Weekly Investor Update (August-WeekOne-2024)

15 min Read August 2, 2024 at 5:00 PM UTC

Monday

Ethiopian birr dips 30% as central bank floats currency for IMF loan

Ethiopia’s central bank floated the country’s birr currency on Monday, a move aimed at securing support from the International Monetary Fund (IMF) and advancing a long-delayed debt restructuring.Following the float, the birr’s value against the U.S. dollar plummeted by 30% to 74.73 per dollar, per theCommercial Bank of Ethiopia, the country’s largest lender. The currency had been trading at 57.48 birr to the dollar on Friday.The central bank announced that banks are now permitted to buy and sell foreign currencies to their clients and among themselves at freely negotiated rates. The regulator also stated it would only make “limited interventions” in the foreign exchange markets going forward.

The Horn of Africa nation has been grappling with soaring inflation and chronic foreign currency shortages. Late last year, it became the third economy on the continent in as many years to default on its government debt. The country has been in discussions with the International Monetary Fund (IMF) to establish a new lending program, following the abandonment of the previous fund-supported program agreed upon in 2019 due to conflict in the northern region of Tigray. Negotiations resumed after a peace deal was reached in November 2022.

IFC backs group to build $1bn solar energy project in Ghana

The World Bank’s International Finance Corporation is supporting a Ghanaian conglomerate’s $1 billion solar project that aims to increase the country’s solar generation capacity sevenfold by 2030.TheIFChas provided a $130 million loan to LMI Holdings to help finance the construction of 1,000 megawatts of solar installations over the next six years, according to LMI Group Chief Executive Officer Kojo Aduhene.As of the end of 2023, Ghana had 141 megawatts of installed solar power, based on data from the Energy Commission. The project, designed to supply affordable electricity to companies in Ghana, has already installed 1 million square feet of rooftop solar panels, generating 16.8 megawatts as part of the first phase.

At the end of last year, Ghana had an installed capacity of 5,639 megawatts but struggled to generate enough electricity to meet the peak demand of 3,618 megawatts due to insufficient funds to pay suppliers. Studies indicate that Ghana has substantial potential for both concentrating and non-concentrating solar technologies, with an estimated 50–100 megawatts of solar energy potential still untapped. Currently, a dispute between the finance ministry and independent power producers over arrears threatens to bring back unscheduled blackouts, similar to those Ghanaians experienced in the first half of the year. Despite these challenges, the country’s solar energy potential remains significant, and efforts like the $1 billion solar project backed by the World Bank’s International Finance Corp. aim to tap into this potential and enhance the country’s energy security.

Ivory Coast leads first-quarter GDP growth in francophone West Africa

The economy of the West African Economic and Monetary Union (WAEMU or UEMOA in French) zone grew 5.1% during the first three months of 2024 compared to 5.6% in the same period the previous year, according to figures from the regional central bankBCEAO.Growth was primarily driven by steady economic activity. Among the eight countries in the zone, Côte d’Ivoire (the largest) recorded the highest growth rate at 6.3% in the first quarter of 2024, followed by Togo at 6.1% and Benin at 6%.The second largest, Senegal, grew 4.7% in the first quarter of 2024.Coup-hit Nigerposted the worst results with a -0.1% decline due to political, security, and climate crises. Conversely, othermilitary-ledcountries Burkina Faso and Mali grew by 3.9% and 4.9%.

Economies in the WAEMU averaged 6% GDP growth between 2013-2018 and above 5% each year since – except in 2020 (COVID-19). These economies are Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal, and Togo. In 2024, four feature among the world’s ten fastest-growing economies projected by the IMF. The region also has a more conducive policy environment offering companies a relatively easy regional expansion route due to shared culture, language, regulations, and currency. With this, francophone West Africa offers some of the best investment prospects on the continent. However, it is often overlooked due to language barriers and a lack of local context on the part of investors. For one, the BRVM stock exchange serves as the portal through which investors can capitalize.

Egypt’s Cartona raises $8.1m to provide retailers with working capital

Cartona, an Egypt-based B2B e-commerce platform, has raised $8.1 million in aSeries Aextension, comprising $5.6 million in equity and $2.5 million in debt, from new and existing investors to expand its market share and assist retailers.Venture Capital firmAlgebra Venturesled the extension round, with participation fromSilicon Badiaand theSANAD Fundfor MSME. The debt component was provided byCamel VenturesandGlobalCorp.This additional funding comes a year after Cartonasecured $12 million in Series A fundingled by Silicon Badia, with participation from the SANAD Fund for MSME, to scale in Egypt. Cartona reportedly remains in a strong financial position, claiming to still have significant cash from the previous round. The 2024 funding brings its total Series A to $20.1 million.

Egypt has over 400,000 shops and thousands of international and local brands, with the retail sector growing annually by 8%. Reports indicate that the overall retail market size is $120 billion, with the food and beverage market worth $70 billion. Venture capital has driven market digitization in the country, fostering growth and competition among players like Cartona, the now-defunct Capiter, and MaxAB, which is currently in merger talks with Wasoko. Despite the millions of dollars in funding and the presence of similar companies across Africa, these ventures have barely scratched the surface or created significant value for stakeholders in the supply chain and the investors backing them.

Mozambique to get $825m after win in ‘tuna bond’ fraud case

Mozambique has secured a $3.1 billion judgment against shipbuilding company Privinvest in London’s High Court over bribes the country alleged the company paid to its officials andCredit Suissebankers as part of the “tuna bond” scandal.Reuters reported that the court ruled “substantially in favor” of Mozambique in the lawsuit. Judge Robin Knowles stated thatMozambiquehad been exploited by developed institutions and corporations that should have known better.Knowles determined that Mozambique is entitled to $825 million from Privinvest owner Iskandar Safa. In addition, the company owes lenders and bondholders an indemnity of just over $1.5 billion.

The case focused on agreements between state-owned entities and Privinvest for maritime security and fishing vessel projects. These were financed through loans and bonds from various banks, including Credit Suisse, and were secretly guaranteed by the state. However, a substantial portion of the funds vanished, and when the government’s debt was revealed in 2016, it led to a series of economic crises. International donors, such as the IMF, temporarily suspended aid, causing the currency to plummet, defaults to occur, and financial instability to ensue. Mozambique filed suit against multiple parties, including Credit Suisse (now part of UBS), three former Credit Suisse employees who had admitted guilt in the US, Privinvest, Safa, and others.

Senegalese telco Sonatel grows net profit by 30% in first half

Sonatel, the most valuable company on the BRVM, reported a 29.6% increase in net income for the first six months of the year, rising from 148.6 billion FCFA to 192.6 billion FCFA ($318 million), according to its latest financials for the quarter ended June 2024.This growth was driven by significant improvements in revenue from the mobile data (+16.9%), broadband (+20.4%), and mobile money (+15%) segments. These gains boosted the group’s overall turnover by 83.6 billion FCFA, reaching 877.7 billion FCFA, up from 794.1 billion FCFA a year earlier, representing a 10.5% increase.In addition, the Senegalese network operator (SNTS) posted a 17% increase in EBITDAAL to 407.7 billion FCFA, with an EBITDAAL margin up 2.6 points to 46.5%. Operating income also saw a substantial rise of 32.6%, reaching 301.9 billion FCFA compared to 227.7 billion FCFA the previous year.

Present in five countries—Senegal, Mali, Guinea, Sierra Leone, and Guinea-Bissau—the telecom company Sonatel has continued its investments, totaling 134.5 billion FCFA. These investments are aimed at maintaining its leading position in all these countries. Looking ahead, Sonatel plans to strengthen its commercial activity and optimize its expenses to further improve its performance in the second half of 2024. Additionally, the company intends to accelerate its digitalization process to enhance the experience for both customers and employees. The Sonatel stock has hoveredaround 5-year highsin the last few weeks.

MNT-Halan expands into Turkey with acquisition of Tam Finans

Egyptian fintechMNT-Halanhas acquired commercial finance companyTam Finansand its $300 million loan book from private equity firmActera Groupand the European Bank for Reconstruction and Development (EBRD) for an undisclosed sum, as part of its expansion into Turkey.This acquisition follows MNT-Halan’srecent $157.5 million funding roundannounced last week to support its expansion efforts. The company’s plans for international growth involve a mix of mergers and acquisitions (M&As) and partnerships.Announcing the acquisition deal, MNT-Halan highlighted a “significant” market opportunity in Turkey, citing “ample growth opportunities for the banking sector.”

Egypt’s most valuable startup and only unicorn, MNT-Halan, offers a variety of financial services to both businesses and consumers through the Halan app. These services include loans, pre-paid cards, e-wallets, savings, and e-commerce solutions. The recent acquisition of Tam Finans is set to complement MNT-Halan’s offerings with micro-lending and factoring services, primarily targeted at SMEs. Tam Finans has reportedly disbursed more than $6 billion to date through these services.

Educatly raises $2.5m to expand higher education platform

Egypt-based edtech startupEducatlyhas secured a new funding round of $2.5 million, led by TLcom Capital and Plus VC. The round also saw participation fromEgypt Venture(Egypt) and theHBAN syndicate(Ireland).Founded in 2020, Educatly aims to democratize access to higher education opportunities. In 2021, the startup raised a $1 million pre-seed round from Falak Startups, Enterprise Ireland, and a group of angel investors.The latest funding will bolster Educatly’s presence in the Middle East and Africa, targeting key markets such as Egypt, Saudi Arabia, the United Arab Emirates, Nigeria, Kenya, and Ireland.

Venture capital investors are increasingly backing education-focused technology startups in Africa, as they move to capitalize on an obvious market and economic opportunity while driving tangible educational impact in the fast-growing region. The past few years have seen a rise in the adoption of edtech innovation in Africa. Available projections indicate that the market will grow into a multibillion-dollar industry, driven by increasing demand for online learning solutions, e-books, and educational apps. However, significant challenges remain for players in the space, such as access to funding and route-to-market which VC firms can help address.

Bitcoin falls below $65K as cryptocurrencies see sharp decline

Cryptocurrencies experienced a sharp decline on Wednesday as rising geopolitical risks captured investors’ attention following the conclusion of the July Federal Reserve meeting, which saw benchmark interest rates remain unchanged with little indication of a widely expected rate cut in September.Bitcoin(BTC) dropped to $64,500 from around the $66,500 level where it was trading after Federal Reserve Chair Jerome Powell’s press conference, falling more than 2% over the past 24 hours.The sell-off occurred as the New York Times reported that Iran’s leaders ordered retaliation against Israel for the killing of Hamas leader Ismail Haniyeh in Tehran, increasing the risk of a broader conflict in the region.

While digital assets suffered losses, most traditional asset classes climbed higher during the day. The 10-year U.S. bond yields fell by 10 basis points, gold rose 1.5% to $2,450, slightly below its record highs, and WTI crude oil prices surged by 5%. Equities also saw significant gains, with the tech-heavy Nasdaq 100 index rebounding 3% and the S&P 500 closing the session 2.2% higher, led by chipmaker giant Nvidia’s (NVDA) 12% gains. The differing performances between asset classes could be attributed to traders’ positioning before the Federal Reserve meeting.

Kenyan court voids controversial finance law that triggered protests

Kenya’s Court of Appeal declared the government’s 2023 finance law unconstitutional on Wednesday, dealing a significant blow to President William Ruto’s administration. This follows the withdrawal of this year’s finance bill after deadlyprotests.Finance bills, presented to parliament at the start of every financial year, are the government’s main tool for outlining revenue-raising measures, including tax hikes and the introduction of new levies.The 2023 finance bill was challenged in court after a series of politically chargedstreet proteststurned violent. The bill proposed doubling the value-added tax on fuel, introducing a housing tax, and raising the top personal income tax rate, among other measures.

President Ruto, facing the most severe crisis of his nearly two-year presidency, is caught between the demands of lenders like the International Monetary Fund to reduce deficits and a population struggling with the soaring cost of living. The protest movement, which lacks official leaders and largely organizes via social media, has rejected Ruto’s calls for dialogue—even after he abandoned his proposed tax increases and reshuffled his cabinet.

Helios, Gaia aim to raise $600m to back climate projects in Africa

Helios Investment Partners LLP and Gaia Fund Managers are raising hundreds of millions of dollars for Africa-focused climate funds, aiming to capitalize on opportunities in renewable energy and drought-resistant agriculture on the continent.Helios, the largest Africa-focused private investment firm, has secured about $200 million from eight state-linked institutions as an initial step to establish the largest Africa-focused climate fund. Helios’ Climate, Energy Access, and Resilience Fund, known as Clear, has a target size of $400 million, which would make it the biggest Africa-focused climate fund.Meanwhile,Gaia Fund Managersfrom South Africa announced it has secured $50 million in commitments toward its Luxembourg-based Gaia Africa Climate Fund, which has a target of $200 million.

Investors are increasingly interested in Africa, where the lack of power infrastructure has left 600 million people without access to electricity, presenting an opportunity for large-scale investment in renewable energy plants without the need to retire fossil fuel-fired facilities. Additionally, the growing severity of droughts has heightened the demand for irrigation and technologies to reduce water use in agriculture, a sector that most Africans depend on for their livelihoods.

UK firm acquires majority stake in troubled Nigerian telco 9Mobile

LH Telecoms Limited, a UK-based telecoms company, has acquired a majority stake in Emerging Markets Telecommunication Services Limited, which operates as9Mobile.The acquisition of a controlling stake in the Nigerian telco received the necessary approvals from the Nigerian Communications Commission (NCC) and the Federal Competition and Consumer Protection Commission (FCCPC), as required by law.The African Export-Import Bank (Afreximbank), which was 9Mobile’s main lender as of May 2023, also approved the investment that led to the change in control. As part of the deal, the new investor,LH Telecoms Limited, received 95.5% of 9Mobile’s shares in exchange for a significant capital injection.

The latest acquisition is expected to revitalize 9mobile, which has struggled to retain subscribers over the years. With the injection of fresh funds by the new investors, 9mobile, currently the fourth operator in Nigeria’s mobile network space, can now compete more effectively with MTN, Airtel, and Globacom, which dominate the market.9mobile, which once had over 20 million active subscriptions, had only 11.6 million connected lines as of March 2024, having suffered a consistent loss of customers over the years. As of March, the company accounted for only 5.3% of the market share, while MTN, Airtel, and Globacom controlled 37%, 29%, and 28% of the market, respectively. This acquisition aims to restore 9mobile’s competitive edge in the telecom space.

Network operator Airtel Africa acquires shares in $29m buyback

For the quarter ending June 30,Airtel Africareported purchasing 21 million shares for a total consideration of $29 million in nearly five months, as part of the share buy-back program it commenced on March 1.The Lagos-listed network operator saw an 8.6% increase in its customer base, reaching 155.4 million, with data capacity across its network increasing by 33%. It also disclosed revenue of $1.16 billion, a decline of 16.1%, but achieved a profit before tax of $74 million, up 134%, and a profit after tax of$31 million, up 120.3%.In February, Airtel announced its intention to launch a share buy-back program of up to $100 million over 12 months and the program still has up to seven months before it concludes.

A buyback is when a company purchases its shares in the stock market. This repurchase reduces the number of shares outstanding, which inflates earnings per share (EPS) and can often lead to an increase in the stock’s market price, benefiting shareholders. Besides its share buyback program, the company in March was considering taking its mobile money unit public, eyeing an initial public offering (IPO) that could value Airtel Money at over $4 billion. By June, the number of mobile money subscribers in Kenya surged following Airtel’s removal of withdrawal codes. The total customer base grew by 9% to 152.7 million, while its data customer base increased by 17.8%, it said in May. In addition, Airtel’s mobile money customer base saw a significant rise, increasing by 20.7% to 38 million.

Mozambique cuts key rate for fourth straight time after IMF advice

Mozambique’s central bank cut its main interest rate for the fourth consecutive monetary policy meeting on Wednesday, citing a favorable inflation outlook and indicating thatmore rate cutsare likely to follow.The bank reduced its MIMO interest rate to 14.25% from 15.00%, marking its fourth consecutive 75-basis-point reduction.The country’s inflation rate slightly decreased to 3.04% year-on-year in June, down from 3.07% in May, according to data from the statistics agency.Bank of Mozambique Governor Rogério Zandamela told reporters that inflation is projected to remain in single digits over the medium term, and the central bank expects to continue reducing the MIMO rate.

The move makes Mozambique’s central bank an outlier among African central banks, as only five others have lowered rates this year, with the majority either raising rates or maintaining them due to inflation concerns. The interest rate cut is expected to support Mozambique’s economic growth, which slowed to an annual 3.2% in the first quarter from 4.8% in the previous three months. The IMF indicated earlier this month that further policy rate cuts were warranted in Mozambique.

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