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AXA IM Alts Leads New Investment Round in Sanergy’s Africa and Asia Expansion

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AXA IM Alts, a global leader in alternatives investments, through the AXA Impact Fund Climate and Biodiversity, along with Mani Kapital and Kepple Ventures, two Tokyo based investment platforms, have invested in Sanergy, an organics recycling company transforming how cities in the developing world manage waste by upcycling it into valuable agricultural inputs – insect-based protein for animal feed, organic fertilizer, and biomass fuel. This circular economy approach is cleaning up the environment, promoting sustainable agriculture, improving yields for farmers, and creating thousands of jobs along the value chain.

“The future of our planet requires both innovative thinking and bold, climate-friendly investing. We are delighted to partner with AXA IM Alts, an institutional investment manager with a strong investment solutions offering. AXA IM Alts’ vast investment experience and its networks will catalyze our growth,” said Ani Vallabhaneni, Sanergy CEO and Co-Founder.

With AXA IM Alts’s support, Sanergy would be well-positioned to scale its operations in Kenya and across the region. Sanergy collects organic and sanitation waste from agribusiness, urban markets, informal settlements, and central kitchens, then processes these waste streams into insect-based proteins derived from black soldier flies for animal feed replacing unsustainable fishmeal, soil-restorative organic fertilizer for sustainable agriculture, and biomass fuel replacing unsustainable firewood and heavy fuel oil in industrial boilers. AXA IM Alts’s support also positions Sanergy for expansion across Africa and Asia in the coming 5 years. Sanergy has the goal of processing 1 million tons of waste per year by 2026, and aims to operate in at least 10 cities.

“We believe that Sanergy provides a transformational solution to the health and environmental hazards caused by the improper management of waste in Africa and beyond and we are thus very excited to contribute to the next phase of Sanergy’s ambition. Sanergy, which demonstrates that a focus on the health and well-being of people can also lead to significant environmental benefits, is a great addition to our portfolio of investments we manage on behalf of our clients and composed of businesses offering scalable solutions to environmental issues and tangible solutions actively participating to promote biodiversity and fight against climate change,” said Jonathan Dean, Head of Impact Investing, AXA IM Alts.

As part of the investment, the consortium made a secondary investment to acquire the stake held by Acumen and by Global Partnerships. Both of these partners were early stage investors in Sanergy, and their exit marks a resounding conclusion to a successful partnership and offers further proof in the power of impact investing.

“Acumen and Global Partnerships believed in Sanergy’s potential and leadership when we were a very young company. We are forever grateful for their support, mentorship and solidarity as we work to solve important social, environmental and economic challenges and we are so pleased to have rewarded their faith in us,” said David Auerbach, Sanergy President and Co-Founder.

“We first invested in Sanergy when the company consisted of a small group of dedicated founders with a big vision to create a sustainable, cost-effective, and scalable solution to the sanitation crisis in informal settlements,” said Jim Villanueva, Managing Director of the Global Partnerships/Eleos Social Venture Fund. “I’m so proud to see how Sanergy has grown to serve more than 100,000 residents per day with safe sanitation, while producing valuable commercial byproducts from waste inputs. We have confidence in the continued growth of Sanergy globally and are pleased to see long term strategic funders stepping in to take the company forward.”

“Acumen is proud to have supported Sanergy’s founding team who had the courage to address the sanitation problem facing poor communities in East Africa. Acumen’s capital and post investment support helped Sanergy successfully design and implement an innovative business model that provided low-income communities with clean and sustainable toilets. The company is now well positioned to leverage its sanitation by-products to address at scale the challenge of lack of affordable and quality animal feed inputs,” said Shiru Mwangi, Acumen East Africa Regional Director.

Sanergy has also recently been recognized for its work recently as a winner of the inaugural Carl Bergfors’ Food Planet Prize.

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Investment

Diaspora investments: A must for the development of Africa

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Image Source: rupixen.com

It has been three years since his Excellency president Nana Akufo-Addo of Ghana shared some controversial thoughts on Africa’s dependence on aid or support from Europe in a decades long effort to develop the continent.

He was applauded for his bold statement and stance, but many (especially people from the Ghanaian diaspora) thought they were only words. Words they had heard many times before, but without plans or actions backing them. This might be true from their perspective, yet for the current generation of descendants from those who have been sold into slavery, it was good to hear an African leader show some backbone.

“We can no longer continue to make policy for ourselves, in our country, in our region, in our continent based on whatever support that the western world or France, or the European Union can give us. It will not work. It has not worked, and it will not work”.

The Diaspora Is Linked To The Strength of Africa

President Nana Akufo-Addo’s views on European aid are commendable, even if we debate how much he will be able to back up his words with actions.

“The place of the Diaspora, the status of the people in the diaspora, of the African diaspora, is intimately linked with what happens on the continent. An Africa strong and performing, transforms your position, your status here in Europe”.

He was addressing diaspora members in France, but he could have been addressing all people of African descent worldwide. The fact is that his ability to back his words, not exclusively but to an important extent, is contingent on the support he as an African leader receives from the African diaspora.

Remittance Coming From The African Diaspora

As a member from the African diaspora, one might ask: “Are we not supporting enough?”

Ishmeal Lamptey (Source: unsplash.com)

According to the World Bank Sub Saharan Africa received an estimated 48 billion US dollars in remittance funds from the African diaspora in 2019.

A study by Comstock, Iannone, Bhatia published in March 2009 (yes, the phenomenon has been studied for some time now) shows most funds are spend on costs of sustenance (29%), medical costs (16%) and education (12%).

When looking at the order of precedence these costs take in relation to each other, we see that unforeseen costs come first, second are medical costs and the last are for education. This underlines what we all know. The fact that there is often a sense of emergency to these transfers.

The Need To Move From Remittance To Investment In Africa

So, to answer the question of the diaspora, if it is not doing enough…well no. Harsh isn’t it? The fact of the matter is that the remittance funds are our own version of aid to the continent. It is keeping our people our family from dying but it’s not helping with any development.

We, the African diaspora, need to make the transition from remittance to investment. Remittance will always be part of the financial flows, but when seen in relation with Foreign Direct Investments (FDI) from the diaspora, they shouldn’t dominate as they do at present.

Following the content of a few independent journalists, there is now ample proof that at least some in the diaspora are not only willing, but able to move to the continent and start new businesses. But this group is a very small minority. The vast majority will not be able to follow suit and we should not want them to.

The revenues of the use of their human capital is needed to generate the investment flows Africa needs. The challenge Sub Saharan Africa faces is that of aggregation of available funds originating from the diaspora. The funds are clearly there, the industries which need them for we’ve identified, but now we need to create a robust infrastructure to aggregate and get them to their destination.

Like we pointed out in our previous article about thinking sufficiently big; while we keep our eyes on the end goal, we might need to start building one stone at a time. From individual projects, to industries, to the whole economy.

When doing so, we need to keep in mind that Africa is a unique environment. The common instruments of capital allocation used in the world should certainly be our starting point, but not limit our imagination when pooling the diaspora funds and channeling them into the continent.

As we have admonished a few times now; Africa should think BIG. And that also applies to its diaspora. In the coming articles we will continue exploring the idea of “thinking big” in the African context. So please make sure to subscribe to our Newsletter. We invite you to share your thoughts with us on the matter and get a discussion going with us and our other readers.

Article By: Jerrol Cambiel, Chief Executive EU Operations Debnoch Capital

 

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Economy

Deal making slows across sub-Saharan Africa, but post-pandemic opportunities look interesting

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Deal making activity in sub-Saharan Africa (SSA) dropped in the second half of 2020 (H2 2020), when compared to the second half of 2019 (H2 2019) and year-on-year, deals were also down in both volume and value compared to 2019. As the continent gears up for post-pandemic recovery in 2021, the opportunities presented by free trade across the continent, foreign investment opportunities due to new partnerships and trade relationships, as well as the post-pandemic focus on technology, healthcare and renewable energy, will be key factors in attracting valuable mergers and acquisition (M&A) activity to the region.

Further, South Africa’s deal volume and value both dropped in 2020, with the industrials and healthcare sector attracting the biggest investments. Ghana stood out as a country that attracted more and higher value M&A deals in 2020 than it did in 2019, with China being the primary inbound investor in the country. And Kenya recorded a good increase in deal value for 2020, although volume decreased, with the financial sector being the primary target for inbound investors.

Sub-Saharan Africa

According to Baker McKenzie’s analysis of Refinitiv data, M&A transactions dropped in SSA in H2 2020, down 4% compared to H2 2019, with 329 deals in the period. Deal value fell by 17% to USD8.9 billion in the second half of 2020, compared to the same period in 2019. For the full year 2020, transactions dropped by 8%, with 625 deals in 2020, and deal value dropped by 33%, with deals valued at USD17.4 billion in total for 2020. 

Cross-border activity in SSA remained much the same in the second half of 2020, with 210 deals in H2 2020 compared to 209 in H2 2019. This was due to an uptick in outbound interregional deals, which were up 28% year-on-year. The total value of cross-border M&A deals in the second half of 2020, however, dropped by 21% to USD6.5 billion when compared to H2 2019. For the full year 2020 (FY 2020), the number of cross-border deals dropped by 8% and deal value by 27% compared to 2019. United States-based Mylan NV’s acquisition of the Aspen Pharmacare-Thrombosis business in South Africa for USD759 million was the biggest cross-border deal in the period.

Companies in the materials sector remained the top target for investors in sub-Saharan Africa, with 29 deals in H2 2020, though the biggest value deals came from the energy and power sector, with deals amounting to USD1.7 billion in H2 2020.

The United Kingdom was the most active investor in the SSA region for the second straight year, with 29 deals announced in the second half of 2020. There were also 29 deals from the UK for the full year 2020.

For outbound transactions from SSA, the primary target companies for African investors were in the industrial sector, which announced seven deals for H2 2020 and 17 in total for the full year. The high technology sector announced 12 deals in H2 2020, and 17 deals altogether in FY 2020. Further, India was the primary target for African outbound investors in the region, with 11 deals in H2 2020 and 20 for the full year 2020.

Analysis

Wildu du Plessis, Head of Africa for Baker McKenzie, noted, “While deal making has slowed across Africa, all is not lost and there are still plenty of  opportunities to benefit from good deals on the continent. For the next while, we believe that deal activity across Africa in general will mostly be in the form of take-private transactions, distressed M&A opportunities, restructurings, disposals; and corporates looking for investment opportunities in offshore markets.

“Usually viable businesses are experiencing continued challenges due to the pandemic, leading them to turn to M&A as a way to raise funds. However, the lack of available capital and acquisition finance, as well as the difficulty in pricing deals in an uncertain market, are proving to be big issues for investors and this is slowing down the pace of deal making. For those who have capital, there are plenty of bargains to be had in Africa in the next few years, particularly in those sectors that have been badly affected by the pandemic, as well as in those industries where demand has dramatically increased,” he notes.

“Sectors in SSA that have clearly flourished during the pandemic include healthcare, technology media and telecommunications (TMT) and renewable energy,  with the materials and the financial sectors also attracting interest. Industries such as aviation, retail, oil and gas, and tourism/hospitality will take longer to recover and are more likely to result in distressed M&A activity,” du Plessis says.

Du Plessis says that the good news is that the start of trading for numerous member states of the African Continental Free Trade Area (AfCFTA) is expected to provide a huge boost in investment in post-pandemic Africa.  The AfCFTA has done a great deal to bolster investor interest in the region and dealmakers are taking notice of the agreement’s first movers. After Brexit, big African investors in the United Kingdom and countries in the European Union will continue to target African sectors, hoping to capitalise on new economic partnership agreements, and the launch of free trade in Africa. Investors from the United States will also continue to be strong M&A players in key African countries, with a Biden administration expected to further encourage investment and trade between the US and African countries.

“We can also expect to see heightened scrutiny of environmental, social and governance issues, with companies that have sound ESG strategies leading the pack in terms of investment and growth on the continent.”

Country data

 

South Africa

M&A activity in South Africa decreased as a result of the COVID-19 pandemic. The number of transactions dropped by 6% to 186 deals in H2 2020, and the value of the deals shrunk by 36%, down to USD4.9 billion from H2 2019. The full year 2020 activity was down 6% to 337 deals, while deal value fell by 46% year-on-year to USD8.5 billion. Monthly figures rebounded in H2 2020 and were more comparable to those in 2019.

Cross-border transactions dropped 2% year-on-year to 164, with deal value dropping by 47% to USD4.3 billion. The industrial sector was the primary target for inbound deals with 14 transactions in 2020, up 133% year-on-year.  However, these deals were small in value, yielding a total for 2020 of USD37 million. The largest inbound deal completed in 2020 was in the healthcare sector, with Aspen Pharmacare-Thrombosis acquired by Mylan NV (US) for USD759 million.

The United Kingdom remained one of the primary investors for South African companies, with 25 deals, up 25% year-on-year. However, the biggest deals were brought in by US investors, with total deal value amounting to USD871 million. This was largely driven by the Aspen Pharmacare-Thrombosis acquisition.

Analysis

Morne van der Merwe, Managing Partner and Head of the Corporate M&A Practice at Baker McKenzie, says, “The pandemic has clearly affected both the volume and value of deals announced in the country in 2020. However, South Africa remains attractive to foreign investors who have long considered the country a key gateway into Africa, even more so now that AfCFTA trading has begun, and the country has been singled out as one of the early beneficiaries of intra-African free trade.

“South Africa’s infrastructure, automotive, healthcare and renewable energy sectors have seen large investments in recent years, and this looks set to continue, despite short-term pandemic lows. Government policy has focused on boosting investor interest in these sectors and the country’s special economic zones (SEZs) have been successful in facilitating foreign investment inflows. SEZs are areas in the country that are set aside for specific economic activities. For example the Tshwane Automotive SEZ was launched to attract automotive component manufacturing companies and related services, boost investment in the sector and support black economic empowerment initiatives.

“However, the uncertainty in the country with regards to onerous policy and legislation, junk status announcements by rating agencies, currency volatility, social unrest, electricity and water challenges, skills shortages, the performance of state-owned enterprises, the security of property rights, and serious governance issues in both the public and private sector, continues to make investors nervous.

“To address these challenges, the South African government announced its Economic Reconstruction and Recovery plan in 2020, which outlined deliverables such as energy security, job creation and a trillion rand infrastructure plan. The National Economic Development and Labour Council (Nedlac) also outlined its Plan of Action last year and provided more detail on the infrastructure and energy plan, the creation of a more enabling regulatory framework and a commitment to fighting corruption.

“Despite recent challenges, foreign investors in the UK, Europe and the US have long been valuable M&A investors in South Africa, and this is likely to be further boosted by South Africa being able to maximise the benefits of AfCFTA, due to strong connections across the continent and well-established manufacturing base,” adds van der Merwe.

 

Ethiopia

Ethiopia recorded eight M&A deals in 2020, totaling USD1 million. Of the eight deals in 2020, two of them happened during the second half of the year. The majority of the deals were inbound and cross-border in nature, with seven deals in total in 2020, six of which were announced during the first half of 2020. The country did not announce any outbound transactions in 2020.

The retail sector has the highest number of inbound transactions in Ethiopia, two in all. Eritrea made most investments into the country, with two transactions in 2020.Tigray Ethiopia’s acquisition by Yanchang Petroleum of Hong Kong for USD1 million was the sole transaction with a disclosed deal value.

“Deal making in Ethiopia slowed due to the pandemic in 2020, exacerbated by foreign exchange shortages, electricity supply issues and security concerns, among other things. The country’s industrial parks have attracted the interest of foreign investors and look set to assist the country in its post-pandemic recovery. The parks are providing a boost to Ethiopia’s manufacturing sector and will assist in the creation of jobs,” says du Plessis.

 

Ghana

Ghana exhibited a solid M&A performance, despite the slow pace of dealmaking in H1 2020. It recorded 10 deals in H2 2020, representing 100% growth from H1 2020, and 14 deals in total for the full year, reflecting a growth of 17% year-on-year. Total deal value soared by 11607% to USD818 million and 3369% to USD832 million in the second half of 2020 and the full year, respectively.

Cross-border transactions contributed a huge portion of M&A activity in Ghana, recording a total deal value of USD793 million for both H2 2020 (seven deals) and the full year 2020 (nine deals).

The materials sector was the top target for inbound and outbound deals in H2 2020 and FY 2020. China was the primary investor in the country, with two inbound deals worth USD214 million for both H2 and FY 2020. For outbound transactions, Australia was the key target with two deals totaling USD 440 million, and one transaction worth USD439 million in H2 and FY 2020, respectively.

China’s acquisition of the Bibiani Gold Mining Project via Chifeng Jilong Gold Mining Co for USD 109 million was the largest inbound deal in H2 and FY 2020. Conversely, Engineers & Planners Co Ltd’s acquisition of Cardinal Resources Ltd in Australia for USD 439 million was the top outbound transaction for H2 and FY 2020.

Ghana, despite some ups and downs, appears to be getting it right in terms of striking the right balance between encouraging investment and protecting the rights of the country and its people. It has also been singled out as one of the countries that is ready to benefit early on from AfCFTA. This is due to existing favourable conditions in the country, such as having an open economy, good infrastructure, a supportive business environment and the ability to quickly ramp up its intracontinental exports. All this bodes well for Ghana’s future economic position in Africa,” says du Plessis.

 

Kenya

Deal making in Kenya dropped 28% with only 18 deals in H2 2020, but deal value increased by 224% to USD467 million. This was mainly due to Network International Holding Plc’s USD 288 million acquisition of Direct Pay Online Ltd. Activity for the full year 2020  was down 28% in volume terms, but value increased by 52% year-on-year to USD722 million. Monthly figures seem to have peaked in July with eight transactions and tailed off over the rest of the year.

France was the top M&A partner for Kenya, with five inbound deals from this country, up 25% year-on-year. Deals from France into Kenya were worth USD36 million for FY20, up 24% year-on-year. The UK had the highest deal value for inbound transactions due to the Direct Pay Online acquisition. Volume-wise, the financial sector was the primary focus, with seven inbound deals and three outbound transactions. For inbound value, deals in the financial sector increased to USD435 million, up an incredible 1697% year-on-year.

The Deal Drivers Africa Report, published by Mergermarket, ranked Kenya among Africa’s most sought-after countries for M&A transactions. Before the pandemic, M&A activity in the East Africa region had increased significantly, with Kenyan deals dominating the market. The East African regional economy (in which Kenya has the largest economy) continues to be a key driver for sub-Saharan Africa’s growth going forward.

“Kenya has long been considered East Africa’s investment hub, attracting some high-value M&A deals in the last few years. However, the country’s post-pandemic economy will take some time to reach previous levels. The country’s TMT sector, which has a well-developed market for mobile money services, and its bustling financial sector, are the ones to watch as the country gears up for its post-pandemic recovery,” says du Plessis.

 

Mozambique

In Mozambiquedeal making grew by a few deals, although the number overall was limited. There were six reported deals in H2 2020 compared with only one in H1 2019. The full year total for 2020 was 12 compared to four deals in 2019.Transactions in Mozambique were mostly inbound cross-border deals. There were six such deals in H2 2020, and 11 for the full year.

The real estate sector was the primary target for investors into Mozambique in H2 2020, with two deals announced, though for the full year, the materials sector was the most targeted, with four deals in total. The energy sector in Mozambique was the most prolific sector in terms of deal value, with USD145 million in deals announced in H2 2020. This is mainly due to the acquisition of Cetral Termica de Ressano Garcia by the UK’s Actis LLP, for the same amount.

Mauritius and Canada were the top two investors in Mozambique, with three deals each in 2020, although Canada did not make any acquisitions during the second half of the year. Two out of the three deals from Mauritius were announced in H2 2020. Mozambique announced no outbound transactions in 2020.

“Mozambique is one of the world’s largest holders of liquified natural gas, and its energy sector has been attracting global interest for some time. We expect interest in this sector to increase in future years, and possibly act as a catalyst to boost much-needed investment in other sectors in the country going forward,” notes du Plessis.

 

Nigeria

M&A activity in Nigeria in H2 2020 dropped by 25% to 24 deals compared to H2 2019.Tthe size of the deals shrunk by 68% down to just USD279 million. However, full year 2020 activity was up by 4% to 52 deals compared with 2019, but deal value was 42% lower year on year at USD 716 million.

Cross-border transactions dropped 8% year on year in 2020 to 33 deals, with deal value dropping by 36% to USD552 million. Domestic deals increased in 2020 by 36%, however, the value of the deals dropped by 57. This indicates a focus on smaller deals in the country in 2020.

The financial sector remained the primary target for both for inbound and outbound deals, with five and three deals respectively in 2020. Lagos, the capital of Nigeria, was cited in May 2020 as one of four cities in Africa to be emerging as FinTech hubs by The FinTech Times. The megacity of over 20 million inhabitants is home to the nation’s largest financial institutions such as First Bank of Nigeria (FBN), Access Bank, Ecobank and First City Monument Bank (FCMB) as well as international banks such as Citibank.

South Africa served as the primary investor for Nigerian companies with six deals in 2020. Multichoice Group Ltd.’s USD 83 million acquisition of Betking was the biggest deal in the country.

Du Plessis says, “The Nigerian economy was already impacted quite severely by the disruption in oil markets in recent years, and COVID-19 added extensive damage to the economy. The fintech and renewable energy sectors, however, look set to provide much needed investment impetus for economic recovery and the country has also stated it plans to boost its manufacturing capacity, which will enable it to take further advantage of free trade under AfCFTA.”

By: Baker McKenzie

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Investment

David Buttress, Ex-Just Eat CEO invests in Egypt’s elmenus and joins its Board

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David Buttress, Ex-Just Eat CEO (Source: Thoburns)

Egypt’s fastest-growing online food ordering company has grown revenue by 300%, and plans an ambitious expansion strategy

elmenus, Egypt’s biggest food discovery and ordering platform announces an investment in the company from David Buttress, who has also joined the Board. David is the former CEO of global food-ordering firm, Just Eat.

David’s expertise in customer-centric service development will support elmenus as it formulates its ambitious growth strategy and explores expansion opportunities. In the next 18 months, elmenus plans to:

  • Scale its offering and expand its market share, with 4,000 new drivers to be recruited;
  • Enrich its social and personalized dish discovery experience; and
  • Empower restaurants to be stronger partners to elmenus

David has an extensive entrepreneurial and investment background having joined Just Eat in 2006 to launch its UK business. He led Just Eat in making global acquisitions and investments including the acquisition of MenuLog in Australia for $855 million and taking a majority stake in Brazil’s iFood. David also led Just Eat UK from a start-up to becoming Europe’s largest technology IPO, in just a decade. He is currently a Venture Partner at global venture capital firm, 83 North, and has several successful start-ups in his portfolio.

elmenus began as a comprehensive directory providing users with menus and information about restaurants, while growing a community of followers who shared their love of food via images and reviews. With a critical mass of users and restaurants, elmenus launched its online ordering in late 2018.

Since then, it has experienced rapid success in Egypt’s underserved online ordering market, growing revenue by 300%, achieving significant market share, all with less than $10 million in funding. This included a successful Series B round in 2020 – raising $8 million – led by UAE-based VC firm Global Ventures and Algebra Ventures.

“As we aim to become the go-to food app for all dining decisions, and a partner of choice to restaurants to help them solve their scaling challenges in the MENA region, I believe David’s insights and exceptional record will play a vital role in accelerating our growth and guiding elmenus in acquiring a significant share of the market. We are very excited to be working with an industry veteran like David. His belief in our vision is a grand testament to us.” said Amir Allam, CEO of elmenus.

David Buttress commented: “elmenus’ exponential growth this past year has been quite remarkable. It has been owning the food discovery approach, making it the stronger partner to restaurants as it provides them with more than just online ordering services.

“While elmenus witnessed a 3x growth in 2020 since delivery increased drastically in light of the COVID-19 challenges and more restaurants outsourced their delivering operations, the company is expected to grow 10x in 2021 as it upscales its product and restaurant offerings. It is an exciting time in the company’s evolution.”

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