Fintech in Africa, as elsewhere in the world, is big business. Investment is flooding into startups providing innovative ways of offering financial services. Startups in the fintech space took on almost 30% of the total funding raised by African tech businesses in 2015. Globally, growth in the sector is huge, with $19.1bn invested globally last year, a 106% jump from 2014.
Infrastructure models require a return on investment that is secure and a political environment that is stable. The quality of governance and the legal enforcement of contracts vary widely across African jurisdictions and like all emerging markets, a high level of due diligence has to be carried out. However, with a population of 1.2 billion and increasing levels of education and aspiration, there is a huge demand for improved living standards across Africa. This brings with it the need for reliable power supply, clean water and effective waste water treatment, new roads, railways and ports, as well as telecommunication facilities (to name but a few).
The International Monetary Fund (IMF) suggests that Egypt has overtaken South Africa as the second largest economy in Africa.
By Keith Woodhouse (top), Partner, London; John Nielsen (middle), Associate, London; & Jeff Buckland (bottom), Partner, Johannesburg, Hogan Lovells
Robert Hamill (left), Partner & Sam Webster (right), Senior Associate, Mayer Brown, say that this 2016 will be critical for M&A; activity in the energy sector following the turbulence of 2015
The World Bank released the Africa’s Pulse report on April 11, in which the multilateral organisation outlined salient economic vulnerabilities and provided strategies for unlocking inclusive, sustainable growth. The report focuses primarily on the economic growth and policy challenges presented by the terms of trade shock posed by the commodity price slump. The large shock to the terms of trade undermined the strength of local currency units (which added greatly to consumer price inflation pressures and inflated the real debt burden), and weakened policy buffers. The resultant increase in external fragility weakened fiscal positions, set off a flurry of credit rating downgrades and increased the probability of balance of payments crises.
The most significant development in the financial services industry in the US and the UK in recent times has been the emergence of robo-advisors – internet-based systems which, through a series of questions, lead investors to an appropriate mix of investments suited to their personal circumstances.
Recent US airstrikes in Libya and Tunisia underline a growing concern that ISIS is deepening its reach across northern Africa. Increasingly, Libya is becoming the main target of the group, but why? And what are the national and regional consequences?
SAVCA, the South African Private Equity and Venture Capital Association, held a successful annual conference at Spier Wine Estate, Stellenbosch, on 17 and 18 February 2016. Close on 400 delegates came together to navel-gaze both the South African and broader African private equity environment, and it is worthwhile trying to tease out some themes and trends for the year ahead.
It's said that the shift from rural to urban population is the most significant phenomenon since independence in most African countries. Lagos is reported to have recently joined the ranks of the world’s megacities, which is Africa’s second after Cairo, while Kinshasa is also rapidly approaching mega city status.
The announcement by Barclays Plc that it will sell down its stake in the Johannesburg-listed Barclays Group Africa serves as a blow to the “Africa Rising” narrative. The upbeat story on the back of strong economic growth has been widely told and well received over the past decade. However, amidst a slump in global commodity prices and slower growth key trading partner China, Sub-Saharan Africa (SSA) Africa is facing many challenges in 2016.
Private equity investments have not been embraced by South African retirement funds which have less than 1% of their portfolios invested in private equity. The low investment in private equity comes despite its 4 to 5% outperformance of equity investments and its ability to catalyse and develop new businesses and expand existing ones, while investing in schools, housing and power, all of which contribute to the South African economy.
With all eyes on Minister Pravin Gordhan as he prepares for his Budget Speech later this month, one thing that is certain is that 2016 is going to be a tough year for South African consumers. A looming ratings downgrade, the falling rand and rising inflation means that Treasury will have to hike taxes even more significantly this year than in the previous few years, and much of this burden will land on consumers’ shoulders.
The rise of the the Chinese currency, the renminbi (RMB) gives emerging markets an important alternative when it comes to currency investment and hedging.