More M&A coming to East Africa

In an opinion piece in the Business Daily Sheel Gill of KPMG East Africa suggests that most small and medium sized companies in the region may have to shape up by merging with bigger ones or shape out by getting acquired all together in order to survive the coming growth boom fueled by the oil money.

Clearly, rising business confidence due to reduced political risk, consumer demand and improving economic prospects in the region after the discovery of oil and gases deposits could see more firms in the technology; mining and financial services sectors look to M&A for growth and expansion.

“We have 46 banks in Kenya, 67 per cent of which are in the category of small, all competing for increasing business. For such banks to grow and increase shareholder value there will be need for a series of consolidations across the sector.” – Gill (History of M&A in Kenyan banks)

For these Gill cites the I&M merger with City Trust that will see the former reverse list on the Nairobi Security Exchange. This will be first reverse listing in a region more accustomed to IPO’s, right issues and cross-listings.

M&A’s are not entirely new in East Africa. The most recent ones being the failed KenolKobil/Purma Energy takeover bid, CFC/Stanbic merger, the botched BOC/Carbacid merger, Craft silicon/Fanisi Capital, Taipan/Lion Petroleum inc merger, Marsh Ltd/Alexander Forbes acquisition, Emerging Capital Partners/Java 90 percent stake buyout, and many others.

Most of the nearly 20 documented M&A last year took place in Kenya.

But with more of these M&A’s comes regulatory challenges that could see some listed firms exit the exchange in the near future.

Uhasibu 101

It has been a while since I blogged anything here. Blame it on twitter … definitely twitter and other work related affairs. So here I am again and hope this time the mojo will last.

Two weeks ago, just out of curiosity, I attended a free accounting training at M-lab by the Uhasibu team (who have won awards btw!), a cloud based accounting package developed specifically for the east African market, which I found quite interesting for anyone looking for a start up accounting system.

The training was basic – for an accountant (former in my case) – including petty cash management, journal entries, statutory compliances with KRA, NHIF and NSSF, invoicing system, payroll and other features that most start-ups need for their financial system.

The whole package goes for 1,000 Kenyan shillings ($12) per month and can be customized to the user wishes, although Uhasibu developers advise that you avoid tweaking it as long as possible lest you introduce bugs in your system, which will cost you to fix.

What makes Uhasibu standout from other regulator accounting packages (QuickBooks, Sage)  is its built for the local market (east African). You can generate a VAT reports for KRA, and eliminates a lot of paper work. It also can be used by even non-accounting staff reducing the data entry workload on the accountant (who can easily be outsourced.

The only downside is some of its functions are still in beta and so some items would need to be entered manually. Its over reliance on internet is also a gapping achilles heel, limiting its use in remote areas, but they are working on an offline support that would certainly boost its usability.

They are also coming up with a mobile version/application.

They’re doing another free training on September 1st, which I highly recommend. Or just attend for the cake. Yeah, there is free cake too and God knows we all love freebies, right?

Tale of Two IPO's

In the last few months we've seen two pubilc share offers in east Africa; the Bank of Kigali offer in Rwanda and the British American Investment Co. offer in Kenya, both whose shares were supposed to start trading this week.

While Bank of Kigali offer was successfully oversubscribed by 274 percent (raised $62.5 million out of the targeted amount of $16.7) and went ahead to gained 52 percent on the first day; British American IPO managed a 60 percent subscription (only managing $37.8 million of the $62.9 million targeted) and has said in a newspaper posting that it would delay its stock exchange debut by six days to September 8.

Does this mean Rwanda is a better investment destination in the region than Kenya?

Cherry Picking - 2011

2011 has opened with more than enough offers for East African investors. After several rights issues were over-subscribed last year and with the economy looking quite optimistic, the bull market could be back in the region.

A quick line up of some corporate actions across East Africa[no particular order]:

Kenya
- TransCentury (net assets worth $150mln) - to raise Ksh.3 bln through introduction
- British American Group: planning a Ksh.7 bln IPO
- CFC Insurance Holdings to list this year.
- Kenya Airways fund raising for expansion (right issue/corporate bond?)
- TPS EA planning a second rights issue
- Cooperative Insurance Company (CIC) IPO [2013]
- National Bank of Kenya – government 51% divesture
- Consolidated Bank – government divesture
- 30 year state bond {on going}
- NSE trading at a seven months low = undervalued stocks?

Uganda
- Kinyara Sugar Works - to list a 49% stake this year
- Tullow Oil - to cross list some shares in USE

Rwanda
- MTN Rwanda – state to sell off it’s 10% stake
- SONARWA – Rwanda’s biggest insurer. Govt to sell a 20% stake in an IPO.

Tanzania
- Precision Air – 55 mln shares or 65% of its authorized shares worth $28 mln to be sold in an IPO
- African Barrick Gold Plc – listed on London Stock Exchange in March 2010. To cross list some shares at the DSE

mostly sourced from Reuters

Blocked

It's been a while since my last blog post: too much to do, too little time, too lazy to write anything. Good news though, at last the block is headed to an end. And this one does not count as a post either.