The Growing Role of Private Equity and Venture Capital in Funding African Business

Private equity (PE) and venture capital (VC) are proving to be vital funding sources for businesses in Africa, offering capital to support their growth and expansion when commercial debt is unavailable or too expensive. Private equity firms typically invest in established businesses with a track record of generating revenue and profits, while venture capital investors will take early stage risk and support startups. These alternative sources of capital have become increasingly important, particularly during the COVID-19 pandemic and its aftermath, which has impacted traditional lending institutions and created a financing gap.

Tanzania’s Transformation Signals Great Opportunities for Investors and Businesses

Tanzania is a country with a wealth of untapped investment potential. A stable political climate, a young and rapidly growing population, and abundant natural resources well-position Tanzania for sustained economic growth. Its strategic location in East Africa makes it an ideal hub for trade and commerce. As a gateway to the broader region, it creates access to significant markets and opens even more potential investment opportunities.

Stories that Matter | May 2023


South Africa, Egypt, Nigeria, Kenya, and Morocco Hold Over 50 Percent of Africa’s Private Wealth
According to a report by Henley & Partners in partnership with New World Wealth, private wealth in Africa amounts to USD 2.4 trillion, with five cities accounting for over 50 percent of the continent’s wealth. These cities include Johannesburg, Cairo, Cape Town, Lagos, and Nairobi, accounting for 56 percent of the continent’s high-net-worth individuals (HNWIs). The report states that there are currently 138,000 HNWIs in Africa with investable wealth of USD 1 million or more, 328 centi-millionaires worth USD 100 million or more, and 23 US-dollar billionaires. South Africa is home to at least twice as many HNWIs as any other African country, accounting for 30% of the continent’s centi-millionaires. Egypt, on the other hand, accounts for the most billionaires. Dominic Volek, Group Head of Private Clients at Henley & Partners, believes that more African countries will begin to attract HNWIs by providing residence and citizenship through investment opportunities that have the potential to transform their economies.

Source: Business Insider


Africa needs USD 700 Billion of Finance for Green Energy and Metals
According to Standard Bank Group, Africa will need more than USD 700 billion in finance over the next decade to develop renewable power and mines to extract the metals required for the green energy transition. The continent’s financial institutions will not be able to provide even half of that, and most of the money will need to come from investors from elsewhere, Kenny Fihla, CEO of Standard Bank’s corporate and investment banking unit, said. “Many of the minerals required to build solar panels, lithium batteries, and wind turbines, among others, are found in sub-Saharan Africa,” Fihla said. “Our team has also quantified the amount of investment required in that space as in the order of hundreds of billions of dollars.” African governments are under pressure to extend power supply to the 600 million people – about half of the continent’s population – who currently lack electricity access. At the same time, copper and cobalt deposits in the Democratic Republic of the Congo and Zambia, lithium reserves in Zimbabwe and platinum and manganese seams in South Africa are seen as key to providing the materials needed for everything from solar panels to electric vehicle batteries.

Source: Engineering News


Africa’s Vast Potential Lures U.S. Investors in Search of Returns, Impact
Africa, for years, has struggled to attract the notice of – and money from – American pension funds. But in the past two years, U.S. pension fund trustees and other billion-dollar asset owners appear more open to investing in some of Africa’s 50-plus countries, particularly in infrastructure. Institutional investors are encouraged by a U.S. government-led geopolitical charm offensive in Africa. They are wagering on higher-risk returns amid inflation, Fed rate hikes and uneven portfolio performance at home. And pension funds may one day view Africa as a potential ESG or DEI investment destination, especially those with social impact as a portfolio goal, investors and consultants said. In the past few years, the City of Hartford Pension Commission, the City of Philadelphia’s Board of Pensions and Retirement and the Public School Teachers’ Pension & Retirement Fund of Chicago have invested USD 5 million, USD 50 million and USD 10 million, respectively, into a USD 900 million vehicle called African Development Partners III.

Source: Pensions & Investments

Democratic Republic of the Congo / Uganda

DRC in Discussions with Uganda Over Use of Crude Pipeline
The Democratic Republic of the Congo (DRC) is discussing with neighbouring Uganda for possible use of the East African country’s planned crude oil pipeline to export petroleum, DRC’s Ministry of Hydrocarbons (MoH) said. Uganda is developing the USD 3.5 billion 1,445 km East African Crude Oil Pipeline (EACOP), starting from the oil fields in its Albertine rift basin on its western border with DRC to Tanzania’s Indian Ocean seaport of Tanga. The pipeline is for transporting Uganda’s crude to international markets when the country starts production in 2025. The DRC’s MoH recently said in a Twitter statement that its Minister, Didier Budimbu, met Uganda’s Energy Minister, Ruth Nankabirwa Ssentamu, with discussions involving access to the pipeline. “Uganda acknowledged the crucial requirement of [the] DRC to access [EACOP] for the transport of crude oil to be produced from the oil exploration blocks located in the Albertine Graben in the [DRC],” the statement read. The DRC and Uganda share the oil-rich basin of Albertine Graben.

Source: Reuters


Ethiopia Surpasses Uganda, Tanzania for Kenya Investments Abroad
Ethiopia has toppled Tanzania and Uganda as the leading destination of Kenya’s investment abroad, buoyed by the expansion of local firms in the giant neighbouring market. Direct investment abroad- referred to as outward direct investment – is a category of cross-border investment associated with a resident in one economy having control or a significant degree of influence on the management of an enterprise resident in another economy. As well as the equity that gives rise to control or influence, direct investment also includes investment associated with that relationship, including investment in indirectly influenced or controlled enterprises, investment in fellow enterprises, debt (except selected debt), and reverse investment. The newly released Economic Survey 2023 shows that although Tanzania was the leading destination for Kenya’s investment abroad at the start of 2015, the table has since tilted in favour of Addis Ababa.

Source: Nation Africa

Kenya/ Tanzania

Value of Kenya Exports to Tanzania Tops EAC Growth
Kenya’s total exports to Tanzania posted the biggest growth among all East Africa Community (EAC) destinations in terms of absolute value last year, underlining the gains of a reset in the relations between the two countries. Data by the newly released Economic Survey 2023 shows that Kenya exported goods worth TZS 1.14 trillion (approx. USD 483 million) to Tanzania last year compared to TZS 911 billion (approx. 386 million) in 2021 – a TZS 236 billion (USD 100 million) jump which was the highest among all other EAC destinations. “Exports to Tanzania grew by 25.9 percent to TZS 1.14 trillion (approx. USD 483 million) in 2022 due to increased exports of iron and non-alloy steel,” the survey said. The performance of Kenya-Tanzania trade comes in the wake of improved relations between the pair after years of tiffs that, at one point, resulted in retaliatory measures such as trade bans. Kenya mainly imports cereals, wood, and edible vegetables from Tanzania, and it exports pharmaceutical products, plastics, iron, and steel to the neighbouring State.

Source: The Citizen


Diaspora Nigerians Remitted USD 168 Billion in Eight Years – World Bank Report
According to World Bank reports collated by our correspondents, the Nigerian Diaspora community has remitted USD 168.33 billion to the country in the past eight years. This is as foreign investments inflow into the country fluctuated in the period under review and caused a scarcity of foreign currency which has since led to the free fall of the naira. According to data from the World Bank and Budget Office of the Federation, Nigeria’s Diaspora remittances have played a key role in assuaging the impact of foreign exchange scarcity and keeping the country’s forex reserve afloat. In 2022, the World Bank stated that remittances flow to sub-Saharan Africa grew by 5.2 percent to USD 53 billion, with Nigeria getting the largest share. The data from the global bank revealed that between 2015 and 2022, a total of USD 168.33 billion was sent home by Nigerians in the Diaspora. A breakdown of the figures showed that in 2015, the Diaspora remittance was USD 21.2 billion; it fell to USD 19.7 billion in 2016; and increased to USD 22 billion in 2017.

Source: The Punch Nigeria


Tanzania Plans Largest Bridge in Africa to Boost Trade
Tanzania plans to construct the first bridge in Africa, spanning 50 kilometres, connecting the mainland to the Zanzibar Islands to facilitate the movement of people and commerce. Geofrey Kasekenya, the deputy minister of Works and Transport, said as much in Parliament recently. He also mentioned that the negotiations started on 11 March 2023 and are already far along. According to Kasekenya, the prospective investors of M/S China Overseas Engineering Group Company (COVEC), who have expressed interest in helping to build the bridge, met both sides. He noted that the idea for building the bridge will involve a partnership with the business sector and that both sides in mainland Tanzania and Zanzibar are still working on the meeting’s outcome. He was responding to a query from Mwantum Dau Haji (CCM Special Seats), who wanted to know when the bridge’s construction would begin. The concept for the bridge initially surfaced in 2020 when Tanzanians living abroad proposed building a sea bridge to connect Unguja Island and Dar es Salaam.

Source: Business Insider

Stories that Matter | April 2023


AfCFTA Secretariat and Afreximbank Sign AfCFTA Adjustment Fund Host Country Agreement with Rwanda
The AfCFTA Secretariat and the African Export-Import Bank (Afreximbank), recently in Kigali, Rwanda, signed the Host Country Agreement for the African Continental Free Trade Area (AfCFTA) Adjustment Fund with Rwanda. The agreement was signed by Wamkele Mene, secretary-general of the AfCFTA Secretariat; Mrs Kanayo Awani, executive vice president, Intra-African Trade Bank at Afreximbank; and Dr Vincent Biruta, Minister of Foreign Affairs and International Cooperation of Rwanda. paving the way for the operationalisation of the AfCFTA Adjustment Fund. The USD 10 billion fund, headquartered in Kigali, Rwanda, is a critical instrument in realising the AfCFTA. It will help countries to implement agreed protocols and support African companies to retool for effective participation in the new trading regime. The AfCFTA Adjustment Fund will support AfCFTA state parties to adjust smoothly to the new liberalised and integrated trading environment established under the AfCFTA Agreement by mitigating the potential adverse impacts of AfCFTA-induced tariff revenue losses.

Source: Afreximbank

The Advancement of Data Protection in Enhancing Business Practice in Africa

Across the world, the obstacles to data privacy have evolved faster than the regulatory and legal structures meant to protect that right. Many businesses in Africa have been victims of data breaches, resulting in significant financial losses and reputational damage. By implementing data protection laws, businesses can take proactive measures to prevent data breaches and ensure they are adequately protected from cyber threats and other data acquisition breaches.

The Data Protection regulation is crucial for business entities as it requires them to assess the impact of personal data processing to promote data transparency and avoid data breaches, leaks and theft of intellectual property. – Jean Eric – Sauzier, Partner, ALN Mauritius

Stories that Matter | March 2023

Two African Banks Stake USD 16 Billion in Oil, Gas Projects
About USD 16 billion is being invested in oil and gas projects across Africa by the African Export-Import Bank (Afreximbank) and the African Finance Corporation (AFC). This was recently disclosed at the Cape Town, South Africa African Refiners and Distribution Association (ARDA) conference. This is coming as stakeholders at the conference urged Africans to keep funds within the continent to finance the over USD 190 billion yearly energy investment needed. Of the banks’ investment, USD 15 billion of the funds is invested by Afreximbank. AFC has already invested over USD 800 million, with an additional over USD 200 million expected to be finalised. Global Head, Client Relations at Afreximbank, Rene Awembeng, said the company’s oil and gas portfolio exceeds USD 15 billion with a healthy pipeline across the continent. Speaking on the sideline of the conference, he noted that the continent must focus on shared infrastructure and be ready to finance itself; otherwise, projected development may remain elusive. Awembeng stated that the continent is in a critical situation where demand for energy continues to rise on the backdrop of a surging population. With the continent relying mainly on the importation of petroleum products at a time when foreign exchange demand is hovering at USD 100 billion yearly and required energy investment annually stands at USD 190 billion, Awembeng said large infrastructure development, including refineries that would meet demand on the continent, must be prioritised and supported.

Source: The Guardian

Key Trends Shaping the Future of the Mining Industry in Africa

The African mining industry is at a crossroads, facing both opportunities and challenges as it strives to sustainably meet the rapidly growing demands for mineral resources. The mining sector is critical to the continent’s economic development, providing employment and contributing significantly to the GDP of many African countries. According to Statista, Africa has abundant reserves of minerals and metals, including gold, diamond, cobalt, bauxite, iron ore, coal, and copper spread out throughout the continent. Africa continues to be a major producer of many important mineral commodities for the world.

Strengthening the Role of PPPs in Project Financing and Development in Africa

According to the World Bank, the term “People-first Public-Private Partnerships (PPPs) for the Sustainable Development Goals” (now shortened to “PPPs for the SDGs”) was coined in 2015 alongside discussions around the Addis Agenda. After adopting this agenda, the United Nations’ Financing for Development Office convened a session that shaped the discussions on guidelines and documentation of PPPs. At first, PPPs were used for risk mitigation exercises for the private and public sectors. However, they have morphed into a broader concept of structuring agreements which can have significant development benefits which, include actualising the SDGs for developing countries.

Stories that Matter | February 2023


Africa has USD 1.5 Trillion Green Hydrogen Economy Potential
A new study, titled Africa’s Extraordinary Green Hydrogen Potential, conducted by the European Investment Bank (EIB), International Solar Alliance and the African Union (AU), has revealed that Africa’s green hydrogen potential is approximately USD 1.5 trillion, and if maximised through to 2035, has the potential to position the continent as a global clean energy hub. Supported by the government of Mauritania, Europe’s HyDeal and Morocco’s UCLG Africa, the study has identified three green hydrogen hotspots, namely Mauritania and Morocco, Southern Africa and Egypt. The study stipulates that exploiting the continent’s solar energy potential by developing up to 1.2 gigawatts of new generation capacity in the three-specific hubs could enable the production of up to 50 million tonnes of green hydrogen per annum by 2035 at a globally competitive cost. This would help improve global energy resilience, the decarbonisation of heavy industries, the continent’s economic competitiveness and heightened GDP growth. Ambroise Fayolle, vice president of the EIB, stated, “Unlocking Africa’s green hydrogen potential will require close cooperation between public, private and financial partners.”

Source: Energy Capital & Power

Africa and the US Agree to Foster Closer Working Relationship

In recent years, there has been a rise in global powers such as the US, China and the EU (European Union) seeking to strengthen economic, political and security relations in Africa. The US has traditionally used its foreign policy framework to determine the type of relations it will have with different countries across the globe. However, this has had to change as many African countries have shifted their focus East toward China. The recently concluded US-Africa Leaders Summit held in Washington D.C. will see Africa and the US reigniting relations. This summit also indicates that competition between these three major global powers will continue as we head into 2023 and beyond. According to Voice of America, the US has pledged USD 55 billion over the next three years, with trade, agriculture and infrastructure (digital, energy and physical infrastructure) getting the most attention. These three areas are critical for Africa’s growth and continue to take centre stage as global economic shocks such as the COVID-19 pandemic and the war in Ukraine contributed to slowed growth of these sectors. Below is a breakdown of the focus areas that the two continents made significant commitments.