DealMakers AFRICA Q3 2020
From the editor's desk
There has been much hype around the implementation of the African Continental Free Trade Area (AfCFTA) agreement, which was first presented for signature as far back as March 2018. Though it has been touted as the way to revolutionise trade across the African continent, by increasing the focus on domestic rather than international trade, the coronavirus pandemic has stalled the momentum of the agreement, which was to be effective from July 2020. The new implementation date is January 1, 2021. The World Bank, in its October 2020 issue of Africa’s Pulse, claims that the agreement could potentially boost Africa’s output by US$211 billion by 2035, with the largest increases in the services sector ($147 billion), manufacturing ($56 billion) and natural resources ($17 billion). However, implementation now poses certain risk for some African countries, as the playing fields look very different now than they did prior to the pandemic and, as a result, they may find it difficult to adjust import and export tariffs in the short term.
Africa’s appeal has not been dampened by COVID-19, and it is still thought to be the fastest-growing market, where opportunities for venture capitalists and private equity funds abound. According to the IMF, Africa is home to more digital financial services deployments than any other region in the world. African tech startups have continued to grow in the face of economic challenges, with the most active sectors being information technology, finance and agriculture. The fact of the matter is that plenty of investors, both local and international, have funds that need to be invested and, while valuations have fallen, COVID-19 has changed very little from an investor perspective. According to the World Bank, approximately 95% of all consumer payments in Africa are still being made in cash, with more than half the continent’s adult population lacking access to a formal account. The asset class has a proven track record for being able to outperform others during times of weak economic growth and market volatility, and 2020 is on course to beat 2019’s record, to become the best yet for investment.
Analysis of Q1-Q3 merger and acquisition data collected by DealMakers AFRICA (excluding South Africa) shows the total value of deals at US$8,1 billion for the period – up $1,7 billion on H1 numbers. If foreign deals are excluded (foreign deals are recorded when a company being acquired is based in a non-African country but has subsidiaries or assets in one or more African countries), the value drops to $7,54 billion from 334 deals (pg 3).
By region, the most active was West Africa with 100 deals, of which 63 were recorded in Nigeria with a value of $230 million. East Africa recorded 93 deals with Kenya, unsurprisingly, the most active with 53 deals. By value, North Africa led the tables at $2,8 billion off 54 deals; Egypt led the region with $2,65 billion off 38 deals. The list of top ten deals by value for Q1-Q3 2020 (pg 4) reveals that five deals during the period July to end September made the list. The top two, by value, were the disposal by Cairn Energy of its stake in the Sangomar Offshore Contract Area in Senegal – valued at $300 million – and the disposal by Total Gabon of 7 mature, non-operated offshore fields to Perenco – valued at c.$290 million.
The private equity deals included in the regional numbers, of which the values are, for the most part, undisclosed, were most prominent in Nigeria (35 deals) followed by Kenya (27). Investments were mainly in the tech space and across diverse sectors.
For the past two years, DealMakers AFRICA has hosted its annual Awards in Nairobi in March, at which the work by advisory firms in East and West Africa is celebrated. Plans to hold the event in Lagos in 2021 have been cancelled due to disruptions caused by the pandemic. The awards will, however, still be acknowledged and we are working on bringing a virtual event to a larger and geographically wider audience. I am, once again, grateful to our event sponsors Ansarada and Brunswick, who continue to pledge their support in recognising the work undertaken by this industry on the continent.