Citigroup, Credit Suisse await Africa deals on state asset sales

  • Banking
  • Tuesday, 10 Sep 2019

JOHANNESBURG: Citigroup Inc and Credit Suisse Group AG are expecting more African deals as governments sell assets and Ethiopia opens up.

“Privatisation is a theme we see as becoming increasingly important given the fiscal pressures faced by many African governments,” Vikas Seth, the head of mergers and acquisitions for Europe, Middle East and Africa for Credit Suisse, said in an interview at the World Economic Forum on Africa.

“Several governments recognise the need for reform. Sizable transactions” such as the Ethiopian telecoms auction and Angola’s planned privatization of 175 companies are “keenly anticipated,” he said.

Foreign enthusiasm for Africa has long been fickle. But the continent has been piecing together the largest free-trade zone.

Once in motion, the African Continental Free Trade Area will cover a market of 1.2 billion people, with a combined gross domestic product of about US$2.5 trillion. Six of the world’s fastest-growing economies are in Africa.

East Africa is also drawing attention as regional firms seek to expand in Ethiopia, according to Miguel Azevedo, Citigroup’s head of investment banking for the Middle East and Africa.

The Horn of Africa nation has the continent’s second-largest population and an economy the International Monetary Fund predicts will expand more than 7% a year through 2024.

“Kenyan-based companies are looking into Ethiopia as a big opportunity,” he said.

“That area I would say, as an area, rather than a single country, is of particular interest.” There are bright spots for investments into Africa: “First, consumer-facing sectors are expected to experience strong growth. Some observers believe that in terms of consumption patterns, Africa today is where Asia was 20 years ago with a bright future ahead.

“A second bright spot relates to infrastructure investments. As the continent industrializes and as the African Continental Free Trade Area becomes effective, the need for world class infrastructure to facilitate intra-Africa and global trade will only increase.

“Finally, natural resources will continue to be relevant given the abundance of minerals across the continent.” Citigroup’s Miguel Azevedo: “South Africa, Nigeria and Egypt are the three big economic engines of Africa where most opportunities will lie,” in addition to East Africa.

“There are some very good companies in Kenya. Primarily in the service area, and banking. So Kenya is a very important one and we see a lot of interest. Then there’s a few new kids on the block – Ethiopia and Angola. They are opening and they are becoming more targeted by investors.” Telecoms, financial services and fintech, consumer goods and infrastructure are industries where there are “exciting opportunities.” — Bloomberg

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