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June 2020: Update on recent developments for investors across East Africa

  • Market Insight 8 June 2020 8 June 2020
  • Africa

  • Corporate

In this article, we highlight some of the key recent developments investors should be aware of across various sectors in East Africa. In this month's update you will find information on the rise of digital payments in Rwanda, the changing landscape of medical services delivery in Kenya, the steps Ethiopia is taking to prepare for a digital economy and much more.

June 2020: Update on recent developments for investors across East Africa

Key recent developments in East Africa:

Tanzania

Barrick pays first tranche of the USD 300 million settlement

The Tanzanian government has recently received USD 100 million from Barrick Gold Corporation as the first tranche payment of the USD 300 million cash component of the recent restructuring. It is reported that this initial payment will be followed with five equal USD 40 million annual payments.

The other news related to the above is that the Tanzanian government has issued an export permit to allow the export of the 277 mineral concentrates containers held in Dar es Salaam since 2017.

The above appears to be the implementation of the deal that was entered into between the Tanzanian government and Barrick Gold Corporation earlier this year. As a result of this deal a joint venture company called Twiga Minerals Corporation was created in which the government holds a 16% free carried interest. This is in line with the amended Mining Act that requires the government to be given not less than 16% free carried interest in every company that holds a mining licence or a special mining licence.

Works on the East African Crude Oil Pipeline to commence next year

Following on from the Tullow and Total SA deal which was announced in April 2020, further positive news has been announced in relation to the Lake Albert oil project. While addressing the Tanzanian parliament last month, the Energy Minister, Dr Medard Kalemani announced that the construction of the Hoima to Tanga crude oil pipeline is expected to begin in April 2021.  

According to Dr Kalemani while the parties await the final investment decision in relation to the project, the priority during the forthcoming financial year is to ensure the finalisation of the negotiations of the following key project agreements: Host Government Agreements, Shareholders' Agreement, Land Lease Agreement and the Ports Agreement.

Uganda

Locally made phones exported to Morocco

Last month, the Minister for Finance, Investment and Privatisation witnessed the launch of a new project for mobile phones made in Uganda by SIMI Technologies, a Chinese-owned company. These phones are sold in the Ugandan market already and are now being exported to Morocco as well. 

SIMI Technologies is Uganda’s first phone and laptop manufacturing plant. The company employs over 400 youths and is helping build local capacity through skills transfer. 

In an effort to fight the Covid-19 pandemic, the company also began manufacturing protective eyewear and digital temperature guns which will sell for approximately USD 13. 

Uganda opens up the power sector for private investors

Earlier last month, Uganda announced that it is opening up its electricity sector for private investors but only for the transmission business. 

Internal reports from March 2020 established that Uganda’s power transmission sector requires at least USD 2.5 billion worth of fresh investment over the next 7 years. One of the identified risks in the report is that while increased power generation capacity will become available as new power plants are completed – it is important that the requisite power lines are also installed.  

The Electricity Regulatory Authority have confirmed that the government is exploring the possibility of opening up electricity transmission to private investment but has not provided a time when tenders will be issued. 

The generation of electricity in Uganda is set to increase substantially with the likes of China’s Sinohydro Corporation commissioning a 600-megawatt power plant.

Rwanda

Shareholders of the Bank of Kigali (BK) Group to receive dividends despite ongoing challenges

As Rwanda continues to deal with ongoing economic and social headwinds, BK remains in a strong enough financial state to recently approve dividends of RWF 14.4 (approx. USD 0.015) per share for the year 2019. This payment will only be made once the regulator, the National Bank of Rwanda gives its stamp of approval. The payment will likely occur in 2021.

While certain other global financial institutions are suffering - BK is in a strong capital position having made profits of RWF 37.3 billion (approx. USD 39 million) in 2019. 

The Rwandan government has also set aside economic recovery funds of USD 200 million to support BK’s clients who operate in the tourism and hospitality sector.

Digital payments grow exponentially in Rwanda

Following instructions from the National Bank of Rwanda to mobile network operators (MNOs) to waive fees on cashless transactions in Rwanda, mobile money transaction amounts increased from USD 11 million to USD 25.6 million in just one week (following the imposition of the lockdown in March). 

While MNOs are currently bearing the brunt of this waiver, it is likely to be a temporary measure during the lockdown period.

Kenya

The changing landscape of medical services delivery in Kenya

Telemedicine advancements in Kenya continue as Covid-19 healthcare professionals can evaluate, diagnose and treat patients at a distance - thus reducing the risks of infections.

While there are barriers to growth of innovative telemedicine options such as cultural beliefs, available infrastructure, costs, awareness and lack of policy to regulate telemedicine, there is still potential for significant growth. 

There are now medical consultancy services such as Dial Daktari, (translates to Call a Doctor) which provides convenient and subsidised access to medical consultations via smart phones. 

Remote access to doctors will likely be a continued solution even in a post-COVID-19 world because of its convenience.

Retail tech platform receives USD 350 000 funding

Mesozi Group, a Kenyan tech company has landed a USD 350 000 investment to fund its platform MarketForce 360.

Mesozi Group stated that the investment would go into their flagship product, MarketForce 360, which is a field sales and distribution automation software platform. The platform allows clients to estimate demand and tailor sales, distribution and marketing efforts based on real-time market trends and consumer purchasing habits. The Group also has other products including an online travel booking service Cloud9xp.

In spite of the current economic climate, the investment comes from a number of global venture capital companies including Viktoria Business Angels Network (VBAN) and Growing Africa Capital. This shows that venture capital companies still have a large appetite for investment for viable products. 

Ethiopia

Telecoms operators invited to invest in Ethiopia

Ethiopia has officially invited foreign telecommunication companies to express interest in acquiring a stake in the state-owned Ethio Telecom. According to the Ethiopian Communications Authority (ECA), the country intends to sell up to 40% stake in Ethio Telecom. It is also understood that 5% of the stake in the company will be offered to the public.

The ECA has also indicated that two nationwide full-service telecommunications licences are available to the interested foreign companies – with a response required by 22 June 2020. 

According to the reports in the 2018/2019 financial year Ethio Telecom generated approximately USD 1.1 billion in revenue and reported a gross profit of approximately USD 722 million. Ethio Telecom is estimated to have more than 43.6 million customers across the country.

Ethiopia prepares for a digital economy

With a view of further digitising its economy, Ethiopia has proposed to form the national Digital Economy Council (Council). It is understood that amongst other things the Council will advise the government in relation to the process of transforming the Ethiopian economy into a digital one and also oversee the legislation process of laws for e-transactions and e-government services.

Whilst the bill proposing for the formation of the Council was recently tabled in the parliament, it is hoped that once this process is streamlined - in five years, approximately 70% of the population will be able to use digital transactions.

Further information

If you would like further information on any issue raised in this update please contact Michael Strain or James Pius.

Clyde & Co has the largest “on the ground” presence of any international law firm in East Africa. From our hub in Dar es Salaam, Tanzania, we act as international counsel on transactions across East and Southern Africa. Our team has the ability to advise across the full spectrum of corporate transactions, including cross border M&A and private equity investments and exits.

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