Dubai PE fund Abraaj pumps billions into Kenyan firms

Published on Tuesday, 10 October 2017 10:42

Dubai-based private equity fund Abraaj Group has in recent months invested billions of shillings in local companies, signalling its strong bet on the Kenya economy’s future growth.

The Competition Authority of Kenya (CAK) last month approved Abraaj Group’s acquisition of a 56.2 per cent stake in Kenyan hospital chain Avenue Group, making it the latest of the PE fund’s string of local acquisitions.

The deep-pocketed firm with a $10 billion (Sh1 trillion) portfolio under management across three continents in the Middle East, South Asia and Africa has in recent years made significant investments in four hospital chains, a milk processor and a hospitality chain.

In July this year, Washington-based Emerging Capital Partners (ECP), which owned 90 per cent of Kenyan restaurant chain Java, announced it was selling its entire stake to Abraaj in a takeover plan that also forced Java Coffee House’s founder and chairman Kevin Ashley to part with his 10 per cent stake.

Abraaj at the time said it could not comment on the financial details of the transaction but people familiar with the deal then said it was valued at Sh13 billion.

Abraaj has injected Sh320 billion in 80 transactions across Africa. It is yet to disclose the value of its Kenya portfolio.

Brookside Dairies

The group also owns 10 per cent of the Kenyatta family’s Brookside Dairies.

Its independently run Abraaj Growth Markets Health Fund (AGHF), a $1 billion (about Sh103 billion) health fund focused on Africa, India, and Pakistan, has also been snapping up Kenyan hospital chains firming its grip in the sector.

Abraaj’s health fund includes money from the Bill & Melinda Gates Foundation, the medical parts companies Philips Healthcare and Medtronic, as well as other big institutional investors.

According to Fredd Kambo, a director in the healthcare team at the Abraaj Group with responsibility for East Africa, the PE firm plans to invest in Kenyan’s underserved healthcare sector.

“Essentially, AGHF is on a mission to provide affordable, accessible, and high quality healthcare to middle and low income patients in the region,” said Mr Kambo in interview.

“As an example, the provision of hospital beds per 10,000 people stands at 14 in Kenya versus a global average of 27. We therefore are embarking on a journey to partner with local healthcare operators to provide them with capital and expertise to address the urgent need.” Mr Kambo said.

Abraaj Group is shopping to expand its interests in Kenya’s healthcare sector.

“Right now we have invested in Nairobi Womens Hospital, Avenue Hospital, Metropolitan Hospital, and Ladnan Hospital.

“We are also interested in diagnostics and are seeking opportunities to invest in lab and imaging businesses in this area. Apart from the direct acquisitions, we have conducted a free NCD screening programme which reached 32,000 people in Nairobi,” said Mr Kambo.

Hotspot

Kenya has been tipped to remain a hotspot for private equity (PE) with global deal makers expected to be attracted by an improved business environment.

Analysts at Cytonn see the financial services, information and technology sectors as some of the key areas set to interest investors on the back of good returns.

“We remain bullish on PE as an asset class given the abundance of global capital looking for opportunities in Africa, the attractive valuations in private markets compared to public markets and better economic growth in Sub-Saharan Africa compared to global markets,” it said early this year.

Thirty three of the private equity deals in 2016 in East Africa had a disclosed value totalling Sh48 billion and, 14 of them with value of Sh30.6 billion came from Kenya.

The firm noted the improvement in ease of doing business, high return potential across all sectors, a well-diversified economy and consolidation in sectors such as financial services has created an avenue for increased PE activity.

Source: Business Daily Newspaper.

German pumps maker to open Nairobi plant

Published on Tuesday, 10 October 2017 10:37

Germany’s water pumps and pump systems manufacturer Wilo is set to open an assembly plant in Nairobi.

The firm’s Country Manager, Belete Asnake, Monday said the assembly plant will be fully operational by 2020.

It is targeting to serve the entire Eastern Africa.

“Currently, we have hired 20 people for the new regional office but will expand our production lines creating jobs for more people as we are targeting a market of 250 million from Ethiopia, Kenya, Uganda, Tanzania among other countries within the larger Eastern Africa, he said.

Mr Asnake spoke at Kenya Water Institute (Kewi) in Nairobi where Water Secretary Eugene Wamalwa hailed the new investment.

“The water sector requires investment from both public and private sector players to meet the high demand, mitigate effects of climate change and also prepare Kenya’s ability to meet future water needs for its people,” he said.

Germany’s head of economic affairs Michael Derus said his government had signed a memorandum of understanding with their Kenyan counterparts to facilitate capital investments by German-based companies especially in the water and wastewater subsectors.

“With increased urbanisation, we see big opportunities for German companies to partner with Kenya’s private sector in meeting the needs of the growing population,” he said.

Kenya and Germany target a strong training capacity on water management in Kenya.

Mr Wamalwa said Kewi will benefit from Germany’s technical capacity, thereby improving quality of water supplied.

Source: Business Daily Newspaper.

State earns Sh29bn from investments, past revised target

Published on Monday, 02 October 2017 09:52

The government minted Sh29 billion in the 2016/17 fiscal year from investment earnings, the bulk of which was in form of dividends from telecommunication firm Safaricom SCOM 

The 2017 budget review and outlook paper shows that the earnings were Sh2.4 billion above target, indicating better than expected performance by State-owned corporations and regulators who submit surplus funds to the exchequer.
“During the fiscal year 2016/17, the government received investment income in form of dividends, surplus funds and directors’ fees of Sh28.9 billion against a revised target of Sh26.5 billion, resulting to a positive variance of Sh2.4 billion,” says the Treasury in the paper.

“Government equity participation in strategic investment was Sh3.6 billion in the same period.”
Dividend earnings accounted for Sh23.49 billion, against a budget estimate of Sh22.27 billion. The government holds a 35 per cent stake, equivalent to 14.02 billion shares, in Safaricom, the largest listed firm in Kenya.
Safaricom’s dividend payouts have been increasing over the years, with its most recent dividend standing at 97 cents per share for the financial year ended March 2017.

In the previous year it paid out an ordinary dividend of 76 cents per share and followed this up with a special dividend of 68 cents per share.
Other dividend paying firms in which the State has a stake include Kenya Commercial Bank KCB  and Kenya Power KPLC 

Source: Business Daily

Entertainment, media revenue to hit Sh329bn in next 5 year

Published on Monday, 02 October 2017 09:49

The revenue of Kenya’s entertainment and media sector is estimated to grow by 8.5 per cent over the next five years to hit Sh329 billion ($3.2 billion).

A PricewaterhouseCoopers (PwC) report on the sector and media outlook 2017 – 2021, released last week, indicates that in 2016 the industry was worth Sh216 billion ($2.1 billion), up 13.6 per cent in 2015.

Internet access was identified as the most established industry in Kenya, boasting one of the largest and highest growth rates to 2021.
It will also be the first sub-segment in which revenues hit Sh103 billion ($1 billion) by 2020, as mobile internet access remains the main revenue driver, given the increase in smartphone adoption and popularity.

The report — an in-depth analysis of the trends shaping the entertainment and the media in South Africa, Nigeria, Kenya, Ghana and Tanzania — revealed that over the forecast period, high-speed mobile internet connections will rise at 84.9 per cent compound annual growth rate (CAGR).
The number of mobile internet subscribers is set to more than double over the next five years, reaching 33 million in

“Companies that wish to capture value amid shifting consumer preferences and business model disruptions must focus on an increasingly prominent source of competitive advantage: the user experience. They must harness technology and data to attract, retain and engage users; and convert them into devoted fans,” said Vicki Myburgh, entertainment and media industry leader for PwC Southern Africa.
Already, a number of multinationals have shown interest in Kenya. Malaysian video streaming service iFlix announced in June that it plans to make an entry.

Giants such as Netflix and Amazon are already in the market, with iFlix hoping to capture a slice of the sector, offering both local and international content at a significant lower price.
iFlix will charge between Sh200 and Sh400 a month and will allow consumers to download content in low, medium or HD format.

Increased use of smartphones has also contributed to growth across other media sectors. PwC said a company such as Nation Media Group has developed a mobile-friendly app to encourage digital readership of its news content.
Also, the social/casual gaming market is expected to rise by 22.4 per cent CAGR to 2021, as access to mobile app stores rise amid falling costs of mobile data.
Total advertising revenue reached Sh103 billion ($1 billion) in 2016 and is set to grow at eight per cent CAGR over the next five years, fuelled by internet advertising’s CAGR of 13.6 per cent over the forecast period.

Prior to 2016, the report said, Kenya’s largest advertising market was radio. “Considering its small economy, Kenya has the largest radio advertising market in the Middle East and Africa regions, and the 14th largest in the world. By 2021, it will generate more radio advertising revenue than Italy, a country with a bigger population and an economy more than 20 times larger,” the report said.

According to analysts at Bizna Kenya, low costs and robust listenership are key pull factors to businesses looking to advertise in Kenya.
Due to the range of radio stations in the country, advertisers can reach key demographics, meaning targeted and more effective ad campaigns.

Internet advertising is one of the fastest-growing sectors. By 2021, revenue is expected to hit Sh23.38 billion ($227 million), making it the third largest advertising category in Kenya.
Already, international players have started trekking in, with Swedish phone-call filtering firm Truecaller announcing in May that it would offer advertisement opportunities to Kenyan firms on its mobile app.

The advertising revenue is set to increase as the country’s media industry continues to expand.
The report says there are several small but growing untapped areas, such as cinema, which could rise quickly, while the emergence of global corporations could help propel revenues.

Source: Business Daily