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DealMakers AFRICA Q1 2025 issue
THORTS
Coining the future: Kenya’s digital asset revolution
by Njeri Wagacha and Wambui Kimamo | Cliffe Dekker Hofmeyr
Africa’s fintech sector: a story of growth, innovation and opportunity
by Liesl Olivier | Webber Wentzel
Regulatory predictability: A key priority for African Competition Authorities amid investor uncertainty
by Nazeera Mia | Bowmans
The untapped power of M&A to save Kenyan businesses
by Martha Mbugua | Cliffe Dekker Hofmeyr
CONTENTS
FROM THE EDITOR'S DESK
The return of Donald Trump to the US presidency early in the quarter introduced uncertainty
and recalibration in US-Africa investment dynamics, which is clearly reflected in the data
captured by DealMakers AFRICA.
In the three months to end March 2025, deals on the continent (excluding South Africa and failed deals) numbered 75, valued at US$2,17 billion – this against 125 deals ($3,7 billion) in 2024, 133 deals ($3,69 billion) in 2023, and 202 deals ($9,8 billion) in 2022 – a noteable decrease over the period. Private equity investment, a key driver in M&A on the continent, fell 40% in Q1 year-on-year (pg 4).
On a regional level, East and North Africa were the most active, accounting for 55% of deals captured in the quarter (pg 3).
Kenya remains the anchor for deal activity (12 deals) in the East African region, with the focus on financial services, healthcare and agritech. Tanzania and Uganda saw increased investor interest in infrastructure, manufacturing and logistics. East Africa’s energy transition saw an increase in M&A deals in the solar, wind and hydro sectors.
Egypt remained the most active country in North Africa (14 deals), followed by Morocco (4 deals) and Tunisia (3 deals), with activity in the financial services, logistics and consumer goods sectors, and venture capital and private equity interest in fintech, healthcare and renewable energy. M&A activity in West Africa was dominated by Nigeria, which accounted forc.65% of deals announced in the region. Africa represents a hotbed for fintech innovation. In fact, fintech was (by far) the
dominant sector, accounting for c.50% of total investment for the quarter. Mobile connectivity and creative business models are leapfrogging traditional solutions, and one such fintech deal was LemFi’s $53 million raise which ranked in the top deals by value for the period (pg 6). Interestingly, and unusually, the top deals by value reflect a broad range of sectors from mining to heavy industrials, fund raising and agriculture.
In the remaining quarters of 2025, M&A is likely to be influenced by whether the US clearly defines its Africa policy; but until such time, will likely remain subdued and inconsistent. However, sectors such as energy independence, critical minerals and digital infrastructure may still see interest, with dry powder waiting to be deployed in sectors with strong fundamentals and resilience to macroeconomic volatility.
Despite global politics and potential trade wars, Africa provides massive market potential with good demographics and rapid urbanisation.
The rise of cryptocurrencies as an investment, the power of M&A as a strategic solution for businesses in distress, the critical role of regulatory predictability, and the evolution of Africa’s fintech are the basis of the articles in this issue, which make for interesting reading.
THORTS
Coining the future: Kenya’s digital asset revolution
Njeri Wagacha and Wambui Kimamo
Kenya’s financial landscape has long been dominated by traditional banking institutions. However, with the rise of cryptocurrencies, regulatory bodies have gradually shifted their stance. In 2015, the Central Bank of Kenya (CBK) issued a public notice warning against the use of virtual currencies, citing their unregulated status and lack of government backing. This position was echoed by the Capital Markets Authority (CMA) in 2018, which cautioned against participating in initial coin offerings (ICOs) due to the high risk of fraud and lack of investor protection. The CBK reaffirmed its position in a further notice issued in 2020.
Despite these warnings, cryptocurrency adoption among Kenyans has grown. The Kenya Revenue Authority (KRA) reported that between 2021 and 2022, cryptocurrency transactions amounted to approximately KES2,4 trillion – nearly 20% of the country’s GDP – demonstrating widespread public engagement with cryptocurrencies. The government’s recognition and acceptance of virtual currencies followed suit in 2023 when it introduced the Digital Asset Tax (DAT), imposing a 3% tax on income derived from the transfer or exchange of digital assets. This marked Kenya’s first formal approach to regulation, signalling a shift from caution to structured oversight.
However, the regulatory framework for crypto assets in Kenya remains uncertain due to the absence of specific definitions or classifications of digital assets. The CMA provides the legal foundation for securities regulation, but its definition of securities does not explicitly cover cryptocurrencies. Kenyan courts have interpreted the law more broadly in the Wiseman Talent Ventures case, where Wiseman attempted to conduct an initial coin offering of its token, KeniCoin. The court applied the U.S.-developed ‘Howey Test’ (1) to classify the offering as an investment contract , thus bringing it under the jurisdiction of the CMA. The decision emphasised consumer protection and recognised the potential mandate for the CMA to regulate the digital asset space in the absence of a legal regime.
Njeri Wagacha
Wambui Kimamo
Despite this, the Wiseman ruling did not establish a definitive classification framework for cryptocurrencies, as the court refrained from providing abstract criteria for determining when a digital token should be regulated under the CMA Act. The court also noted that the KeniCoin token bore characteristics of a currency, which would ordinarily fall under the purview of the CBK, which has an exclusive mandate over issues related to currency and payment systems. This overlapping consideration further illustrated the lack of clear boundaries between the CMA and CBK’s regulatory mandates in relation to cryptocurrency. While the judgment highlighted the court’s prioritisation of consumer protection, it also highlighted the urgent need for a clear regulatory framework for digital assets in Kenya.
IMF MARKET ANALYSIS
In December 2024, at the request of the CMA, the International Monetary Fund (IMF) conducted an analysis of cryptocurrency activity in Kenya. It highlighted the absence of cryptocurrency specific regulations, with oversight based on existing CBK and CMA mandates – an approach that was limited and not legally binding, as outlined in the Wiseman case. This regulatory gap has contributed to the rise of crypto-related scams and criminal activity. The IMF gave various recommendations, including:
• Conduct a comprehensive market analysis on the state of Kenya’s crypto market and identify financial, market and consumer protection risks;
• Develop crypto-specific regulations aligned with international standards through collaboration with foreign regulators, to manage risks associated with international exchanges while accommodating Kenya’s unique context to maintain financial stability; and
• Strengthen cooperation across the relevant authorities, and invest in adequate technical and human resources to ensure effective oversight.
VIRTUAL ASSET SERVICE PROVIDER BILL 2025 (VASP BILL)
The Kenyan government has since embraced the sector, as seen in the draft National Policy on Virtual Assets and the VASP Bill, introduced by the Blockchain Association of Kenya in March 2024.
The VASP Bill proposes a comprehensive regulatory framework to promote financial stability, market integrity and consumer protection while addressing anti-money laundering (AML) / combating the financing of terrorism (CFT) risks. It designates the CBK and CMA as the key regulators responsible for the licensing and oversight of VASPs. Key provisions include licensing based on eligibility, financial health, cybersecurity and public interest; mandatory Know Your Client (KYC) procedures, reporting of suspicious transactions, a local presence, robust governance structures; and severe penalties for non-compliance, including up to KES10,000,000 for individuals and KES20,000,000 for entities, or ten (10) years imprisonment.
Public participation concluded on 29 January 2025, with the following feedback:
• The 3% tax on the transaction amount should instead be on gains or transfer fees;
• Introduce tiered licensing to accommodate multi-service providers and eliminate regulatory duplication; and
• Harmonisation with international standards is required, to support cross border transactions and global competitiveness.
THE BENEFITS OF CRYPTOCURRENCY ADOPTION AND REGULATION
Regulatory oversight plays a key role in protecting investors and ensuring market integrity. The VASP Bill aims to enhance consumer protection, prevent fraud, and align Kenya with international standards. If effectively enforced, the framework could boost investor confidence, attract innovation, and position Kenya as a leading crypto investment hub.
The VASP Bill will formalise tax compliance by requiring licensed entities to report and remit the DAT, replacing the current reliance on voluntary contributions. In the financial year ending June 2024, the KRA collected KES10 billion in DAT from just 384 cryptocurrency users, highlighting the significant capacity for revenue generation for the government.
In 2024, Kenya was grey-listed by the Financial Action Task Force for inadequate measures against money laundering, terrorist financing, and unaddressed crypto-related risks. The implementation of the VASP Bill demonstrates Kenya’s commitment to strengthening its AML/CFT framework, as it provides comprehensive provisions to address these concerns.
Stablecoins are cryptocurrencies pegged to fiat currencies or commodities and offer price stability compared to traditional cryptocurrencies. A survey by Emurgo Africa revealed the growing adoption of stablecoins in sub-Saharan Africa, driven by local currency volatility and limited banking access. In Kenya, factors like inflation, currency depreciation, a strong fintech ecosystem, and widespread internet access have accelerated stablecoin use. Platforms like Binance have leveraged M-Pesa to enable stablecoin-fiat exchanges, expanding financial access in remote areas. Stablecoins are increasingly viewed as a cost-effective, reliable alternative for value storage and currency conversion, offering protection against inflation and currency instability.
IN SUMMARY
Just as M-Pesa transformed the way in which Kenyans interact with money, cryptocurrencies are set to further revolutionise the financial sector by offering decentralised, borderless and digital alternatives. With Kenya’s history of embracing technological advancements and its large, digitally literate population, the country is well-positioned to become a key player in the global cryptocurrency market. As fintech startups focused on cryptocurrency continue to penetrate the market, future collaborations between traditional banks and blockchain companies are likely, fostering a more inclusive and efficient financial ecosystem.
Wagacha is a Director and Kimamo a Trainee Lawyer | CDH Kenya
1. A contract which involves the investment of money or other property with the expectation of profit or gain based on the expertise, management or effort of others.
THORTS
Africa’s fintech sector: a story of growth, innovation
and opportunity
Liesl Olivier
Africa’s fintech evolution is a fascinating example of how a confluence of technological and customer behaviour trends can create not one, but several leapfrog moments.
The genesis of fintech’s success across the continent, especially payment providers such as Paystack, M-Pesa, Moniepoint, Mukuru, Momo Money and Flutterwave, is primarily due to the advances made in the telecommunications industry. As telecommunications providers built network infrastructure to support mobile phone access from Cairo to Cape Town, they unwittingly created the backbone that enabled feature phones and then smartphones to thrive across Africa.
It is the access created by these mobile technologies that has allowed consumers on the continent to connect to
Liesl Olivier
the global digital payments system, with PCs and laptops no longer a necessity. Before digital payments came into being, African consumers quickly adapted to new payment plans to go mobile, such as pay-as-you-go, which became available in South Africa in 1996.
In 2022, global consultancy McKinsey published a report called Fintech in Africa: The end of the beginning, where it stated:
“Our analysis shows that fintech players are delivering significant value to their customers. Their transactional solutions can be up to 80 percent cheaper and interest on savings up to three times higher than those provided by traditional players, while the cost of remittances may be up to six times cheaper.’
“Taken together with an influx of funding and increasingly supportive regulatory frameworks, these factors could signify that African fintech markets are at the beginning of a period of exponential growth if, as expected, they follow the trajectory of more mature markets such as Vietnam, Indonesia, and India.”
TELECOMS ARE BECOMING FINANCIAL SERVICE COMPANIES
Of further interest is the way in which, over the last decade, telecommunications companies have become financial service companies. Safaricom (owner of M-Pesa), MTN and Vodacom are examples of telecommunications companies that have leveraged their owned infrastructure to challenge, and often surpass, traditional banks to capture market share in the financial services sector, optimising opportunities for cross-selling.
Broadly speaking, African telecommunications providers have shown an appetite for calculated risk that their peers in Europe and North America would baulk at. Often, African providers are not just building telecommunications infrastructure at the greenfield stage, but other infrastructure taken for granted in older markets, such as roads, electricity and security, a role traditionally played by mining companies.
REGULATORY ENVIRONMENT AMONG KEY FINTECH CHALLENGES ACROSS AFRICA’S MARKETS
The fintech sector’s success across Africa’s markets does, however, run into its own challenges. According to McKinsey, the key challenges cited as stymying the continent’s fintech sector were scale and profitability, an uncertain regulatory environment, scarcity, and corporate governance.
Speaking to our clients operating across the continent, the regulatory challenge alone is one that poses significant delays and uncertainty for businesses.
Central banks and bodies that regulate the fintech sector play an outsized role in shaping national sector development. In fact, recent regulatory changes made by the Central Bank of Nigeria reportedly helped their fintech sector grow by approximately 70% in 2024.
Key to regulatory success is forming or leveraging existing relationships with regulators based on trust and mutual respect, which takes years to cultivate. Webber Wentzel partners with our clients to maintain and manage these relationships, working with specialist local firms and on-the-ground teams versed in the complexities of financial services and digital regulation.
On occasion, working with regulators also requires leveraging our legal expertise beyond the financial services sector, which is why it’s advantageous to partner with a full-service firm. While legal text can be interpreted in a limited number of ways, having the right personnel and expertise in the room is as much a success factor as legal knowledge, as noted by select clients.
INSURANCE – THE NEXT EXCITING MARKET
When speaking of fintech in Africa’s different markets, what is materially being referred to is Africa’s digital payments landscape. It has been the sector’s growth engine, with Africa accounting for around 70% of global mobile money payments in 2022.
But with payments reaching maturation, what’s the next frontier? According to some of our clients in the financial services sector, insurance is the next great fintech opportunity across the continent.
In 2022, the insurance penetration rate in East Africa’s various economies was dismally low: 2.14% in Kenya, and 0.62%, 0.74%, and 0.3% in Tanzania, Uganda, and Ethiopia respectively. The penetration rate of life insurance continent-wide was reportedly 1.6% in 2022, with South Africa accounting for 79% of total life insurance premiums in Africa.
Like the payments landscape, success will depend on having a nuanced understanding of local market conditions and consumer behaviour, in addition to conforming to the legal framework. For example, in Nigeria, a startup called WellaHealth has partnered with pharmacies to provide insurance products to pharmacy customers, knowing that most Nigerians will visit a pharmacy first, and self-treat before seeing a doctor.
As digital penetration continues to make inroads outside Africa’s largest markets, Africa’s fintech leaders will likely be joined by innovative newcomers in the next few years.
Olivier is a Senior Associate | Webber Wentzel
Regulatory predictability: A key priority for African Competition Authorities amid investor uncertainty
THORTS
Nazeera Mia
In an era marked by geopolitical and economic volatility, the call for legal and regulatory certainty in African markets has never been louder. For investors navigating these markets, particularly in the context of competition law, predictability is paramount. African competition regulators, to their credit, are increasingly cognisant of this need, and are actively working to deliver clear, coherent, predictable and consistent regulatory frameworks.
HEIGHTENED COMPLEXITY
Regulatory unpredictability can take many forms—chief among them, overly complex legal frameworks and insufficient clarity on their interpretation. These can inadvertently lead to regulatory fragmentation, overlapping mandates and, ultimately, a chilling effect on investment and competition.
Nazeera Mia
At last count, 35 African countries had enacted national competition laws, with additional layers emerging at the regional and continental levels. While this expansion reflects growing regulatory maturity, it has also heightened complexity. Key issues include the need for clarity around concurrency of jurisdiction and the harmonisation of enforcement mechanisms and procedural guidelines.
TOWARDS REGIONAL ONE-STOP SHOPS
Regional one-stop shops for merger control provide a single, centralised authority for merger review in transactions that span multiple jurisdictions. This gives transacting parties a clear and predictable pathway for notification and approval. Instead of having to navigate a patchwork of differing national laws, filing requirements and merger review timelines, parties can anticipate a uniform process, reducing legal uncertainty and procedural surprises.
In the COMESA Common Market, significant changes are on the horizon, as the COMESA Competition Commission (CCC) intends to adopt revised Competition Regulations, intended to come into effect during the third quarter of 2025. The revised regulations will reaffirm the CCC’s exclusive jurisdiction over mergers with a regional nexus, reinforcing its role as a single point of contact for such filings.
The East African Community Competition Authority (EACCA), while not a new institution, is set to assume a similar role for its member states — Burundi, the DRC, Kenya, Rwanda, Somalia, South Sudan, Uganda and Tanzania. Amendments to the EAC Competition Act and Notices relating to merger control were gazetted in December 2024, introducing yet another regional competition law regime that transacting parties need to navigate.
Notably, the CCC and EACCA share jurisdiction over Burundi, the DRC, Kenya, Rwanda and Uganda. That said, the CCC and EACCA are in discussions to resolve the issue around dual jurisdiction, and to avoid requirements for merging parties to notify in both jurisdictions.
A parallel development is occurring in West Africa. In 2024, the ECOWAS Regional Competition Authority (ERCA) introduced new legal instruments, further clarifying the region’s merger control framework. Under the expanded framework, cross-border mergers that involve at least two member states and meet prescribed financial thresholds are mandatorily notifiable to ERCA. The objective of ERCA is clear: to avoid duplicate filings at the national level, thereby increasing procedural efficiency. The Nigerian Federal Competition and Consumer Protection Commission (FCCPC), however, has indicated that they take an opposite view and still require notification under the national merger control regime. ERCA and the FCCPC are in discussions to resolve the issue around dual jurisdiction. Also to be noted is that a number of ECOWAS member states are also member states of the West African Economic and Monetary Union (WAEMU), where competition law is regulated at a regional level by the WAEMU Commission.
ENHANCING LEGAL COHERENCE THROUGH COLLABORATION AND CAPACITY BUILDING
It is widely acknowledged that the development of competition law frameworks across Africa must be rooted in consultation and stakeholder engagement. Legal certainty is best achieved through a participatory process involving regulators, policymakers, the private sector and the legal community.
Moreover, alignment with internationally accepted best practices — whether in merger review standards, investigative procedures, or remedial measures — will enhance coherence and reduce the risk of fragmented enforcement across jurisdictions.
Institutional unpredictability also warrants attention. Economic constraints in some jurisdictions may hamper regulatory capacity, occasionally leading to reactive or inconsistent decisions. Political transitions, too, can disrupt enforcement priorities or redirect focus to other policy imperatives, further complicating the competition regulatory landscape.
Regional regulators are well aware of the structural disparities among member states — be they in the form of varying competition law maturity, resource constraints, linguistic diversity, or differing national priorities.
Strengthening the authority and autonomy of regional bodies in overseeing cross-border mergers represents a constructive step toward reducing this variability.
In COMESA, for example, the CCC has been a key player in building a coherent and effective enforcement ecosystem across the COMESA Common Market. Through strategic collaboration and robust capacity-building programmes, the CCC has significantly advanced the institutional and procedural capabilities of national competition authorities within Member States. In ECOWAS, ERCA intends to do the same. ERCA has designed a curriculum to aid capacity building in Member States and intends soon to roll out training for competition authorities in Member States. ERCA is also in the process of reviewing the laws of Member States with the aim of modifying, updating and harmonising the laws with ECOWAS instruments.
THE ROLE OF LEGAL PRACTITIONERS IN ADVANCING PREDICTABILITY
The legal profession plays an indispensable role in fostering certainty in competition regimes. Where legislative gaps or ambiguities exist, lawyers can help shape outcomes through constructive dialogue with regulators, the provision of legal opinions and, where necessary, litigation. Judicial pronouncements in precedent-setting cases also serve as catalysts for regulatory reform or prompt reconsideration of administrative decisions.
IN SUMMARY
Recent regulatory developments across Africa — especially those spearheaded by regional authorities — reflect an encouraging recognition of the critical role predictability plays in attracting and sustaining foreign investment. For legal practitioners, investors and regulators alike, this evolution signals a shared commitment to creating a more stable, transparent and investor-friendly competition law environment on the continent.
Mia is a Knowledge Lawyer | Bowmans
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THORTS
The untapped power of M&A to save Kenyan businesses
Martha Mbugua
Mergers & Acquisitions (M&A) are gaining traction in Kenya, as businesses look for strategic ways to navigate financial pressures and unlock growth opportunities.
M&A activity in Kenya has seen a notable upsurge over the past two years, marking a strong rebound from the slowdown caused by the COVID-19 pandemic. Meanwhile, the World Bank forecasts a 5.2% economic growth rate for Kenya between 2024 and 2026, driven largely by a strengthening private sector and rising business confidence.
While still relatively underutilised in Kenya, M&A offers a structured path for companies to restructure debt, preserve operations, and protect stakeholder interests. It prevents catastrophic liquidations and is seen as a viable business rescue strategy. But for an M&A deal to work for this purpose, compliance with Kenya’s legal framework is essential.
Martha Mbugua
The Insolvency Act sets out the steps that distressed companies must take, beginning with notifying creditors and seeking their approval for proposed restructuring plans. Regulatory oversight is then provided by bodies such as the Competition Authority of Kenya (CAK), which evaluates the deal against certain thresholds and sector-specific regulators.
Most critical of all, the interests of creditors, shareholders and other stakeholders must seamlessly align. It is up to the company directors to ensure that the deal is in the best interest of all parties, balancing debt repayment while preserving operational value.
The benefits of M&A are clear, but the path to get there is not without its challenges.
Time sensitivity is a major hurdle. For companies on the brink of insolvency, delays can exacerbate financial decline, leaving little room for thorough due diligence or optimal deal structuring. Negotiations in distressed scenarios are equally complex. Multiple stakeholders, each with differing priorities, must find common ground. Then, parties must wade through one or more regulatory approval processes that seriously slow down transactions, further compounding time pressures.
Debt restructuring is another critical factor. Many distressed companies carry significant liabilities, making it challenging for shareholders to negotiate favourable terms. Creditors may resist debt-to-equity conversions or extended repayment plans, which can undermine the viability of a deal.
Debt restructuring often forms the backbone of distressed M&A transactions. Common approaches include debt-to-equity swaps, extended repayment terms, or asset-based settlements. These strategies reduce the financial burden on the distressed company, while ensuring creditors recover part of their investment.
Historically, liquidation and receivership have been the go-to solutions, but M&A presents a compelling alternative. By leveraging partnerships, attracting private equity investment, and embracing innovative debt solutions, companies can turn potential collapse into an opportunity for revitalisation.
With increased activity from private equity firms and venture capitalists in Kenya, the value of scooping up distressed businesses becomes clear as there is untapped potential. These are the investors who add operational expertise on top of their capital, adding real weight and intention to the turnaround.
For Kenyan businesses, particularly small and medium-sized enterprises, it’s time to take comfort in M&A. In truth, even the most financially troubled local firms can attract investment and acquisition interest, so long as they present a compelling value proposition and align with strategic goals.
No more is M&A a tool reserved for multinational corporations. It is a viable strategy for homegrown companies seeking survival, growth and renewal. With careful planning, transparent communication and a willingness to adapt, businesses can unlock the potential of M&A.
As business evolves, it’s not farfetched to see M&A becoming a cornerstone for reshaping industries, saving jobs and revitalising key sectors. For forward-thinking leaders, the time to explore M&A as a strategic solution is now. By embracing this approach, Kenyan businesses can navigate financial distress with confidence, ensuring long-term sustainability in an increasingly competitive market.
Mbugua is a Partner in Corporate & Commercial | CDH Kenya