Atta Africa Financial Update

Key commercial and political activity in Africa for private equity investors by DCE Partners, UK Private Equity advisors to Atta

Executive summary: Banking in Africa

The banking industry in sub-Saharan Africa can be characterised as a dichotomy between the highly concentrated, oligopolistic examples - with large banks accounting for the majority of market share - and fragmentation, with cases of 20, 30 or even 40 high street banks in some markets all jostling for a piece of an an increasingly larger pie.

Overall the financial sector landscape is generally underdeveloped in sub-Saharan Africa, with banking systems accounting for the preponderance of financial sector assets and activities. In the fragmented markets especially, banks are small in absolute and relative size - they are characterised by low loan-to-deposit ratios and large shares of assets are held in the form of government securities. Lending is mainly short-term in nature - the majority of loans are current.

Banks are also typically high-cost operations in due to a combination of factors, including the small absolute size of banks and banking systems; low income levels, large informal sectors, and low levels of financial literacy.

However, new forces are at work on the continent: targeted policy reforms are beginning to appear, supporting new payment system infrastructure, improvements in
creditor rights and the evolution of information and communication technologies has already shown its potential to widen access to financial services - especially for rural populations.

There is also significant scope for rapid expansion across borders with pan-African banking groups. The development of banking systems in many markets is impeded by the small economic size of national markets, however regional economic integration holds out the prospect for escaping the disabilities of small domestic market size.

East African property market to attract US$800 million

  • The region's property market is to get a boost of over US$800 million in capital investment after two real estate investment trusts (Reits) and several private equity firms announced their entry into the market
  • Stanlib has issued its I-Reits public offering of US$125 million, targeting both institutional investors and pension funds; Growthpoint Properties has announced its intention to enter the regional market through a pan-African fund and aims to raise US$500 million to invest in the real estate sectors in Uganda, Kenya and Tanzania
  • These new players are looking to invest in shopping malls, offices, hotels and industrial properties

New investment regulations boost Namibian private equity

  • New regulations implemented in Namibia requiring institutional investors to invest a minimum percentage of their assets into unlisted assets will provide a significant boost to private equity in the country
  • New regulations prescribe that long-term insurance companies and pension funds must now invest a minimum of 1.75 per cent of their market values domestically into unlisted investments
  • This is a trend that has been seen across a number of African countries in the last few years, including Nigeria and South Africa