before the closing of the first quarter of 2012 M&A activity in Africa has hit an impressive $3.5bn from a total of 30 deals.
According to data by Mergermarket, energy and mining related activity account for the majority of African M&A, but an increasing trend of diversification in the region’s investment profile is an evident undertone. With the consumer sector registering the second highest activity level in 2011, with deals including Indian Bharti Airtel’s $10.7bn acquisition of Zain in 2010, and US retail giant Walmart’s $2.4bn purchase of a stake in South African Massmart, Mergermarket tracked 236 deals between September 2011 and March 2012 and the energy, mining & utilities, financial
services, telecommunications, transportation and consumer sectors all registered high levels of activity.
Africa is also witnessing seeming northward trend on the horizon. Investors are becoming more adventurous, venturing into other emerging markets – away the continent’s largest economy – South Africa.
Countries such as Ethiopia, Africa’s second most populous nation, are emerging as important investment destinations with the government playing a major role in facilitating an “enabling environment” for investment. Since last August there have been three privatisations of state owned brewing companies worth a combined $500m – sold to Heineken, Diageo and Duet Group.
Anticipated deals
The Ethiopian government is has doubled efforts at seeking investors to help develop a new rail network in the country. According to the adviser to the minister of industry, Mesfin Wubeshet the government is seeking international partners to help develop 2,000km of new train routes.
Ethiopia is looking to partner with international companies on the basis of a design, build and transfer turnkey arrangement provided they can mobilise the foreign portion of the investment required for any selected route.
Mr Wubeshet also indicated that the total cost of the project is expected to be “billions of dollars” but was unable to specify further. Ethiopia hopes to complete the 2000km rail network within five years, he added.
A spokesperson for Ethiopian Railways Corporation (ERC), confirmed that International consultants will be invited to bid for other projects to oversee other segments.
Walmart had recently indicated interesting in expanding to Ethiopia.
In Nigeria, Africa Finance Corporation (AFC), a Nigerian financial institution focused on financing infrastructure projects, is likely to play a role in fastracking the process of the seemingly perennial Sphinx riddle – power privatisation.
According to Folahanmi Fagbule, Associate Vice President, Origination and Coverage, by partially financing companies shortlisted for a second round of bids, the company, which recently signed an MOU with Zambia-based Copperbelt Energy Corporation Plc, will facilitate collaboration on the development and investment of power assets throughout Africa.
Copperbelt is competing in the second round of bidding for two power distribution companies being sold by the Nigerian government, under the name “The Copperbelt Consortium,” according to documents from Nigeria’s Bureau of Public Enterprises. Although the AFC deal does not include an equity or debt investment with Copperbelt, the option is still on the table.
Mr Fagbule also indicated that AFC would work with other local and foreign partners involved in the power privatisation process, in addition to Copperbelt. Bidding documents requires companies shortlisted for the 17 state-owned power distribution and generation assets to show financial
capability to acquire, upgrade and maintain the asset.
AFC is investing in projects and companies throughout Africa, Fagbule explained.
Mergermarket had previously reported that AFC planned to make one or two acquisitions valued between $30m and $40m by the end of the first quarter of 2012, with an interest in companies and greenfield projects in Kenya.
AFC takes up to a 40 percent stake in its investments through a mixture of equity, mezzanine and senior debt.
According to its 2010 annual report, the company has $1.1bn in capital and has made $732.9m in gross debt and equity investments since 2008.
