges experienced by employees and surrounding communities during the pandemic.

Financials

Following the establishment of AfCFTA on 1 January 2021, financial institutions in SSA have an important role to play in facilitating trade between the multitude of diversified economies with different financial systems. The financial sector is leading the way in developing new technologies, such as artificial intelligence systems, advanced analytics and digital trade finance platforms, that will assist new financial processes and facilitate demand for capital, allowing market participants to be able to capitalise on the opportunities that AfCFTA will bring. This increased demand for new financial products and services has led to an increase in investment in the financial sector in SSA in the first six months of the year, with a corresponding increase in the volume of both inbound and outbound technology deals.

Technology

African consumers have shown a growing reliance on technology across multiple platforms, even well before the pandemic struck. The growth of the continent’s digital economy has naturally been accelerated by the pandemic and this unabated demand for technology has caused extensive cross-sector disruption, with the financial, energy, transport, retail, health and agricultural sectors all seeking opportunities to expand their tech infrastructure in order to acquire the necessary skills and innovation needed to keep up with demand. Fintech is also a popular tech sector for investment in Africa and specifically in South Africa, Kenya and Nigeria. There were nine inbound M&A transactions in the technology sector in the first half of this year and 13 outbound deals (up 160% from five outbound M&A deals in H1 2020). This rise in outbound M&A is the result of African tech companies’ continued targeting of offshore investments in companies that will deepen their access to new technologies, markets and talent.

Energy

Further, the demand for power is spurring on investment in the energy sector. Access to power in Africa has been hampered by the lack of access to competitive funding, the dire state of the continent’s utilities infrastructure and the need for energy policy and legislation to be adapted so that it can boost investment in the sector. Africa has a role to play in innovating smart power solutions for a post-COVID-19 world and ensuring a sustainable and diversified energy mix. The combination of the rise of cost-effective renewable energy, the decentralisation of energy production, and improvements in energy storage, smart metering and other digital technology have the potential to revolutionize the way power is generated and consumed. In Africa, the most noticeable trend has been the transition towards decentralised power solutions and solar home systems from being a niche sector dominated by NGOs, to being considered a mainstream investment focus by the big players.

Healthcare

The healthcare sector did not see any deals in the first half of this year, with many investors taking time to assess the impact of the pandemic. However, expanding access to quality healthcare services and increasing domestic pharmaceutical manufacturing capacity will continue to dominate Africa’s healthcare sector development agenda, and investment can be expected to follow in support of these objectives. Clearly, COVID-19 caused a massive spike in the already increasing demand for affordable healthcare in SSA. Technology-focused healthcare delivery models, which allow for easier access to medical advice and care, especially in Africa’s rural areas, had already begun easing the constraints of the traditional delivery model and driving further investment in digital healthcare across Africa before the pandemic hit. M&A investors in this sector usually show long term commitment, understanding of individual markets and strong partnerships with local stakeholders and governments with the aim of improving access to public healthcare.

Jurisdictions

Investors from the United Kingdom (UK) and the United States (US) accounted for the highest number of M&A transactions in the first of this year – 24 deals each for UK and US investors in H1 2021. This amounted to a 20% rise in deals from the UK compared to the same period last year – 20 deals took place in H1 2020. Investments from the United States led to a 60% increase from the same period last year, 15 deals were announced in H1 2020. Notably, Chinese investors were involved in eight deals in SSA in 2021, an increase of 300% from the two deals they undertook in the same period last year.

After Brexit, big African investors in the United Kingdom and jurisdictions in the European Union will continue to target African sectors, hoping to capitalise on new economic partnership agreements and the launch of free trade in the region. US investors will also continue to be strong M&A players in key African jurisdictions, with a Biden administration expected to further encourage investment and trade between the US and the continent. China’s increasing M&A activity in SSA is primarily due to the jurisdiction’s growing demand for high-grade natural resources, from gold and oil to copper and cobalt, needed to meet its growing industrial needs. China also has one of the strongest infrastructure construction abilities in the world and is well placed to help Africa to address its vast infrastructure gap.

ESG

No matter where investors are from or what sectors they operate in, ESG has become one of the hottest topics for businesses, their boards, their customers and their employees. While in previous years, some viewed the inclusion of ESG elements to be at the expense of returns and efficiency, among other things, this has rightly shifted to viewing ESG strategy as a prerequisite to business success, and we expect it will become an essential element of M&A investment in Africa going forward.

Nigerians High Use of Cryptocurrency and Rise in Second Citizenship Demand Symbolise Need for Greater Freedom

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Nigerians High Use of Cryptocurrency and Rise in Second Citizenship Demand Symbolise Need for Greater Freedom

 According to global cryptocurrency trading platform Paxful, Nigerians are only second to the United States when it comes to Bitcoin exchange. Fuelled by political unrest as witnessed by last year’s #ENDSars movement and a struggling economy, a crackdown from the government has done little to quell the use of Bitcoin in Africa’s largest economy.

In addition to the increasing use of cryptocurrency, there has been a surge in demand for second citizenship as Nigerians begin to look elsewhere for greater freedom. The COVID-19 pandemic has exacerbated pre-existing concerns amongst Nigerians, including corruption, high inflation, lack of opportunities and access to higher quality education and healthcare. This has led many to reconsider their future in the country. Second citizenship, similarly to cryptocurrency, provides the holder with alternative options of living and conducting business. They both can be utilised to diversify one’s assets whilst offering an insurance policy during times of crisis.

According to CS Global Partners, a London-headquartered legal advisory, St Kitts and Nevis, a small dual-island nation in the Caribbean, has seen an influx of Nigerian investors enquiring about its Citizenship by Investment (CBI) Programme. Launched in 1984, the programme is one of the longest-standing options on the market and is internationally recognised as a ‘Platinum Standard’ brand for second citizenship. Due to its vast experience in the industry, investors recognise the programme as a trusted product.

“As the world’s first CBI programme, the St Kitts and Nevis programme is also first in the industry when it comes to innovation and legislation of its CBI programme from the constant development of new investment opportunities to the passing of key legislation that raises the standards of accountability and investment protection in the entire CBI industry,” highlighted Les Khan, CEO of Citizenship by Investment Unit, for Nigeria’s Business Day.

To become a St Kitts and Nevis citizen, an applicant must make a one-time investment to the Sustainable Growth Fund. The fund option is hailed as the country’s fastest route to second citizenship, and it channels revenue generated into national development projects in many sectors, including healthcare, tourism, and education.

Once applicants successfully pass due diligence checks, they gain travel prospects to nearly 160 destinations, the right to live, work and study in the nation, along with the ability to pass citizenship down to future generations. St Kitts and Nevis also has a limited time offer that grants citizenship to a family of up to four for $150,000 rather than $195,000.

Africa: Competition in the Digital Economy 

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Africa: Competition in the Digital Economy 
By Lerisha Naidu, Partner, and Angelo Tzarevski, Senior Associate,  Competition and Antitrust Practice, Baker McKenzie Johannesburg 

Digitisation has ushered in an era of hyper-connectivity, marked by disruptive digital platforms that operate on a global scale. According to Refinitiv data, 37 cross-border merger and acquisition (M&A) deals in Africa were announced in the technology, media and communications (TMT) sector in the first half of 2021, valued at USD 768 million. The growth of the digital economy across the continent has naturally been accelerated by the COVID-19 pandemic and this unabated demand for technology has caused extensive cross-sector disruption in the financial, energy, transport, retail, health and agricultural sectors.

There is an appreciation that digital markets are characterised by, among other things, multi-sided platforms, large returns to scale and complex network effects. As a result, competition authorities are increasingly presenting novel theories of anticompetitive harm, which, unlike those in the more traditional markets, are yet to be tested.

From an African perspective, this dynamic evolution of markets presents an opportunity to drive structural transformation and development, as market participants integrate to reach consumers and suppliers that would otherwise be inaccessible. To achieve this, competition authorities must balance the importance of upholding the regulatory process with the promotion of innovation and investment.  The common themes related to merger control, abuse of dominance and cartel conduct in Africa point to the nexus between competition regulation and the digital economy.

Merger Control 

The effectiveness of merger control as a means of furthering competition policy objectives is dependent on the competition authorities’ ability to avoid two types of errors – false positives, which occur when a merger that should have been permitted is blocked; and false negatives, which occur when a merger that should have been prohibited is approved and consequently, implemented.

Competition authorities increasingly perceive false negatives as being a more probable eventuality in the context of digital transactions, suggesting that there has been inadequate enforcement in this sector. The question is whether competition authorities are adequately equipped and resourced to consider mergers in digital markets.

Market Definition 

Market definition is becoming more intricate in the evolving digital era, especially in relation to so-called zero-price markets where users of products or services do not pay money for their use, such as social networks.

Further, in market environments with two-sided platforms, the question is whether the relationship between the platform and the respective market sides can be considered separate markets or whether there is a single market. There is also the issue of whether there are circumstances under which a market can be viewed in isolation of the other side or whether the interplay between both sides ought always to be taken into account.

One of the emerging views is that because market boundaries are difficult to define and change rapidly in the case of platform markets, less importance should be placed on market definition in the competition assessment and more emphasis should instead be placed on the theories of harm and identification of anticompetitive strategies. This view is compounded by the methodological problems associated with applying traditional economic tests when defining digital markets.

Merger Thresholds 

It is commonplace for mergers to be notifiable and subject to evaluation only where the merging parties meet certain financial thresholds, usually in terms of turnover figures and asset values or market share thresholds. An unexpected consequence of the use of financial thresholds is that mergers with meaningful effects in digital markets may, in certain circumstances, fall well below the prescribed monetary thresholds, with the result that market-altering transactions are able to escape scrutiny by the competition authorities. Compounding this concern is the threat of “merger creep”, where numerous small start-ups are acquired through transactions that may appear relatively inconsequential on an individual basis but, when considered collectively, may have significant competition implications for the market.

Competition authorities argue that the traditional financial threshold-based approach to merger notifiability may need to be reconsidered and, perhaps, replaced in light of the dynamics of the digital market. South Africa is considering a combination of deal value and market share metrics in this initial assessment around whether the transaction should be compulsorily notified.

Killer Acquisitions 

A key attribute of digital markets is the acquisition of small start-ups by large firms. Start-ups often need to be acquired to access the capital required to scale-up, leading to procompetitive effects. Africa has the fastest growing tech start-up ecosystem in the world – going forward, competition authorities will likely pay close attention to determining and distinguishing between procompetitive acquisitions intended to expand or improve product offerings from those that have the object of eliminating competition – also termed killer acquisitions.

In South Africa, this concern has prompted the competition authority to apply greater scrutiny to digital transactions that would ordinarily not warrant notification, and its competition authorities recently published proposed amendments to the Small Merger Guidelines, which call for notification of small merger transactions involving digital market players based on deal value and/or the parties’ market shares.

Abuse of Dominance 

Competition authorities have identified conduct that, if undertaken by dominant firms, may result in harm to competition. In the context of digital markets, the issue is whether existing theories of harm apply to digital markets or whether new theories should be considered. In addition, it is not clear how certain abusive conduct arising in digital markets will be assessed. In terms of the existing framework, certain conduct is automatically deemed to constitute a breach of competition with no room for the advancement of procompetitive justifications, while others are analysed by reference to the effects of the conduct on competition.

 

Self-preferencing 

Self-preferencing is the act of giving preference to your products or services over those of your rivals. Dominant firms operating in two-sided markets may leverage the market power they possess on one side of the market, to gain an advantage in the other. Competition authorities have identified self-preferencing as potentially harmful competitive conduct that has the effect of entrenching dominance and excluding competitors.

Acquisition of Data 

The ability to acquire, process and analyse large volumes of data gives dominant firms a comparative advantage in the digital market. Competition authorities are concerned that firms may look to exploit user data to exclude rivals. Given its importance in the digital market, it has been debated whether data can constitute an “essential facility” and, if so, to what extent the refusal to grant access to large datasets may constitute anticompetitive conduct.

In South Africa, a dominant owner of an “essential facility” would risk abusing its dominance if it refuses to grant access to such facility to its competitors where it is economically feasible to do so. There are several difficulties associated with treating data as an “essential facility” and forcing data owners to share it with competitors such. Data is ubiquitous, replicable and varies in its value and usefulness. Also, it cannot be guaranteed that the data held by one entity is essential for the market participation of another entity.

Further, placing an onerous obligation on data-rich firms to share data may also enable competitors to reverse-engineer proprietary algorithms and, in so doing, encourage free riding.  Ultimately, this will deter investment in large-scale data-collection and innovation into data driven platforms. Additionally, obligations to transfer data to competitors may give rise to data privacy concerns.

Use of Algorithms 

There is growing concern that algorithms can result in exclusionary anti-competitive conduct and consumer harm. Potential theories of harm include the use of ranking algorithms to, inter alia, manipulate consumer and limit choice, apply different pricing/terms to different categories of consumers; and manipulate platform ranking to exclude rivals.

It is not clear how anti-competitive algorithms can be detected or assessed within the existing framework. In addition, competition authorities are faced with conceptualising whether algorithms that result in more automated processes, can constitute “unilateral” conduct for purposes of the assessment of abusive conduct.

Cartel Conduct 

Competition authorities are concerned that digital markets have altered the nature of interactions and are questioning whether the use of algorithms can facilitate agreements or coordination on price and other trading conditions in a more efficient way than traditional human interactions.

One of the challenges for antitrust authorities would be demarcating cartelistic flow of virtual information resulting in tacit collusion from mere market transparency and machine learning adaptation to such detected market trends.

Convergence of Competition and Social Policy 

Governments around the world have decisively shifted away from the purely economics-based origins of competition regulation, turning instead towards a model that acknowledges and, to an extent, caters to the broader needs of modern society. With digital innovation opening up the economy to many individuals and businesses that were, until recently, excluded from meaningful economic participation, it is likely that public interest imperatives will play a crucial role in the development and implementation of competition law in the digital space.

 

Are Data Centers in East Africa Ready for Digital Demands?

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Are Data Centers in East Africa Ready for Digital Demands?

By Carol Koech. Country President, Schneider Electric East Africa.

NAIROBI, KENYA – ( AfricaNewswire.net) – Last year was different for many obvious reasons. But one habit which hasn’t changed is our need and use of everything digital. The pandemic has accelerated our use of digital channels, both as individuals and as businesses. We’re using more streaming services, increasing our time on social media, conversing over Zoom and Teams, and using online platforms to learn.

All of these activities are dependent on our data centers. These spaces, which are home to vast computing power and storage, are today’s utilities. They’re as essential as our roads and our hospitals. And we’ve got to ask ourselves if we have the necessary infrastructure to ensure that the data will continue flowing.

Data centers are being utilized more than ever. For example, the world’s largest internet exchange facility, DE-CIX Frankfurt, saw on-average data traffic increases of 10 percent in early March last year as people started staying at home. Our switch to video conferencing, which has seen triple digit growth, is another example of changing habits and the need to understand how our data usage will affect our data centers.

Our demand for faster speeds and better connectivity isn’t going to lessen. The good news is that data center spending is going up; Gartner is estimating that end-user spending on global data center infrastructure is projected to reach US$200 billion in 2021, up 6% from 2020. The landscape in East Africa is no different. In Kenya for example, the country has a total number of 43.7 million Internet/data subscriptions according to the Communication Authority of Kenya; this coupled with the country’s youthful demographics means that data demand will rise rapidly, which will require more data centers. And we can already see investments in this space.

We have a moment to plan out how best to design and build data centers to make them future-ready, more energy efficient and sustainable. Sustainability matters, given how much power data centers consume – up to three percent globally – and the energy cost savings an efficient data center can achieve.

So, how do we build a future-ready data center? There’s four points we have to bear in mind to ensure that our data centers are able to cope with our data demands.

Let’s begin with Time-to-market. Data centers can take years to build, and we don’t have the time to spare. But there are steps we can take to reduce time-to-market. Firstly, look at efficient, modular, pod or row data centers solutions. One idea is to design your pod data center to your specific requirements, put your pod housing onsite and roll your IT rack and equipment configuration into it. You can add pod data centers quickly and incrementally at a lower cost when compared with a full-blown facility.

The second issue to tackle is that of people. We’re facing a talent issue; there’s a shortage of data center professionals, both regionally and globally. But there are steps you can take to minimize this. Data center owners can improve staffing efficiency by augmenting data center teams with more digital services and management software, which can monitor and optimize performance in real time. Digital services and cloud-based management software can speed diagnostics and lower costs whilst also providing the visibility and tools to drive operational and process efficiency. When combined together, management software and digital services drives efficiencies not just at the equipment level but at the people level by streamlining processes.

Now, let’s talk capital spending. Data centers require significant investment, both to build and modernize. There are ways to reduce up-front costs. For example, smart data center owners are looking to modular, scalable uninterruptible power supplies (UPSs). A scalable UPS architecture enables data center operators to take a “pay-as-you-grow” approach, investing in additional power capacity only when needed and avoiding a scenario where costly up-front oversizing is required to address perceived long-term growth needs.

New technologies are also helping to reduce ownership costs. One exciting development is lithium-ion technology. Lithium-ion batteries have a 10-to-15-year real-life expectancy. They are small, light, and easily installed in multiple orientations. Lithium-ion batteries are indifferent to extreme temperatures and produce unlimited deep-cycle discharges; they thrive during power fluctuations, brownouts, and blackouts. Their usage is going to markedly reduce the total cost of ownership.

Finally, let’s talk design process. Digital design tools that use common reference designs that account for materials, costs, and performance characteristics can reduce both the needed to and the costs associated with amending or changing a data center. These tools make use of tried and tested designs, which will lower risk whilst allowing for optimizing how data centers operate. Reference designs standardize equipment across facilities, enabling staff to work seamlessly across locations. Companies like us are also happy to share thousands of reference designs with customers.

We’re in a unique situation, where the pandemic has underlined our utter reliance on data. Data centers are as important to us as any other fundamental service. But, just like with any other utility, we have to plan ahead to ensure that we have the capacity to meet our needs now and into the future. Let’s work smart and ensure that we have the regional data center capacity to both fuel our economic growth, as well as allow us to share our messages with loved ones.

Deal value increases in South Africa and Nigeria in the first half of this year, M&A in Kenya decreases slightly  

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Deal value increases in South Africa and Nigeria in the first half of this year, M&A in Kenya decreases slightly  

Marc Yudaken, Partner in the Corporate/M&A Practice at Baker McKenzie

Johannesburg, 19 July 2021 – Baker McKenzie’s latest analysis of Refinitiv data shows that the value of mergers and acquisitions (M&A) in the first half 2021 (H1 2021) soared in South Africa, and that deal value also increased in Nigeria in the first six months of 2021, but Kenya experienced a slight decrease in both deal value and volume in H1 2021. 

 South Africa 

 The value of M&A transactions in South Africa in H1 2021 amounted to USD 52 billion, with 169 deals announced in the period. Compared to the first half of 2020, transactions volumes decreased by 8% but deal value increased by 958% in the first half of 2021. 

 Refinitiv data shows that the volume of domestic transactions increased slightly to 80 deals, a 10% increase year on year (Y-o-Y). Domestic transactions in South Africa in H1 21 were worth USD 46.7 billion, a dramatic 2148% increase year-on-year (Y-o-Y). Further, cross-border transactions increased 17% Y-o-Y to 89 deals, with deal value surging 251% to USD 5.4 billion. 

According to Marc Yudaken, Partner in the Corporate/M&A Practice at Baker McKenzie in Johannesburg, “Despite the excellent start to 2021, the unrest in South Africa threatens to impact the positive strides made in terms of foreign investment into the country in the first six months of this year. For the sake of South Africa’s post-pandemic recovery, the turmoil engulfing our country has to be ended before investors are forced to seek less risky alternatives. Foreign investors will only ramp up their investments if they are confident their assets are safe. They need political and economic certainty and must have confidence that there is rule of law in the countries in which they invest.”

High technology companies were the primary targets for inbound deals in South Africa, with 12 transactions, representing a 200% in deal volume Y-o-Y and a deal value of USD 160 million, an increase of 1997% when compared to the same period last year. 

 Wildu du Plessis, Head of Africa for Baker McKenzie, explains, “It’s no secret that African consumers have shown a growing reliance on technology across multiple platforms, even well before the pandemic struck. The growth of the digital economy across the continent has naturally been accelerated by the pandemic and this unabated demand for technology has caused extensive cross-sector disruption, with the financial, energy, transport, retail, health and agricultural sectors all seeking opportunities to expand their tech infrastructure in order to acquire the necessary skills and innovation needed to keep up with demand. Fintech is also a popular tech sector for investment across Africa and specifically in South Africa, Kenya and Nigeria, with health-tech, mobility and agritech also attracting growing interest.  

 “It looks like South Africa is leading the way in terms of high value deals in the tech sector and we expect this tech M&A trend to continue as the continent gears up to operate in the post-pandemic new normal,” he says. 

 The United States was the primary investor for South African companies, with 16 deals (an increase of 60% Y-o-Y) valued at USD 496 million (an increase of 340% Y-o-Y). This was helped by TPG Capital LP’s USD 200 million acquisition of Airtel Africa Plc-Mobile (telecommunications) announced in March 2021. The largest inbound deal in H1 2021 was Temasek Holdings (Pte) Ltd’s (Singapore) USD 500 million acquisition of Leapfrog Investments (financials), also announced in March 2021. 

  Nigeria 

Twenty-eight deals were recorded in Nigeria in the first half of 2021, and deal value amounted to USD 1 billion. Compared to the first half of 2020, transaction volume rose by 17% and deal value soared by 267%. 

 Refinitiv data reveals that domestic transactions decreased by 15% to 11 deals, but deal value increased by 342% Y-o-Y to USD 726 million. Cross-border transactions increased 13% Y-o-Y to 17 deals, with deal value rising 8% to USD 296 million.  Financial companies were the prime targets for inbound deals, with four transactions showing a 100% increase Y-o-Y and deal value of USD 10 million, a 327% increase year on year. 

 Once again, the US served as the primary investor for Nigerian companies, with four deals worth USD 13 million. The largest inbound deal into Nigeria in H1 2021 was Mwendo Holdings BV’s (South Africa) USD 182 million acquisition of Blue Lake Ventures Ltd (Media and Entertainment), announced in June 2021.

Du Plessis notes that while US investors have shown interest in Africa for some time, under President Biden, the general consensus is that US engagement with African countries is focusing on strengthening relationships in a strategic, co-operative way. It has been noted that Biden will continue with successful bipartisan programmes implemented by his predecessors, as well as further encouraging US trade and investment in the continent. Considering that US companies were the top investors in two of Africa’s largest economies in the first half of 2021, dealmakers are clearly comfortable with Biden’s approach to Africa.

Kenya 

In H1 2021, deal making in Kenya decreased by 14% with 18 deals in the period and deal value decreased by 96% to USD 11 million. Financial companies were the prime targets for inbound deals with five transactions, representing a 150% increase Y-o-Y, with deals valued at of USD 11 million, a 78% decrease Y-o-Y.  

 Nigeria served as the primary investor for Kenyan companies with three deals. The largest inbound deal into Kenya in H1 2021 was Liberty Holdings Ltd’s (South Africa) USD 8 million acquisition of Liberty Kenya Holdings Plc (insurance), announced in March 2021. 

 Du Plessis adds that the decrease in M&A volume and value in Kenya in H1 2021 is expected to be temporary as the country continues to implement pandemic recovery policies, including a vaccine rollout strategy for the adult population with a planned completion date of mid-2022. The country’s reputation as an East African investment hub, in addition to its strong technology capabilities, means that it is just a matter of time before Kenya takes up its rightful place as one of the top target countries for technology transactions in Africa.” 

Decentralised finance may be the panacea for filling Africa’s Investment Gap

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Decentralised finance may be the panacea for filling Africa’s Investment Gap
by Pomy Ketema, Counsel, Baker McKenzie, New York
African countries continue to face substantial financing gaps as they take on projects of all sizes in pursuit of development. To tackle the slowdown in foreign direct investment since the onset of the pandemic, some African countries are actively courting their diaspora and looking for pockets of cash-rich businesses around the continent.
Each country is on its own development trajectory. However, continental and regional initiatives, such as the African Continental Free Trade Area (AfCFTA), are being harnessed as broad-based wealth-creation vehicles. The AfCFTA, which took effect on January 1, 2021, aims to create an integrated continental market by reducing trade barriers among its 54 signatory countries. The trading pact is still under implementation due to the substantial undertaking involved in integrating a massive economically fragmented continent. The AfCFTA Investment Protocol, one of the many legal instruments that make up the agreement, is still under negotiation.
Even at this stage, the benefits of the agreement are undeniable as institutional capabilities designed to alleviate hurdles to economic development are being deployed at record pace. It will take some time to work through all of the practical and regulatory issues that arise in cross-border trade and investments. Fortunately, the challenges of implementation have not dampened the appetite of Africa-based businesses to expand into other African markets. This trend can be seen in recent large investments going into refineries and pipelines, manufacturing facilities, logistics, telecommunications and technology. Partial backing for such projects has come from the global financial and investor community.
Africa’s technology industry has been a lubricant in institutional building in all corners of the continent. Africa’s top ten economies, making up a combined GDP of over USD two trillion, are already embracing blockchain technology to build capabilities in agriculture, logistics, procurement, education, banking and other sectors. Decentralized finance (DeFi), which is in its infancy, presents immense opportunities for the African Union to further its vision for development through the creation of one integrated, digitalized capital market. A DeFi solution could accelerate the continent’s economic integration by facilitating a seamless flow of capital.
This is not to say that there has not been any effort in this regard. A project to link all Africa-based capital markets has been in progress for some time. This is a good first step. However, traditional capital market systems, which are still based largely in the physical world, are increasingly becoming less competitive when compared to blockchain-enabled financial platforms that connect sellers and buyers directly and execute many functions via smart contracts. Recent successful high-profile bond offerings on such platforms have demonstrated the scalability of the technology and, even in highly regulated markets like the U.S., investors locked into illiquid investments are already benefitting from blockchain-enabled exchanges that facilitate trading of securities among parties that are subject to lower registration and disclosure requirements under securities laws.
As the technology takes hold, it seems logical that the world will be migrating to more agile capital markets platforms that are accessible anytime, anywhere. While a country-by-country adoption makes sense at this stage, selective uses in trading blocs should not be overlooked as such technologies can deliver on the policy objectives of development agreements like the AfCFTA.
DeFi has raised novel regulatory and tax issues, especially in the developed world where long-standing rules and agencies that regulate securities and financial products based on clear categorizations of assets, activities and participants have struggled to adjust to new digital asset classes and ecosystems. These challenges are especially acute in cross-border activities and, thus far, laws that have extraterritorial reach and international collaborations among enforcement agencies have been used to fill the gap in this borderless environment. As DeFi uses continue to expand, we should expect to see a range of domestic and multilateral regulatory developments in consumer protection, tax compliance, prevention of illicit finance and data privacy, among others.
Africa’s journey in the capital markets space could be different. Although the majority of African countries have stock exchanges, most have limited listings. Accessibility has long been cited as one of the major hurdles to participation. Despite the regulatory challenges, DeFi presents immense benefits by streamlining the listing and other processes, broadening the investor base, and providing bespoke solutions to administrators. To that end, serious consideration should be given to including in the AfCFTA Investment Protocol ground rules for trading in securities issued by governments and businesses in member states. Such provisions could be instrumental in providing harmonized rules for mobilizing capital needed for large projects within the continental investor community and their global alliances, and could pave the way for member states to open up their markets to the region via cost-effective alternative platforms. Consistent with the over-arching theme of the AfCFTA agreement, the primary regulators and enforcement agencies in this space should be those belonging to the member states themselves.
While the borderless nature of Defi raises the stakes for policymakers, the technology itself provides solutions to many of the underlying concerns. Negotiations concerning outstanding AfCFTA protocols should take into account the potential of this industry to transform the continent. For those companies in the DeFi industry looking for opportunities to deploy their technology and knowhow beyond cryptocurrencies, Africa holds tremendous potential. In the fourth industrial revolution, Africa could be the frontrunner in creating a virtual universe.

Green Gold Farms raises $1.6 million to tackle Ghana’s food import problem and poverty in the North

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Green Gold Farms raises $1.6 million to tackle Ghana’s food import problem and poverty in the North

 

Women farmers on Green Gold Farms' Sekpe farm
Women farmers on Green Gold Farms’ Sekpe farm

 

Green Gold Farms is tackling the problems of poverty, lack of economic opportunity, and malnutrition and related illnesses in Northern Ghana through large-scale agricultural production. Despite abundant amounts of land, diverse agro-ecological richness and plentiful available labor, the majority of the two million people living in Northern Ghana are food-insecure. Limited economic opportunities leave many precariously close to the poverty line of $1.90 per day.

Ghana currently imports over US$2.4 billion worth of food annually. Such a high food import bill contributes to the country’s large trade imbalance, depletes its foreign exchange reserves – critical for paying off foreign debt, and essentially exports jobs overseas. Additionally, imported food is typically more expensive and of lower quality. For example, some imported frozen poultry products have been sighted to be over ten years old and preserved with harmful substances, which are toxic and known to cause serious health problems.

“It’s a shame that we have so much rich, arable land in this country, but are unable to put it to productive use,” says Green Gold Farms’ CEO, George Boakye Sarpong. “Most farmers don’t have access to capital or modern farming equipment, which would enable them to scale their production. Thus, they remain subsistence farmers, perpetually trapped in the cycle of poverty. As a result, we [Ghana] spend scarce resources importing food that we should be growing domestically.”

The capital raised will allow Green Gold Farms to invest primarily in capital equipment to scale-up production of organic and non-GMO crops such as maize and soybeans; generate large numbers of well-paying, sustainable jobs; and launch an outgrower program for smallholder farmers. The company has partnered with local communities to secure over 60,000 acres of fertile land in the Northern and Eastern Regions of Ghana. The company will use its huge land concessions to engage in commercial-scale food production and, in the process, create tens of thousands of jobs, boosting the regional and national economies. These land partnerships have already created over 400 well-paying jobs, the bulk of which have gone to women and youth from these partner communities.

Commenting on the deal, Grace Anim-Yeboah, Business Banking Director at Absa Bank Ghana, noted that the bank is committed to its critical role being an agent of economic change, growth and development. “We are excited to be playing a key role in shaping Ghana’s agricultural sector and connecting fast-growing companies, such as Green Gold Farms, with our financial resources and services. This will help the company fulfil its bold ambitions of revitalizing commercial farming in Ghana sustainably.”

Green Gold Farms is also developing an innovative outgrower scheme that allows smallholder farmers to lift themselves out of poverty by training them on regenerative agriculture best practices, enabling them to produce on larger plots of land, and providing them with all of the necessary inputs and mechanization. Over time, the company aims to cede its primary production to these smallholder farmers and move up the value chain into processing and, eventually, into manufacturing.

The company is attempting to develop and scale a sustainable food production model in partnership with the public and private sector that can be applied to developing countries around the world to help lift billions of people out of poverty, and to do it in an environmentally sustainable manner.

About Absa Bank Ghana Limited
Absa Bank Ghana Limited is one of Ghana’s leading financial institutions offering an integrated set of products and services across Corporate and Investment Banking; Business Banking with solutions for Medium, Small, Micro Enterprises (MSMEs) and Start-ups; and Retail Banking. Absa Bank Ghana is part of Absa Group Limited, one of Africa’s largest diversified financial services groups, with a presence in 12 African countries and representative offices in London and New York.

About Diaspora Capital
Diaspora Capital is a US-based social impact investment group that leverages “citizen capital” from the Ghanaian diaspora and friends of Africa to provide alternative access to capital and technical assistance to small and medium-sized enterprises (SMEs) in Sub-Saharan Africa to create jobs, to improve livelihoods and to contribute to poverty alleviation.

About Channel Ventures
Channel Ventures is a digital trade finance company with core operations in Africa. Channel Ventures offers working capital solutions to small and medium sized enterprises (SMEs) engaged in cross-border trade and those who generally need purchase order financing in emerging markets, with an initial focus on Africa.

EPMT Fund
End Poverty Make Trillions Fund is an evergreen fund that invests in communities with the lowest incomes with the aim of eradicating poverty. EPMT’s Managing Partner, Darryl Finkton, Jr., a Harvard University and Oxford University graduate, where he was also a Rhodes Scholar, launched the billion-dollar EPMT fund – after careers in management consulting, healthtech VC and hedge fund management – to fund entrepreneurs from disadvantaged or underrepresented backgrounds who are working to solve the most pressing problems facing their communities.

SOURCE Green Gold Farms

CONTACT: Jasmine Johnson, Green Gold Farms Ghana, +233(0)271427846, [email protected]

Related Links

greengoldfarmsghana.com

Nigeria: new data from EFInA shows financial inclusion growth

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Nigeria: new data from EFInA shows financial inclusion growth

The EFInA Access to Financial Services in Nigeria 2020 Survey shows that while more Nigerian adults are financially included, National Financial Inclusion Strategy targets were not met.

For the first time, more than half of Nigerian adults are using formal (regulated) financial services, according to newly published data from EFInA (Enhancing Financial Innovation & Access). The EFInA Access to Financial Services in Nigeria 2020 Survey shows that 51% of Nigerian adults are using formal financial services, such as bank, microfinance bank, mobile money, insurance, or pension accounts, up from 49% in 2018. This has largely been driven by growth in banking, with 45% of Nigerians banked in 2020, up from 40% in 2018.

Growth in digital financial services and agent banking highlights opportunities to drive faster progress toward financial inclusion, particularly for excluded groups such as women, rural and Northern Nigerians.

Although financial inclusion has grown in the past decade, Nigeria fell short of the National Financial Inclusion Strategy targets for 2020. The country had aimed to reach 70% of Nigerians with formal financial services by 2020; the actual figure was 51%. The strategy also set targets for overall financial inclusion, which counts Nigerians that use either formal financial services or informal financial services that are not nationally regulated, such as savings groups. The overall financial inclusion target was 80% by 2020; EFInA data shows that only 64% of Nigerian adults were financially included by the end of 2020. This means that 36% of Nigerian adults, or 38 million adults, remain completely financially excluded.

In addition, large gaps in financial access remain for some of Nigeria’s most financially excluded groups. Women continue to be more financially excluded than men, with only 45% of women using formal financial services, compared with 56% of men. Adults in Northern Nigeria continue to be significantly more financially excluded than those in the southern zones, and rural adults are still more excluded than those in urban areas. Young adults, between the ages of 18-25, are significantly more likely than older adults to be financially excluded.

In her goodwill message, Aishah Ahmad, Deputy Governor, Financial Systems Stability (FSS), Central Bank of Nigeria (CBN), said:

“Financial inclusion is a strong lever for bridging income inequality, combating poverty and preserving social harmony. The CBN has accordingly been at the forefront of the efforts to drive financial inclusion in Nigeria by championing the development & implementation of Nigeria’s National Financial Inclusion Strategy led by the CBN Governor.”

The Deputy Governor and Chair of the Financial Inclusion Technical Committee further remarked:

“Despite progress achieved to date, critical groups remained excluded including women, rural dwellers and citizens in the northern area. To address the issue with women, CBN launched a Framework for Advancing Women’s Financial Inclusion in Nigeria in 2020 and is leading the industry to implement the framework, which we expect to lead to significant increase in women’s financial inclusion in Nigeria.”

Ashley Immanuel, CEO of EFInA, said:

“At our current rate of progress, we will not reach the 2020 financial inclusion targets until around 2030. However, we can reach these targets much faster if we follow paths taken by other African countries that have seen rapid financial inclusion growth due to mobile money. EFInA’s Access to Financial Services in Nigeria Surveys show that use of digital financial services and agent networks started to grow significantly between 2018 and 2020.

“Phone ownership has also increased, with 81% of Nigerians now owning mobile phones. Now is the time to build on this initial progress and drive faster financial inclusion growth through digital financial services such as mobile money. We can do this by creating an open and level playing field for a wide range of providers, creating the right environment for fintech to thrive, and encouraging partnerships between different providers.”

Financial inclusion can benefit individuals, families, and businesses, supporting key outcomes such as GDP growth. For the first time, the EFInA Access to Financial Services in Nigeria 2020 Survey measured the financial health of Nigerian adults, finding that only 27% of Nigerian adults are considered financially healthy, while 39% are financially coping and 34% are financially vulnerable. Nigerians require a range of useful, affordable, and accessible financial services to meet all of their needs. Many Nigerian adults continue to rely on different types of providers to meet those needs; while use of banks increased in 2020, so did use of unregulated services such as savings groups and village associations.

The EFInA Access to Financial Services in Nigeria Survey highlights significant market opportunity for financial service providers to address Nigerians’ financial needs. For example, only 2% of Nigerian adults are insured, but 18 million uninsured adults say they would be interested in microinsurance. Only 7% of Nigerian adults have pension accounts, but 24 million adults without pensions are making regular savings for their retirement. While only 45% of Nigerians are banked, 35 million unbanked Nigerians own mobile phones and could be reached with mobile money.

Gail Warrander, Economic Development Team Leader, Nigeria for the UK’s Foreign, Commonwealth & Development Office, remarked:

“The EFInA Access to Financial Services in Nigeria 2020 Survey shows that Nigeria has made progress on financial inclusion but there’s still a way to go. The report models how the journey to the financial inclusion goal can be speeded up by encouraging the scale up of mobile money.

“I firmly believe that the majority of those excluded, especially women and youth, could then enjoy the convenience of financial services, including using remote payments systems. This survey is full of rich data for policy makers, development partners and financial services companies to use.”

SOURCE British High Commission Abuja

St Kitts and Nevis Formalises Diplomatic Relations with Cameroon, Deepening Relations with African Continent

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St Kitts and Nevis Formalises Diplomatic Relations with Cameroon, Deepening Relations with African Continent

LONDON, June 16, 2021 /PRNewswire/ — In a brief ceremony at the St Kitts and Nevis High Commission in London, His Excellency High Commissioner Kevin M. Isaac was joined by his Cameroonian counterpart Mr. Albert Njoteh Fotabang to sign a joint communique forming diplomatic relations between the two nations. The diplomats discussed areas of mutual interest including promoting cultural exchange and enhancing support for small states in international organisations. Additionally, they agreed upon moving towards establishing a visa waiver, enabling citizens to travel freely between the countries.

The signing between St Kitts and Nevis and Cameroon aligns with the government’s commitment to further relations with the African continent, bridging the gap between the regions and emphasising their shared history and challenges. The last few years has seen St Kitts and Nevis commence ties with countries including Mozambique, Djibouti, Rwanda, Sao Tome and Principe amongst many others. Minister of Foreign Affairs, Mark Brantley, praised the signing as a long-time advocate for strengthening diplomacy between Africa and the Caribbean.

High Commissioner Dr. Kevin M. Isaac also spoke about what the signing means for the relationship between the regions: “We are delighted to have formalised diplomatic relations with Cameroon. We know that building new relationships and deepening existing ones are key elements of Government’s policy. We are also confident in the belief that in working together to bridge the geographical divide, we will bring about tremendous opportunities for our citizens on both sides,” he told CS Global Partners.

In recent decades, St Kitts and Nevis has become a popular destination amongst African investors seeking second citizenship. Through its Citizenship by Investment Programme, the dual-island nation has been welcoming high net-worth individuals and their families to become citizens once making an investment into its Sustainable Growth Fund. As the oldest CBI Programme on the market, St Kitts and Nevis offers an attractive investment route that guarantees citizenship within two months, granted that applicants can successfully pass the necessary due diligence checks.

Gaining St Kitts and Nevis citizenship comes with a wealth of opportunities including alternative business prospects, access to higher quality education and healthcare and a second home in a stable democracy committed to the rule of law. Most significantly, investors gain visa-free or visa-on-arrival entry to nearly 160 countries and territories, increasing global mobility and removing the bureaucratic hassle associated with applying for visas.

“CBI has long been considered an option amongst wealthy Africans. Lengthy and often hard to obtain visas mean that travel has generally been a challenge for most African passport holders. By obtaining dual citizenship, you are able to diversify your options and gain easier access to the rest of the world,” says Micha Emmett, CEO of CS Global Partners.

St Kitts and Nevis also boasts a growing economy and a stable currency pegged to the US dollar. African investors who choose to do business on the islands are privy to a number of incentives along with the knowledge that they can pass down their citizenship for generations to come, establishing a future legacy for ones family.

Implementation of cybersecurity and data protection law urgent across Africa   South Africa recently enacted cybersecurity law

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Implementation of cybersecurity and data protection law urgent across Africa   South Africa recently enacted cybersecurity law

Darryl Bernstein, Partner and Head of Dispute Resolution, and Janet MacKenzie, Partner and Head of Technology, Media and Telecommunications,  Baker McKenzie Johannesburg

The pandemic has driven home the high value of personal data to the global economy, while also highlighting its vulnerability to abuse and attack. In response, governments around the world have been reviewing their data privacy and protections laws and regulations, including in South Africa. Global cybersecurity firm Kaspersky recently noted that cyberattacks are set to rise in African countries, especially in the key financial centres of South Africa, Kenya and Nigeria. The cybersecurity firm noted that rapidly evolving digital techniques had led to an increased risk of Advanced Persistent Threats and hacking-for-hire events in Africa.

South Africa

In South Africa, the Cybercrimes and Cybersecurity Act (Act), was signed into law by South African President Cyril Ramaphosa in early June 2021, bringing the country’s cybersecurity legislation in line with global standards. The Act compels electronic communications service providers and financial institutions to act when they become aware that their computer systems have been involved in a cyber security breach, as defined by Act. They must, according to the Act, report such offences to the South African Police Service within 72 hours of becoming aware of the offence, and preserve any information which may be of assistance in the investigation. Non-compliance with this provision is a criminal offence and massive fines can be imposed.

The Act further criminalises harmful data messages, such as those that invite or threaten violence or damage to property, as well as those that contain intimate images. Data is broadly defined in the Act as “electronic representations of information in any form.” The Act also criminalises cyber fraud, extortion, forgery and the theft of incorporeal property. Also listed as an offence is the unlawful accessing of a computer system, data storage medium or personal data. Those found guilty of a cybersecurity offence face hefty fines and lengthy prison sentences of up to 15 years.

POPIA

In South Africa, data security is also governed by the Protection of Personal Information Act.  On 1 July 2021, the substantive implementation of key provisions of POPIA will become enforceable. This legislation, among other things, promotes the protection of personal information processed by public and private bodies, outlines the rights of data subjects, regulates the cross-border flow of personal information, introduces mandatory obligations to report and notify data breach incidents, and imposes statutory penalties for violations of the law.

One of the conditions for lawful processing in terms of POPIA is the use of security safeguards, which prescribes that the integrity and confidentiality of personal information must be secured by a person in control of that information. This is prescribed by POPIA in order to prevent loss, damage or unauthorised access to, or destruction of, personal information.

POPIA also creates a reporting duty on persons responsible for processing personal information, whereby they must report any unlawful access to personal information (a data breach) to the Information Regulator within a reasonable period of time. Like the Cybersecurity Act, POPIA brings South Africa in line with international data protection laws by regulating the processing of the personal information of natural and juristic persons and placing more onerous obligations on “responsible parties” that process such information.

In terms of POPIA, where there are reasonable grounds to believe that the personal information of a data subject has been accessed or acquired by any unauthorised person, the responsible party has to notify the Information Regulator, as well as the data subject, unless that person’s identity cannot be established.

The notification has to be made as soon as reasonably possible after the discovery of the compromise, considering the needs of law enforcement or any measures necessary to determine the scope of the compromise and to restore the integrity of the responsible party’s information system. The responsible party may only delay notification of the data subject if a public body responsible for the prevention, detection or investigation of offences or the Information Regulator determines it will impede a criminal investigation.

The notification must be in writing and must be communicated either via email or posted to the data subject’s last known address. The notification could also be placed in a prominent position on the website of the responsible party, published in the media; or as directed by the Information Regulator. It must provide sufficient information to allow the data subject to take protective measures against the potential consequences of the compromise.

In addition, the Information Regulator may direct a responsible party to publicise, in any manner specified, the fact of any compromise to the integrity or confidentiality of personal information, if there are reasonable grounds to believe that such publicity would protect a data subject.

An organisation that is involved in a data breach situation may also be subject to an administrative fine, penalty or sanction, or civil actions and/or class actions.

   Ghana

In 2020, Ghana similarly passed its Cybersecurity Act 2020, to oversee the country’s response to the prevention and management of cybersecurity incidents. The Act establishes the Cyber Security Authority and provides for the protection of the critical information infrastructure of the country. The Act also regulates cybersecurity activities, oversees the protection of children on the internet and seeks to develop Ghana’s cybersecurity ecosystem.

Cybersecurity and Personal Data Convention

However, data privacy laws, which govern amongst other things, data security and breaches, are currently present in less than half of African countries. Regionally, the Southern African Development Community and the Economic Community of West African States have data protection policies in place and the continent is also covered by the African Union’s Convention of the African Union on Cybersecurity and Personal Data(2014) (Convention) . As of May 2020, the Convention had only been ratified by eight out of 55 AU members (Angola, Ghana, Guinea, Mauritius, Mozambique, Namibia, Rwanda and Senegal), while 14 countries had signed but not ratified it. South Africa, Kenya and Nigeria have not yet signed the Convention.

Legislation governing the digital economy is essential to protect African citizens in terms of both their digital privacy rights and cybersecurity threats, while at the same time also ensuring that their online freedoms are not threatened. The AU has been encouraging its member states to sign the Convention and implement balanced local legislation that is fully enforceable and that respects human rights.

To facilitate this process, consultations with stakeholders in government, businesses (local and international) and organisations representing wider society, would ensure a balanced approach during the drafting of these laws. International legislation should be considered alongside local laws, given the borderless nature of the online environment, and consulting with technology experts on policy means that due consideration can be given to the specific nature of this rapidly developing sector. Considering the current rapid move to digitally-focused business models, the implementation of these legal protections and guidance has become urgent for all African countries.

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