This Week in Africa Finance-161023

Key Takeaways: Ghana gets the next $3 billion IMF credit facility, Africa Bank buys Sasfin’s, Sony commits $10 million to Africa's Entertainment Industry and Notable deals of the week.

Sovereign Debt

Ghana gets next tranche of $3 billion IMF credit facility.

The International Monetary Fund and The government of Ghana have completed a staff-level first review of a $3 billion loan programme, leading to the approval and release of the next tranche of $600 million to the country for its fund-supported debt restructuring programme.

• The prelude to the next loan agreement is part of the agreed IMF $3 billion credit facility requested by Ghana when seeking help to address its economic crisis and growing public debt.
• According to the IMF, despite the global economic headwinds and geo-political events, the Ghanaian government has achieved a feat with its domestic debt restructuring programme and economic reforms, which has led to decreased inflation, exchange rate stabilisation and improved fiscal conditions.
• Ghana has already received the initial $600 million in May 2023 as part of the agreement after meeting defined conditions set by the IMF.
• The Ghanaian government now needs to have debt treatment agreements with its creditors.

AFR’s take: sub-Saharan Africa’s debt to GDP ratio of interest rate payments to its revenue currently stands at 57.7 per cent compared to a decade ago of approximately 28 per cent. With high interest rates, and its debt servicing ability becoming more expensive, a rising fiscal risk including defaults is becoming more apparent. In Ghana's case, the decisive economic reforms with fiscal discipline seem to be yielding results like lower inflation and PMI rates.

M & A

Africa Bank buys Sasfin’s business segment for $172 million.

Africa Bank, South Africa’s leading consumer bank has acquired the capital equipment and commercial property finance business units of Sasfin Bank for a reported transaction value of R3.26 billion ($172 million).

• Africa Bank is looking to rebuild its business after the banking crisis of almost a decade ago which required a central bank bailout.
• The rebuilding process has resulted in acquisitions like Grindrod Bank for R1.5 billion and UBank for R80 million in 2022.
• According to Africa Bank’s CEO the strategic objective is to expand the bank’s non-organic offering through scale, thereby diversifying its balance sheet and risk profile in preparation for an IPO listing

The bottom line: Banks all over Africa are looking to extend their revenue profile and build sustainable businesses which can scale and withstand challenging economic times. The Africa Bank’s acquisition shows an aggressive approach to building a balanced client base and increased revenue opportunities all sensible criteria to position the bank for an IPO.

Venture Capital

Sony commits $10 million investment fund for the Africa Entertainment Industry.

Sony Group has established a $10 million Sony Innovation Fund (SIF) aimed at supporting African entertainment businesses. The new fund will enable the Tokoyo multinational company to play an active role in Africa's fast-growing entertainment industry.

• The SIF: Africa will make seed-stage investments into start-ups focused on gaming, music content distribution and movie production.
• Sony also recently concluded a collaboration agreement with the International Finance Corporation (IFC), to invest in African start-ups in the entertainment industry in Africa by leveraging the strengths of both parties.

The bottom line : The African entertainment industry is very dynamic and produces content and musical hits across its value chain targeted at domestic and international markets with a vibrant diaspora. Some content, music and movie content producers are also leveraging platforms like Netflix and Amazon to distribute the content. Funding in this industry is not as strong as in other sectors like Fintech, so funds like SVC would provide local entertainment makers to build and grow.

Chart of the Week

Ghana and Zambia have been actively working on restructuring their respective sovereign debt, with Ghana receiving a favourable nod from the IMF for the next $600 million. Zambia successfully achieved an agreement with its foreign creditors including China on the $6.3 billion deal that resulted in a disbursement. The markets reflected favourably to this news as reflected in the bonds for both countries.

Deal Roundup

Islamic Finance

Nigeria’s Debt Management Office has confirmed that the N150 billion Sukuk bond offer has been oversubscribed by 435% to N652.827 billion.

Fundraising

Black- and women-owned South African private equity firm, Sanari Capital has raised a second close of $65 million for its Sanari 3S Growth Fund aimed at growing employment opportunities and fostering economic growth across Africa. The fund is targeting a final close of up to $100 million.

M & A

South African private investment firm Harith General Partners has agreed to acquire a 46 per cent equity stake in Mergence Investment Manager. The new acquisition will lead to a combined Asset Under Management( AUM) of $3.1 billion to invest in around Africa, particularly in infrastructure projects.

Private Debt

Guinea-based family-owned furniture group Galerie Marifala Sarlu has received an investment loan of up to €12 million, from the International Finance Corporation (IFC). The investment will support the construction of a 17-hectare production complex 60 km from Conakry (“the Project”) and increase its production capacity.

Pension Fund

Kenya’s National Social Security Fund has seen its asset base rise by $852 million making it one of the largest in Africa. The 8.1 per cent rise in asset base was due to higher mandatory contributions to the National Social Security Fund and gains on offshore investments. The fund was also increased by new Nairobi Securities Exchange-listed Real Estate Investment Trusts (REITs), including the Sh6.92 billion Laptrust Imara Investment Reit (I-REIT).

Private Equity

The first dedicated gender-focused investing Private Equity Fund in Africa, Alitheia IDF has made a $ 5 million investment in the South African woman-owned textile company, IVILI Group.

South Africa Adenia Partners a private equity firm has completed a significant investment in solar energy financing solution provider Enfin.

Mediterrnia Capital Partners an Africa-focused SME and mid-cap growth private equity firm, the Dutch entrepreneurial development bank FMO and IFC, a member of the World Bank Group have made a €57 million investment in Moroccan financial services provider CASH PLUS.

Infrastructure Finance

United States International Development Finance Corporation (DFC) and Africa Data Centres (ADC), a subsidiary of the Cassava Technologies technology group have entered into a Memorandum of Understanding (MoU) to build a $50 Million state-of-the-art Data Centre in Ghana. This funding will allow Africa Data Centre access to a portion of the commitment DFC investment of US$ 300 million.

More Venture Capital

Tripplo the South African Logitech startup has secured a $1.8 million led by Futuregrowth Asset Management.

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