Atta Africa Financial Update

Executive summary for the week of 26-Apr-16 to 03-May-16 (week 18)
Africa private equity exits nearing a decade high.

Private equity exits in Africa reached a 9-year high last year according to data from EY and the African Private Equity and Venture Capital Association (AVCA).

Private equity firms exited 44 companies in 2015, an increase from 39 in both 2014 and 2013. PE firms investing in Africa continue to outperform public markets - African private equity’s strategic and operational improvement measures have resulted in returns significantly greater than the MSCI Emerging Markets Index over the period (2007 to 2015).

Financial services remained the most common sector for exits in 2014 and 2015 (24%). Private equity firms surveyed said the financial services, retail and consumer products, and education sectors were the most interesting sectors for future investment, as they are closely related to Africa’s rising middle class.

Fact: South African Henri Johnson invented the speed gun - but not originally for speeding motorists - he invented it for use in Cricket!

Carlyle and Atlas Mara preparing bid for Barclays Africa

  • Bob Diamond’s investment vehicle Atlas Merchant Capital has teamed up with major US buyout firm Carlyle Group to put together a bid for Barclays Africa Group (Barclays PLC owns 62.3% in Barclays Africa Group)
  • Atlas Mara has teamed up with Carlyle, motivated in part by the limits imposed by the AIM index (where Atlas Mara is listed) prohibiting such a large bid
  • UK banking regulations have made it increasingly burdensome for large banks to own assets in multiple jurisdictions and Barclays’ sale of the African unit will cut the rising costs of complying with this regulation

Vantage closes deal in Namibia

  • Vantage Capital, a South African based mezzanine fund manager, has provided a debenture of N$80m (US$5.52m) to United Africa Group (UAG), an established hospitality and property-owning group in Namibia
  • The funding is being used to support the group’s equity contribution for the construction of a new Hilton Garden Inn, a 181-key three-star hotel to be located in the heart of the Windhoek city centre on Freedom Square
  • The group has grown rapidly to become one of the largest property-owning and hospitality groups in Namibia, with 10 existing hotels in its portfolio
  • Growing tourism demand in Namibia has been a key driver behind the hotel construction project

Bank sector loan defaults hit a ten-year high of US$1.7 billion

  • Loan defaults in the banking sector have reached a decade high as Central Bank of Kenya (CBK) continues to put pressure on commercial lenders to adhere to regulations on non-performing loans
  • NPLs currently stand at eight per cent of the total loans issued by all banks said CBK, up from 6.1 per cent in December and 4.6 per cent in June
  • Banks have been under increased pressure to adhere to set regulations following change of regime at CBK
  • Chase Bank, now under receivership, National Bank and Bank of Africa are some of the lenders that reported spikes in bad loans last December
  • Some of the bad loans in the sector have been linked to insider lending. CBK has ordered fresh audit of insider loans across the sector

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