Kenya becomes Africa’s top Venture Capital destination, Gateway to East Africa

A report from Venture Capital for Africa has shown that Kenya has become Africa’s second biggest venture capital destination. East Africa’s biggest economy beat South Africa, and is soon to overtake Nigeria. Kenya attracted 22% of venture capital flows to Africa, slightly less than Nigeria which attracted 23%. South Africa which has for many decades been the leading destination for private equity and venture capital in Africa is faltering over concerns of slowing growth, amidst sustained high economic growth in emerging regions such as East Africa led by Kenya. South Africa attracted only 11%, and was followed by Ghana, Cameroon and Egypt which attracted 8%, 6% and 5% respectively.

Kenya is favored by many foreign Investors, because it is a strategic gateway to the other countries in East Africa such as Uganda, Tanzania, Ethiopia, South Sudan, Rwanda and Burundi. The country has very well developed infrastructure, an organized city, Nairobi, and the biggest port in the region.

In terms of sector distribution, the biggest venture capital investments in the region were made in ICT (Software, Internet and E-Commerce), Agribusiness, Education, Media, Health Services, Financial Services, and Renewable Energy.

Global Private Equity firms eye investment opportunities in East Africa

With the East African region growing at an average growth rate of 7% annually, the region has certainly arrived on the global economic landscape. East Africa has demonstrated economic stamina over the past few years, emerging relatively stronger from the financial crisis in comparison with most other regions and continuing to grow rapidly despite concerns about slowing growth in other emerging markets, such as China and India.

Today, East Africa accounts for 3 of the 10 fastest-growing economies in Africa, driven by an expanding middle class, improved business environment, harmonized customs procedures due to the region’s economic integration, and a relatively stable political environment (in an African context) – save for the recent troubles in Burundi.

Because of this impressive performance, many global private equity firms have started exploring investment opportunities beyond the already established markets of South Africa, Egypt and Nigeria. Foreign investors, mostly from Europe and the US, are scouting for opportunities in East Africa with plans to pump $1.5 billion into the region’s private companies.

According to a recent survey by KPMG and the East Africa Venture Capital Association, large global Private Equity firms are looking to the East African market to capitalize on the growing investment opportunities available in sectors such as Agriculture, Finance, Fast Moving Consumer Goods, Real Estate, Infrastructure, ICT, Health and Natural Resources.

According to the study, of the total private equity funds of $3.7 trillion raised globally between 2007 and 2014, an estimated 0.6% ($22 billion) was earmarked for Africa, with 0.04% ($1.5 billion) destined for East Africa. Though minimal relative to what was invested elsewhere, this is an impressive start for the region, and with over 21 exits (valued at $260 million) already successfully concluded, this is expected to boost investor confidence.

The survey further showed that 79 private equity-backed deals valued at $822 million were concluded in East Africa over the same period, with signs that the upward trend could be maintained. The largest share in the region was taken by Kenya, which accounted for 63% of the total deals. Tanzania, Uganda, and Rwanda accounted for 15%, 10%, and 8% of the deals respectively.

The survey also revealed that most investors used Kenya as the financial hub and gateway to the other East African countries such as Uganda, Tanzania, Rwanda and Ethiopia.

Ugandan Parliament approves plan to build new Capital City to decongest Kampala

The Ugandan parliament unanimously passed a proposal from its finance committee on Thursday for the government to immediately embark on creation of another city to decongest the country’s capital, Kampala.

images

The decision was taken while considering the second five year National Development Plan (NDP) which will be implemented from financial years 2015/2016 to 2020/2021.

Although the committee did not propose where the new capital city will be built, Nakasongola has been favored by several previous governments and many urban development professionals because of its central location, which would make it easily accessible by all the regions in the country.

Nakasongola is almost 20 times bigger than Kampala with a very low population density. According to Uganda’s National Population and Housing Census 2014 released by the Uganda Bureau of Statistics (UBOS), Nakasongora’s population density stood at 51.8 people/ km² with a total area of 3,511.8 km² compared to Kampala which had 8,418.7 people/ km² with a total area of 180.1 km².

The district is close to Kiryandongo district where the 600 megawatts Karuma hydro power project is being constructed, and also close to the oil region of Bunyoro, which places it in a strategic location to tap the spill overs from the oil and gas industry to develop.

According to Uganda’s Vision 2040, four regional cities have been proposed to be established which include; Arua, Gulu, Mbale, and Mbarara, and five strategic cities which include; Hoima (oil), Nakasongola (industrial), Fort Portal (tourism), Moroto (mining), and Jinja (industrial).

These ambitious plans to build a new capital and also establish strategic and regional cities, wont only help decongest the existing capital, Kampala, but will also boost the country’s construction and infrastructure sectors creating a multitude of investment opportunities over the next 5-10 year period in these sectors with spillovers to other sectors.

Tension, all eyes on EAC Summit tomorrow to resolve Burundi crisis

The situation in Burundi is tense as all the worrying factions in the country look up to the EAC summit due to take place in Dar es Salaam tomorrow to provide a meaningful solution to the month long conflict in which scores have been killed and hundreds of thousands exiled.

The United Nations-sponsored talks between Burundi’s government, the opposition and civil society groups have also been suspended to await further direction from the East African Community Heads of State Summit scheduled for Sunday in Dar es Salaam.

The emergence meeting which was convened by Tanzanian President and chairperson of the East African Community Heads of State, Jakaya Mrisho Kikwete is a follow-up to the 13th Extraordinary Summit of the EAC held on 13 May 2015 which was also held in Dar es Salaam.

The emergency summit is being preceded by a meeting of ministers/cabinet secretaries of the EAC partner states today.

Other dignitaries also expected to attend the summit are; the chairperson of the African Union Commission, Nkosazana Dlamini Zuma, President Jacob Zuma of South Africa, President Eduardo dos Santos of Angola, who is the current chairperson of the International Conference on the Great Lakes Region (ICLGR), and Said Djinnit, the UN special envoy on the Great Lakes Region who shall be representing the UN Secretary General, Ban Ki-Moon.

Whether or not President Nkurunziza will leave the country to attend the summit is still questionable, as the last time he left to attend an earlier EAC summit resulted in a foiled coup at home.

Peace and stability in Burundi is very key for the East African region as a whole, as it won’t only hurt the region’s development plans if it escalates, but will also downgrade the region’s overall risk rating and investor confidence.

International retail giant makes entry into Kenyan market

South African retailer Massmart finally made its entry into the Kenyan market yesterday, ending a 10-year wait. It opened its first store at the grand new Garden City Mall along the Thika Superhighway, where giant local retailer Nakumatt also launched its 53rd outlet in East Africa.

Massmart will trade as Game stores, a discount shop that sells fast-moving consumer goods. The South African retailer entered Ugandan and Tanzanian markets as Game Stores eight and seven years ago respectively, and is looking to consolidate its position in the East African market by opening in Kenya.

The retailer said it sees Kenya as its most competitive market outside South Africa regionally.

Kenya’s retail market is highly competitive and undergoing fast growth with four local players – Nakumatt, Tuskys, Uchumi, and Naivas – dominating the scene. Nakumatt has the biggest market share, although Tuskys has a larger number of branches.

Stores of these companies are also very prevalent in other East African countries, especially Uganda, and they are looking to expand further in the region, especially in countries where their presence is still relatively limited such as Tanzania, Rwanda, and South Sudan.

Massmart opted to set up its own stores in Kenya after failure to acquire a majority stake in Naivas Supermarkets, which was derailed by a family feud.

“We have been trying to get to Kenya probably eight to 10 years now through a partner but we never found one. We looked at Naivas doing a deal but that just never worked out and we thought springing our brand here was another option,” said Mark Turner, Massmart’s Marketing and Customers Director.

Massmart is a South African company that owns brands such as Game, Makro, Builder’s Warehouse and CBW. It is the second-largest distributor of consumer goods in Africa, the largest retailer of general merchandise, liquor and home improvement equipment and wholesaler of basic foods. The company is owned 52.4% by Walmart, an American multinational retail corporation.

Walmart is the world’s largest company by revenue, according to the Fortune Global 500 list in 2014, as well as the biggest private employer in the world with 2.2 million employees.

Rwanda’s Claver Gatete named “Finance Minister of the year”, as Nigeria’s Akinwumi Adesina takes top AfDB job

Rwanda’s Minister of Finance and Economic Planning, Claver Gatete was today recognized as the Finance Minister of the Year at the African Bankers Awards 2015 held in Abidjan, Ivory Coast on the sidelines of the ongoing African Development Bank Annual Meetings.

The Finance Minister of the Year award goes to the African Finance Minister who has carried out prudent macroeconomic policies and, through reforms of his actions, has shown skills and dexterity to create the conditions of an appealing investment climate.

This award comes a day after an African Development Bank report named Rwanda as the fastest growing economy in the East African region at a rate of 7.5%, and pinpointed the need to end the crisis in Burundi before it hurts the region’s economies.

During the same event, Bank of Kigali was also recognized as “the Best Regional Bank in East Africa for the year”. This award goes to a Bank that has excelled in the banking industry in its region by reaching out to new customers, offering new services, adopting inclusiveness by bringing the unbanked into the banking space, making use of new technologies and contributing to a stronger financial sector.

In related news, Akinwumi Adesina of Nigeria will be the eighth President of the Africa Development Bank (AfDB), after beating Cape Verde’s Cristina Duarte, and Chad’s Kordje Bedoumra in a heavily contested race today afternoon. He will take over from Rwanda’s Dr. Donald Kaberuka on September 1, 2015 who has held the office since 2005.

East Africa registers tremendous growth, Political Crises in South Sudan and Burundi dampen Outlook

According to the latest Economic Outlook Report 2015, released by the African Development Bank (AfDB) on Monday, May 25, 2015, the East African region achieved impressive growth of more than 7% in 2014, from below 5% the year before. The region was led by Rwanda with 7.5%, followed by Tanzania at 7.4%, Kenya at 6.5%, Uganda at 6.3%, and lastly troubled Burundi at 4.7%.

This tremendous growth was largely driven by the strong growth in the region’s service and construction sectors. Lower global oil prices also supported the East African Community (EAC) economies, which are net oil importers, as they lowered production costs, boosted consumer demand and mitigated inflationary pressures.

In an interview with The EastAfrican newspaper, Donald Kaberuka, the outgoing president of AfDB noted that East Africa has been the most dynamic part of Africa without oil and gas. This growth is expected to spiral even more with the extraction of large oil deposits discovered in Uganda and Kenya.

However, this positive outlook is overshadowed by the political crises in South Sudan and Burundi which are expected to weigh down the other East African economies – with overall regional average growth expected to dip to 5.6% in 2015, down from 7.1% registered in 2014. The instability in these countries might also raise the region’s overall risk profile.

A concerted joint effort by the regional leaders to restore peace in South Sudan, and stop the crisis in Burundi from escalating is needed, lest the crises will dampen the region’s growth prospects.

As Khartoum takes on the lead role to mediate in the South Sudan crisis, the East African Community Heads of State are this week expected to hold yet another Summit to discuss the Burundi crisis.