Category Archives: DFI

Deal making to finance the future at the African Investment Forum 2021

Next week at Abidjan, Cote d’Ivoire sees the return of the African Investment Forum (AIF) that is supported by the African Development Bank Group (AfDB).

This years’ summit, from December 1 to 3, will be a hybrid mix of physical and virtual sessions and is expected to feature the Presidents of Rwanda, Benin, Mozambique and Togo alongside other continental and international business leaders.

The 2020 annual meetings of the AfDB set out a focus for mobilizing financing towards infrastructure, regional trade and health care and those have carried on into the 2021 AIF whose theme is “Accelerating Transformative Investments in Africa.” It targets five priority investment sectors of agriculture & agro-processing, energy & climate change, health, ICT & Telecoms and industrialization & trade.

At the inaugural AIF in 2018 in South Africa, deals in demand were energy investments for Southern Africa, while East, Central, North and West Africa all had infrastructure top their deal discussions. Eventually, the forum secured $38 billion of investments for 49 projects across the continent.

At the next AIF in 2019, 2,200 participants from 101 countries discussed 57 deals worth $67 billion and eventually, investments were secured for 52 deals worth $40 billion. The 2019 forum also saw 16 SME’s and startups get to pitch in different boardrooms, now a staple of the AIF, alongside industry giants raising millions of dollars for larger projects.

There was no AIF last year, because of Covid-19, and the spotlight that should have been on deals to accelerate African Continental Free Trade Agreement (AfCFTA), has now taken on an added element of helping country economies rebound from Covid-19. The African Development Bank has provided support to different countries through a COVID-19 Rapid Response Facility. Also at the 2021 bank annual meetings, AfDB President Akinwumi Adesina announced that the G7 heads of state had heeded a call that $100 billion of the special drawing rights (SDRs) being issued by the IMF, be provided to support African countries as they tackle debt challenges while responding to Covid-19.

This year priority deals are being discussed that revolve around recovering from Covid-19 and include hospital projects in Angola, Cameroon and Nigeria. Another is to secure $45 million for a vaccine production facility in Eastern Africa that will manufacture three vaccines for the WHO, including one for Covid-19. There are also cotton industry projects for Burkina Faso and Mozambique as Covid-19 showed the need for self-sufficiency and a need to promote local manufacturing capabilities.

Highlights of the 2018 AIF: Afreximbank bank launched a project preparation facility, Mara launched an Android phone, there was an African creative industry showcase and social boardroom sessions for deals in Ghana and Zambia.

Highlights of the 2019 AIF: There were 6 concurrent boardroom sessions, a $600 million investment for the Ghana Cocoa Board, a financing deal for a road-rail bridge over the Congo River to link Kinshasa and Brazzaville, a forum on unclogging digital investments, and the launch of the (4th) Visa Openness Index report. It also featured sessions on opening the bank vault for women entrepreneurs, agro-processing industrial zones, climate change, an infrastructure financing trends report was launched, and a Lusophone compact for Portuguese-speaking African countries that reviewed six investment deals worth $702 million.

2021 AIF Format: Because of Covid-19 restrictions, the AIF will have 250 physical participants in Abidjan while over 2,000 others will connect virtually to participate in the boardrooms, virtual marketplaces, and virtual B2B meetings with investors and sponsors. In addition to the plenary sessions, there will be other parallel invite-only sessions that will feature heads of state, policymakers and industry leaders, some of which will be aligned for American and Asian timezones.

Anyone interested can register here for this year’s event, while companies and individuals are encouraged to join the AIF platform. There they will access financial and investment opportunities as they network with communities of other professionals. 

EDIT: November 29. The Africa Investment Forum event was postponed at the last minute after a new Covid-19 variant made it difficult for delegations to travel to Abidjan and the organizers made a decision to put prioritize the health of participants. AIF teams will continue to have discussions with partners towards investment decisions until they can reconvene at a later date.

 

Kenya Development Corporations Merged

July 2021 saw the announcement of the conclusion of merger plans for a Kenya Development Bank. In a gazette notice, the Government announced the creation of the Kenya Development Corporation in June 2021, which comprises the Industrial and Commercial Development Corporation (ICDC), the Tourism Finance Corporation (TFC) and IDB Capital (formerly known as the Industrial Development Bank).

Industrial & Commercial Development Corporation:

ICDC owns 89% of Development Bank of Kenya, 27% of East African Fisheries, 17% of Eveready Batteries, 18% of Funguo Investments, 20% of General Motors East Africa, 4% of IDB Capital, 46% of KWA Holdings (KWAL) 27% of Mountain Region Poultry, 28% of Sisibo Tea, 2% of Uchumi Supermarkets, 31% of Almasi Beverages, 20% of Aon Minet Insurance and 23% of Centum Investments. Through a defunct subsidiary also 5% of Panpaper Mills, and 100% of Kenatco Taxis and 100% of Kenatco Transport.

ICDC also owns Uchumi House and Finance House in Nairobi and plots in Mombasa, Eldama Ravine, Eldoret and Embu, with another next to Malindi airport.

Tourism Finance Corporation:

TFC has subsidiaries including the Bomas of Kenya, Kabarnet Hotel (98%), Sunset Hotel at Kisumu (95%). Also Kenya Safari Lodges (82%), Mt Elgon Lodge (73%), Buffalo Springs (41%), Golf Hotel at Kakamega (40%), Mountain Lodge at Nyeri (39%) as well as 9% of Mararal Lodge and 5% of the Ark. Also Kenya Hotel Properties i.e. Nairobi’s InterContinental Hotel (33%) and International Hotels Kenya i.e Nairobi’s Hilton Hotel (41%). It also owns 52% of African Tours & Hotels (in liquidation).

TFC, previously known as the Kenya Tourist Development Corporation, owns Utalii house, a building on Moi Avenue Nairobi and a plot on prime Nkrumah avenue in Mombasa

IDB Capital:

IDB owns 0.3% of Consolidated Bank, 0.9% of Nzoia Sugar and 0.3% of South Nyanza Sugar Company (Sony) and a sliver of the Africa Export-Import Bank (AfrExIm)

Other:

All assets, securities and systems of the three institutions are now vested in the new corporation.

Equity Bank’s War Chest

Equity Bank has been on a tear, signing deals with other banks for affordable lines of credit for on-lending. The latest ones are with the African Development Bank and FMO.

The recent financing agreements include:

In 2020:

  • September 2020: $50 million (Kshs 5.5 Billion) loan facility with the IFC.
  • October 2020: $100 Million from Proparco (Agence Française de Développement Group) to enable Kenya MSMEs, women entrepreneurs who had been particularly affected by the economic shock of the COVID-19 crisis to create jobs. It is expected to impact 240 MSMEs firms which will create over 5,000 direct and indirect jobs.

In 2021:

  • March 4: EUR 125 million (Kshs 16.5 Billion) loan facility signed with the European Investment Bank. The long-term loan will support Equity customer to sustain and scale their operations, with Kshs 6.5 billion to agriculture and Kshs 10 billion to MSMEs.
  • March 10: $100 Million (Kshs 11 Billion) facility with DEG of Germany, CDC Group of the United Kingdom, and FMO of the Netherlands to support MSMEs cope with COVID-19 over three years.
  • March 15: USD 75 Million (Kshs 8.25 Billion) loan facility with the African Guaranty Fund to lend to women-owned and managed micro, small and medium-sized enterprises in Kenya, Uganda, Rwanda and DRC.
  • March 23: $10 billion (Kshs 11 billion) from the African Development Bank to support its expansion into Central Africa. The  tier-two facility with a 7-year maturity is also to support lending to women and youth entrepreneurs access capital to recover and thrive in a post-COVID environment.
  • March 25: $50 million (KShs 5.5 billion) NASIRA loan portfolio guarantee from Netherlands FMO, covering loans provided to MSMEs affected by the COVID-19 crisis, including women and young entrepreneurs and companies in the agri-value chain.

All about EADB

The East African Development Bank (EADB) is a development finance institution, headquartered in Kampala, Uganda and has country offices in Kenya, Tanzania and Rwanda. It was one of the  few institutions that survived the collapse of the original East African community. Its main products are medium-term financing and its long-term loans for projects that can be durations of 12 years. 

The bank is in the news over a case involving Kenya’s Cabinet Secretary Raphael Tuju over their demand that he repays $13.6 million (~Kshs 1.4 billion) that arose from a $9.19 million loan in April 2015. 

Excerpts from the 2019 EADB annual report:

  • The bank is owned by four East African countries; the Governments of Kenya 27%, Uganda 27%, Tanzania 23% and Rwanda 9.5%. Other shareholders are the African Development Bank with 8.8% and FMO Netherlands with 2.7%. 
  • EADB has $374 million in assets, which includes $190M in cash in the banks. It earned a profit of $8.7 million (~Kshs 944 million). It is exempt from taxes in all members countries but pays no dividend as their policy is to build up capital of the bank.
  • Had $152 million (~Kshs 16.5 billion) of loans of which $58M (38%) are to Tanzania ventures, $39M to Uganda, $36M to Kenya ones and $17M to Rwanda borrowers. $109 million (71%) of the loans are in US dollars which is the preferred currency of most borrowers.
  • Of the loans, $92M are in stage one (performing normally), $52M in stage two (higher credit risk) and $7M are in stage 3 (impaired). 
  • During the year, existing clients – Kayonza Tea Growers, Centenary Rural Development Bank, Opportunity Bank, and the Government of Tanzania all increased their borrowing. Also in 2019, some long term loans paid off and exited the bank including Nkumba University, Sugar Corporation of Uganda and New Forest Company. The bank also participated in the official launch of the Lake Turkana Wind Power which they partially-financed while Strathmore University completed a Law School Centre for which EADB has provided a Kshs 422M loan.
  • The bank disbursed $21.3 million to new projects during the year. Some were: in Tanzania (National Housing Corporation, $30M to Iyumbu Satellite Centre, and to Tanzania Petroleum Development Corporation to distribute natural gas to 30,000 households), in Uganda ($6.3M for a medical consumables manufacturing plant in Kampala), in Rwanda ($10M to a new cement plant and four lines of credit to a national development bank) and in Kenya (Kshs 30M working capital to Jumuia Hospitals in Huruma), Sidian Bank (EUR 2 million credit line) and Musoni Microfinance  (EUR 1 million credit line). 
  • They have borrowed $81 million from multilateral development banks and other financial institutions including the European Investment Bank, African Development Bank ($22M), CBA ($9M), the Arab Bank for Economic Development in Africa ($10M) and a new line from KFW Germany ($7.8M) whose recipients include Sidian Bank, Musoni Diary and West Kenya Sugar. 
  • Kenya’s  Treasury Principal Secretary, Dr. Julius Muia sits on the board while Treasury Cabinet Secretary, Amb. Ukur Yattani sits on the Governing Council along with other East African finance ministers.

Older notes on how EADB is different from a typical commercial bank:

  • EADB disburses payments to third parties e.g. supplier or contractors for work done/services rendered to sponsor. Disbursements are made against presented supplier invoice or completion certificate for building works. They insist that sponsors procure through open tendering as much as possible.
  • Most EADB loans are repaid quarterly except leases which are monthly. Projects are required to set up standing orders for loan repayment. 
  • They don’t have a deposit-taking, commercial bank so borrowers make repayments to special accounts at other banks (escrow accounts) e.g. payments from buyers of apartments financed by EADB are made into such accounts.
  • Companies are required to submit quarterly accounts for monitoring and failure to submit accounts can delay further disbursement to a project.
  • EADB lending approval decisions are made based on the loan amount involved and applications that are larger than $1 million are approved by the board of directors.
  • As a DFI, some criteria for the financing of projects include economic measures such as increasing the level of real consumption, contribution to government revenue (corporate tax, VAT, excise, export taxes), foreign exchange saved, and employment opportunities created.
  • Projects in arrears get transferred to their “Work Out Unit,” a special department that determines how to resolve these – either by a recovery (sale of assets), write-off (after selling assets), or a turnaround (reviving projects to normal) which is the preferred and most successful option. Sometimes, the borrower is asked to recommend a buyer of assets (provide leadership) if it becomes necessary to sell some of them. 
  • The bank enjoys immunity from prosecution and this has been raised by Tuju’s lawyers in several pleadings. In the past, EADB has also faced challenges including petitions to wind it up, such as a decade ago when they trying to recover over $13M from Blueline, a Tanzanian transporter.  
  • edit On September 28, the OPEC Fund for International Development signed a $20 million loan in favour of the East African Development Bank to go towards supporting SMEs and infrastructure projects in East Africa, in the third loan of this kind that the OPEC Fund has provided to EADB.

10 Points from AfDB 2019 in Malabo

The African Development Bank (AfDB) Group held their 2019 series of annual meetings from 11 to 14 June in Malabo, Equatorial Guinea with the theme of “Regional Integration”

Highlights of the meetings:

1. Fast growth is not Enough: A key theme of the week was that the stellar growth levels in Africa (over 4%) were still not enough to create enough jobs and produce sufficient food on the continent.

2. High 5’s:  Regional Integration is one of the development priority themes (‘ High 5s’) that the Bank had adopted at its 2016 meetings in Lusaka, Zambia alongside (to) “Light up and power Africa”, “Feed Africa”, “Industrialise Africa”, and “Improve the quality of life of the people of Africa.”

3. It is Capital Raising time for the Bank and is organs. There are advanced talks towards a 7th general capital increase, the first since 2010, for the African Development Bank, which will be concluded in September.

A few months ago, Canada provided temporary callable capital of up to $1.1 billion to stabilize the AAA rating of the Bank.

There are also ongoing negotiations for a 15th replenishment of the African Development Fund.

4. Visa Index: The Bank’s Africa Visa Openness Index ranks how accessible African countries are to visitors from within the continent in terms of requiring travel visas and tracks developments by different countries to improve the ease of travel for fellow African citizens.

5. Low intra-Africa trade:  Ahead of the African Continental Free Trade Area (AfCFTA) which comes into force in July 2019, the potential economic benefits of full implementation were highlighted, with the greatest beneficiaries of the increased trade likely to be countries in the Central Africa region.

Africa has 54 countries; Alone they are not very competitive, but together, under the Continental Free Trade Agreement, they are a market of $3.4 trillion

 

Also see the regional economic outlook reports by the Bank.

6. Debt levels in Africa: There was some discussion about the levels and types of debt across Africa and their potential burden versus the growth and infrastructure needs of individual countries. Also the Bank affirmed its support to help countries negotiate better financing terms, get better deals for extractive resources, minimize currency risks, and to enable them to mobilize their own resources domestically.

7. Asia-models for Africa: At the AfDBAM2019, Korea and India showcased their partnerships with the Bank including on agricultural transformation, enhancing food security and scaling financing across Africa.

8. Different forms of development finance by the Bank: 

  • Toward Financial Inclusion

  • Integration of Africa

  • The Environment

  • Food Security

  • Disaster Relief

  • Clean Energy

  • They also have plans for an affirmative action finance facility for women in Africa (AFAWA).

9. Transformational Infrastructure Projects funded by the bank include ports, highways, bridges and border-crossing stations across different countries.

10. Malabo Image: Host nation, Equatorial Guinea, used the forum to shed an image about the country that is full of old stereotypes to one of economic diversification, transformation and infrastructure. President Obiang attended the opening of the AfDBAM2019 which were chaired by the country’s Minister of Finance, Cesar Abogo, who is just 39 years old.

(a) Parallel events during AfDBAM2019: 

  • Africa Investment Forum last year which at its inaugural AIF forum in 2018 in Johannesburg secured  $38 billion of investments for 40 projects across Africa.

  • African Banker Awards

(b) Next meeting: Following these first-ever meetings to take place in Central Africa, the next annual meetings of the bank will be in a year’s time in Abidjan, Côte d’Ivoire – the bank’s headquarter city, where they the election of the Bank President will be the main agenda item.