March 5, 2018

Clyde & Co / East African Investor: March 2018 Update

Clyde & Co has the largest 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 the East African region. 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.

Key recent developments in East Africa:


USD 4 billion private equity bet in Ethiopian Geothermal

U.S. Private Equity and a number of hedge funds are backing efforts by Ethiopia to significantly expand its electricity production capabilities by investing at least USD 4 billion into geothermal projects across the country.

The Ethiopian government recently signed 25 year power purchase agreements with Reykjavik Geothermal Ltd which is backed by hedge fund manager Paul Tudor Jones. The company is working on two projects (of 520 megawatts each) which will be located 250 kilometres south of Addis Ababa.

Seleshi Bekele, the Ethiopian Electricity Minister is seeking to quadruple Ethiopia's power generation by 2020, targeting 17 gigawatts. A significant proportion of this is intended for international sale, making Ethiopia a net energy exporter.

Ethiopia is Turkey's top investment destination in Africa

Statistics released by the Ethiopian Investment Commission show there are over 160 investment projects owned by Turkish companies operational in Ethiopia with an aggregate investment value of over USD 2.5 billion.

Turkish companies are largely involved in Ethiopia's textile and apparel industry, with investment having created over 30,000 jobs.

Going forward Ethiopia is continuing to work in conjunction with Turkey to secure FDI with projects expected in the steel, ceramic and construction sectors in the near future.

Hela Clothing Increasing Investment in Ethiopia

Sri Lankan company Hela Clothing opened its first factory in Ethiopia in June 2017 and has since shipped its one millionth garment and logged 70,000 hours of production at the factory.

Following this success, Hela is seeking to increase investment in Ethiopia raising its work force from 300 to 2,000 which will reduce lead times and increase output.


50 New Mining Licences to be Granted

Over 50 new mining licences are set to be granted over the course of 2018 as Rwanda looks to boost its mining sector and attract investment in the region of USD 2 billion during 2018.

The Rwandan Development Board (RDB) is expected to issue licences for Gold, Tin and Tantalum extraction and intends to see the mining sector contribute up to 5.27% of Rwanda's GDP over the course 2018 (an increase from 1.2% currently).

Rwanda Receives Record Investment

Over the course of 2017, Rwanda received a record USD 1.67 billion of investment with foreign direct investment accounting for USD 1.04 billion of the total.

This represents an increase of 30.7% as compared to the previous year and is expected to generate in the region of 38,000 jobs.

According to official data, the Construction, Mining and Infrastructure sectors received the majority of the investment, with Construction receiving the lion's share at 38%.

This increase coincides with the latest World Bank Ease of Doing Business Report which sees Kigali's position jump 15 places from the previous year.

MTN Rwanda Invests in 3G upgrade

MTN Rwanda has recently announced its intention to invest USD 20 million in investing its 3G network across the country.

The investment will be used for coverage upgrades and will utilise UMTS 850m/900m technology which will automatically result in various 2G sites switching to 3G.

MTN is making this investment to improve the service received by existing customers and with a view to attracting additional customers from Airtel and Tigo which have a 19% and 39% market share respectively.


Swissport to Invest USD 1.76 million

Swissport is set to invest a further USD 1.76 million in Tanzania, following an investment of USD 1.6 million last year.

The money is earmarked for improving on the ground equipment at Dar es Salaam airport and improving export handling.

This investment signals Swissports further commitment to Dar es Salaam airport after having built a warehouse and cold room facility with a throughput capacity of 80,000 tonnes.

Kilombero Sugar Mill in Plans to Construct New Factory

Kilombero Sugar Company is planning to construct a new factory as its farm acreage increases and the company's sugar production target is raised from 126,000 to 250,000 tonnes annually.

This investment is in line with the Tanzanian Government's industrialisation drive which seeks to ensure that Tanzanian mills can meet domestic consumption needs.

Internet Access Hits 23 Million

The number of internet users in Tanzania rose by 16% in 2017, to 23 million, with 82% accessing the internet via their smartphones.

This figure represents a surge in mobile phone and data use which has arisen due to cheaper handsets and mobile packages.

Internet penetration now stands at 45%, up 5% from 2016 and represents a steady growth in the online market place.


Robo Investment Advisor Launches in Uganda

EXNO, an online investment advisory platform has launched in Uganda and is using artificial intelligence to help people plan, save and invest.

The platform takes a variety of metrics as inputted by the investor and generates a recommended portfolio.

The minimum investment required is USD 100 and the algorithm operates on a goal based investment approach where a user invests to reach a particular goal.

The product will allow many middle class Ugandan's to enter the investment space which will increase capital availability within the country.

US to provide USD 11 Million in Off-grid Electrification Drive

During the 2018 East African Energy Infrastructure Summit, held in Kampala, the US Government announced a commitment of USD 11 million over the course of three years to support electricity generation and access in the off-grid sector.

The funds, which will be provided through the Power Africa Initiative, are aimed at supporting innovation, market access and providing advisory services to private sector participants.

This investment will work alongside the Ugandan Government's free connection policy which shifts the burden of grid connection charges onto the Government and is expected to be implemented in March 2018.


Kenya Receives USD 14 billion in bids for USD 2 Billion Bond Issue

Following a European and US roadshow, Kenya has received significant international interest in a Eurobond issuance which will be used to settle existing debts and infrastructure and development initiatives.

The interest in the bond, which has a 30 year yield with an 8.25% interest rate, demonstrates investors' belief that Kenya is a stable economy where long term investments are safe.

This bond issuance should act as a benchmark and will allow other African countries to price their international bonds.

European Investment Bank (EIB) provides USD 40 Million Financing Facility

The EIB has agreed to a USD 40 million financing facility with I&M Bank (I&M) which will be used to support SME enterprises across Kenya by providing I&M's customers with cheaper loans.

Under the credit line, I&M will advance USD denominated loans to eligible borrowers providing up to 50% of the total cost of a given project (which must comply with EIB eligibility criteria).

The EIB is the world's largest international public bank and has provided investment through credit lines with Sub-Saharan Banks exceeding EUR 1.5 billion over the last 5 years.

Dubai Investments to Commit USD 20 Million to Private Schools

Dubai Investment is due to invest USD 20 million as part of a consortium which is developing a number of 'Sabis' branded schools in Kenya and across Africa. The group plans to build 20 schools in the medium term and will initially open in Nairobi in September with a capacity of 2,000 students.

Sabis is well known for offering quality schooling, is a respected name internationally and will assist with further developing Kenya's education sector.