Cash Crisis = Fintech Opportunity
In today’s email:
Fintech: The opportunity in a cash crisis
Infrastructure: BlackRock’s moves in Africa
Chart: African Economies in 2023
Deal Roundup: Notable deals for the week
Cash Crisis = Fintech Opportunity
What happened: The Central Bank of Nigeria introduced a new Naira Exchange Policy, aimed at reducing liquidity in the economy and encouraging a cashless society.
The implementation, timelines and motives are still been questioned and the impact felt across the economy, more strain on existing banking infrastructure, slow down in informal transactions and goods and services price increase leading to the current inflation rate of 21.91% in Feb 2023.
The possible silver bullet
While questioning the policy, data from Nigeria Inter-Bank Settlement System paints a different picture :
Point of Sales transactions increased by 40.69% to N807.16bn in January 2023 from the N573.72bn transactions in January 2022.
Total NIP transactions for the period rose by 45.52 % year-on-year from N26.65tn as of January 2022 to N38.77tn as of January 2023.
The usage of electronic channels for transactions grew by 45.50 % year-on-year from 438.48 million times to 638 million times in the period under review.
Why does it matter: The informal sector is becoming more receptive to digital payment channels. Local transport service providers and rural market traders are using POS terminals to conduct business. The opportunity presented ranges from providing new PoS terminals targeted at the informal sector to building payment capacity and infrastructure that augment or improve existing ones.
BlackRock’s Climate Fund makes its first investment in Africa.
What happened: American multinational investment company BlackRock has made a big play in the African power sector with the acquisition of a stake in Kenya-based Lake Turkana Wind Power, the continent’s largest wind farm project from Finnfund.
The €625m wind farm project began in 2014 and was connected to the national grid in 2018.
The acquisition is through BlackRock Climate Finance Partnership (CFP), with Finnfund making twice its capital investment
CFP is BlackRock’s $673m climate infrastructure investment fund which seeks to cut carbon emissions in emerging markets.
Why it matters: One of the biggest challenges most African countries face is power supply a recurring headache. Existing power infrastructures have not been updated to meet the growing demand and a funding gap exists, which global investors can fill. An efficient and reliable African power infrastructure will have a positive impact at a social and economic level.
African Economies in 2023
The International Monetary Fund (IMF), has predicted that some African countries will experience two-digit growth in 2023, considering the current global economic uncertainty.
1. Angola - Africa’s second-largest oil producer is expected to benefit from higher oil prices to become the third-largest economy in sub-Saharan Africa. The IMF has projected that Angola's GDP will expand by 8.6% this year, reaching $135 billion.
2. Ethiopia - One of Africa's fastest-growing but most closed economies. Ethiopia is going through economic reforms aimed at making it the fourth-largest economy in sub-Saharan Africa overtaking Kenya. The IMF predicts that the Ethiopian economy will expand by 13.5% and GDP reaching $126.2 billion this year.
3. Nigeria - The largest economy in sub-Saharan Africa will continue to grow and the IMF expects Nigeria's GDP to rise to $574 billion this year.
4. South Africa - The second-largest economy in sub-Saharan Africa, with a projected GDP of $422 billion this year.
5. Kenya - One of the leading economies of Africa. The IMF predicts that Kenya will experience a slower growth of 2.4% and its GDP will reach $117.6 billion this year.
M & A :
Mauritius-based Africa Capitalworks has acquired a 51.18% majority stake in Uganda-based Cipla Quality Chemical Industries Limited. The deal is subject to the approval of the Capital Markets Authority and the Uganda Securities Exchange.
Sanlam’s private equity arm has, through its SPE Mid-Market Fund 1, acquired a controlling interest in SkipWaste, a leading provider of integrated waste management solutions.
Endeavor SA has launched the Harvest Fund III and is set to raise R500m to invest in tech-enabled businesses in Kenya, Nigeria and Egypt that are scaling globally.
Pan-African climate-centred private equity firm Inspired Evolution Managers Limited has successfully completed the first close of its third fund Evolution III Fund with $199.4 million. The fund is targeting a capitalisation of $400 million.
Private Debt :
Pan-African alternative investments firm TLG Capital has partnered with Nigerian Fintech startup OnePipe, to provide credit services to the informal sector in Nigeria through a collateralised credit facility worth N2.225 billion.
Global financial services provider Apex Group is planning to acquire South Africa-based Efficient Group, the holding company of Boutique Collective Investments (BCI) and Boutique Investment Partners (BIP) resulting in an exit for Apis Partners’ first private equity fund.
Mediterrania Capital Partners (MCP) a private equity firm has led a consortium who have made a MAD 750 million (USD 72 million) strategic minority stake investment in Moroccan pharmaceutical company Laprophan. The consortium also included German development finance institution DEG, and its Dutch and French counterparts, FMO and Proparco, respectively.
The European Investment Bank has committed a $15 million (EUR 14 million) equity investment into DWM Asset Management LLC for providing private equity to microfinance institutions and other inclusive financial institutions.
Venture Capital :
Cairo-based venture capital firm Flat6Labs has launched a new Africa-focused seed fund to make regional investments in start-ups across East and West Africa
Morocco’s state-owned investment fund, CDG Invest, through its 212Founders program has invested MAD 6.3 million ($607k) in Morocco-based Artificial Intelligence (AI) and deep learning start-up Palm.
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