Weekly Investor Update (August-WeekThree-2024)

10 min Read August 16, 2024 at 5:00 PM UTC

Tuesday

Kenyan lender Equity Group half-year profit up 12.5% to $229m

Equity Group, Kenya’s largest bank by market capitalization, reported a 12.5% increase in net profit for the first half of 2024 at $229 million (KES29.6 billion). That’s up from $203.4 million (KES26.3 billion) in the same period in 2023.This growth occurred despite challenging macroeconomic conditions leading to higher loan defaults. The bank’s robust performance was driven by a 22% rise in interest income, totaling $656 million (KES84.8 billion), against a backdrop of high inflation and interest rates.Equity Group’s success highlights its strategic focus on regional expansion, which has compensated for slower growth in Kenya’s economy. The double-digit growth from its regional operations has helped offset a decline in earnings from its domestic market.

Equity Group recorded a 16% increase in non-interest income, reaching $737.2 million, while customer deposits grew 11% year-on-year to $10 billion (KES1.3 trillion). The bank’s customer base expanded to 20.7 million, contributing to a 55% rise in cash and cash equivalents to $2.6 billion (KES341 billion) and a growth in investment securities to $3.5 billion (KES459 billion). Despite these strong results, the bank did not declare an interim dividend for the first half of the year.Equity Group trades under the ticker symbol EQTY on the Nairobi Securities Exchange (NSE) and closed the previous session at KSh 39.95, marking an 18.7% year-to-date gain. With a market capitalization of KSh 151 billion, EQTY is the second most valuable stock on the NSE, accounting for approximately 9.4% of the equity market.

Vivendi’s Canal+ increases stake in Mauritian pay-TV company

Vivendi SE’s Canal+ is set to double its stake in MC Vision, a Mauritian-based digital pay-TV company, increasing its ownership to 75% from 37%, pending regulatory approvals. This move marks Canal+’s effort to strengthen its presence on the African continent. The transaction’s financial details have not been disclosed.Currimjee Jeewanjee and Co., which co-foundedMC Visionwith Canal+ over two decades ago, will reduce its stake from 53% to 25% as part of the deal. The state-ownedMauritius Broadcasting Corporationwill also sell its 10% stake in the company.The new structure “will enable MC Vision to continue to meet the expectations of Mauritian households in terms of audiovisual content and services, while benefiting from the support of the Canal+ group,” the companies said.

Canal+ is strategically expanding its footprint across Africa, the world’s youngest and fastest-growing continent, to better compete with U.S. entertainment giants. In a significant move, Canal+ made a $3 billion all-cash offer in April for South African broadcaster MultiChoice Group Ltd., with plans to list the combined entity in both Europe and Johannesburg. This expansion aligns with Canal+’s broader goals of capturing a larger share of the African market. MC Vision, which Canal+ co-founded and helped pioneer digital satellite television in Mauritius in 1999, has since evolved into a key provider of premium and exclusive content in the region.

Cameroon cocoa earnings rise 84% to $815m on higher prices

The 2024/2025 cocoa season in Cameroon was officially launched on August 8, 2024, with the National Cocoa and Coffee Office (ONCC) reporting a significant increase in production and revenue for the previous season.During the 2023/2024 campaign, which ran from August 1, 2023, to July 15, 2024, Cameroon produced 266,725 tons ofcocoa, marking a 1.17% increase compared to the previous year.Exports of 185,613 tons generated 265.3 billion FCFA (around $815 million), representing an 84% increase. This boost was largely due to rising internationalcocoa prices, which led to farm gate prices exceeding 6,300 FCFA/kg, a substantial jump from the previous season’s maximum of 1,290 FCFA/kg.

Cocoa prices are rising due to a global supply shortage, chronic underinvestment in cocoa farms, and investor speculation. Chocolate brands are grappling with the impact of higher cocoa costs, and this is resulting in price hikes and shrinkflation. J.P.Morgan Research projects cocoa prices will come down slightly over the medium term, tracking around the $6,000 mark. The majority of exports were handled by three main operators: Telcar Cocoa (35.10%), OFI CAM (24.89%), and SBET (9.88%), with Europe and Asia being the primary destinations. However, there was a slight decline in the volume of cocoa processed locally, with 85,780 tons processed domestically, mainly by large industrial factories like SIC-Cacaos, Atlantic Cocoa, and Neo Industry, among others.

South Africa’s Open Access Energy gets $750k for clean energy drive

Open Access Energy(OAE), a South African startup focused on energy management software, has secured $750,000 in investment fromFactor E Ventures, the first phase of its $1.5 million seed round.This initial funding will be used to address the severe energy shortage in South Africa by improving the distribution and management of renewable energy.The startup plans to use the investment to enhance its software solutions, scale its operations, and increase its market presence in South Africa and the broader Southern African Development Community (SADC) region.

The investment in Open Access Energy (OAE) comes at a crucial time for both the company and South Africa’s energy sector. The country is currently grappling with severe energy challenges, including high costs, grid instability, and a worsening power crisis that has led to the implementation of daily electricity rationing to prevent a nationwide grid collapse. Eskom, the state-owned power generator, has reported power deficits exceeding 6,000 megawatts, highlighting the critical need for innovative solutions. This situation is reflective of the broader challenges faced by many African nations, driving the demand for clean tech startups like OAE to provide sustainable energy management solutions across the continent.

South Africa’s MTN completes sale of Guinea-Bissau unit to Telecel

MTN Group, a pan-African telecom company, announced today that it has completed the sale of its West African subsidiary, Spacetel Guinea-Bissau S.A. (MTN Guinea-Bissau) to Telecel Group Mobile Limited after securing all necessary regulatory approvals.This sale aligns with MTN’s strategic goal of streamlining its portfolio. The company emphasized its commitment to ensuring a smooth transition of ownership, which it believes will benefit MTN Guinea-Bissau, its stakeholders, and the broader telecommunications sector in Guinea-Bissau.MTN’s focus is now on its larger markets, such as Ghana, Cameroon, and Côte d’Ivoire, which have collectively contributed more than 18% to the group’s revenue. Notably, MTN Ghana holds a dominant position in the market, classified as a Significant Market Power (SMP).

In March 2024, MTN disclosed its decision to exit two markets in West and Central Africa (WECA) by selling its equity interests in Guinea-Bissau and Guinea-Conakry to Telecel Group Mobile Limited. This move followed a sale and purchase agreement finalized in December 2023. The decision was part of MTN’s strategic shift to concentrate on more profitable and larger regional markets. The exit was prompted by financial difficulties, particularly for MTN Guinea-Bissau, which had breached an R171 million ($9.3 million) loan, leading to its insolvency in December 2023 after its liabilities exceeded its assets. MTN agreed to sell both MTN Guinea-Bissau and MTN Guinea-Conakry for $1 per company, reflecting their financial struggles.

Interest rate cut likely as Ghana’s inflation slows to 28-month low

Ghana’s annual inflation slowed to a 28-month low in July, easing to 20.9% from 22.8% in June, marking the slowest pace of price increases since March 2022.This decline is a positive sign for the Bank of Ghana’s efforts to controlinflation, which has remainedabove the central bank’s target rangeof 10% for over three years. The slowdown may create room for further monetary policy easing later this year.Earlier, policymakers had surprised markets with an interest-rate cut in January, but since then, they have kept the key rate steady at 29%, given concerns over the weak local currency and its potential impact on inflation.

At the Bank of Ghana’s July 26 monetary policy committee meeting, Governor Ernest Addison highlighted concerns over exchange-rate pressures, rising utility tariffs, and fuel prices, noting that these factors have contributed to a “slightly elevated inflation profile” for the year. Despite these challenges, market sentiment towards Ghana is improving, largely due to ongoing economic reforms and the anticipated continuation of loan disbursements under a $3 billion program with the International Monetary Fund. These developments are expected to bolster confidence in the nation’s economic outlook.

Zambia’s central bank holds key rate to support struggling economy

Zambia’s central bank decided to hold its key interest rate steady for the first time in nearly two years to support itsdrought-stricken economy. The central bank deemed the current monetary policy stance appropriate given that the inflationary pressures facing the country are supply-driven.During a press briefing in Lusaka, Governor Denny Kalyalya announced that the monetary policy committee had kept the interest rate at 13.5%. This decision marked a significant pause after six consecutive rate hikes totaling 450 basis points.Kalyalya explained that the decision was influenced by several factors, including the impact of the ongoing drought, the effects of the previous series of interest rate increases, adjustments to the statutory reserve ratio, and recent reforms in the foreign exchange market.

Zambia’s economy is expected to grow by just 2.3% this year, a significant slowdown from the preliminary estimate of 5.8% growth in 2023. This deceleration is primarily due to the severe drought that has devastated crops, driven up food prices, and reduced hydro-electricity production, which is a critical energy source for the country. Annual inflation, currently at 15.4%, is forecasted to average 15.3% in 2024, higher than the previous forecast of 13.7%. The increase in inflation is largely attributed to supply-side pressures on food and energy, exacerbated by the drought. Looking further ahead, the Monetary Policy Committee (MPC) has adjusted its inflation forecasts for the outer years, expecting inflation to moderate gradually.

Jameson maker Pernod Ricard raises stake in Jumia to 7.5%

Pernod Ricard, the world’s second-largest wine and spirits company and the producer of well-known brands like Jameson, has expanded its investment in NYSE-listedJumia, Africa’s leading e-commerce.The company recently purchased 1.27 million shares in Jumia’ssecondary sale, as disclosed in a regulatory filing. This acquisition has increased Pernod Ricard’s stake in Jumia from 6.4% to 7.5%.Although the exact price of the newly acquired shares is not specified, Jumia’s stock (JMIA) was trading at $4.68 on August 6, the day Pernod Ricard made the purchase, according to Jumia’s SEC filing. If this was the purchase price, the investment would amount to around $6 million.

Pernod Ricard has been a consistent investor in Jumia, once holding as much as an 8.2% stake in the company. However, as Jumia issued more shares between 2020 and 2021, Pernod Ricard’s position was diluted to 6.4%. Despite this dilution and the recent challenges Jumia has faced—such as a decline in share price after missing revenue estimates in Q2 2024 and concerns about further dilution from secondary sales—Pernod Ricard’s recent purchase of additional shares underscores its ongoing confidence in the African e-commerce leader.

Ivorian startup Daba makes final of Ecobank Fintech Challenge 2024

Daba, a multi-asset investment infrastructure provider, has made the final of the Ecobank Fintech Challenge 2024 scheduled to take place on September 27, 2024, in Lome, Togo.TheEcobank Fintech Challenge, now in its 7th edition, is a competition that invites early-stage and mature fintech startups to partner with the bank, offering a grand prize of $50,000 and the opportunity for finalists to join the Ecobank Fintech Fellowship program.As a finalist, Daba now has the opportunity to explore various partnership possibilities with Ecobank, including potential product integration, access to Ecobank’s Pan-African Banking network, and exposure to Ecobank’s commercial and service provider partnerships.

A McKinsey report highlights the ongoing challenges that fintech start-ups in Africa face, despite the rapid growth of the sector on the continent. Issues such as scaling operations, dealing with a complex and often uncertain regulatory landscape, and securing funding are significant hurdles for many of these companies. The Ecobank Fintech Challenge emerges as a pivotal platform designed to help fintech entrepreneurs overcome these obstacles.Since its inception six years ago, the Ecobank Fintech Challenge has drawn over 5,500 participants from 64 countries, enrolling 60 fintech start-ups into the Ecobank Fintech Fellowship.

This material has been presented for informational and educational purposes only. The views expressed in the articles above are generalized and may not be appropriate for all investors. The information contained in this article should not be construed as, and may not be used in connection with, an offer to sell, or a solicitation of an offer to buy or hold, an interest in any security or investment product. There is no guarantee that past performance will recur or result in a positive outcome. Carefully consider your financial situation, including investment objective, time horizon, risk tolerance, and fees prior to making any investment decisions. No level of diversification or asset allocation can ensure profits or guarantee against losses. Articles do not reflect the views of DABA ADVISORS LLC and do not provide investment advice to Daba’s clients. Daba is not engaged in rendering tax, legal or accounting advice. Please consult a qualified professional for this type of service.