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Africa driving its own development agenda

Africa driving its own development agenda

By Charl Bruyns

Head: Investor Services for Standard Bank (SA)

In Africa today, local capital markets, domestic institutions and favourable demographics are converging. This is seeing many countries take control of their own investment and growth agendas.

Large parts of Africa are rapidly approaching a market standard where risk is increasingly less of a factor. Pension fund reforms, new settlement systems and exchanges, coupled with increased financial inclusion – largely driven by mobile technology and fintech – have created the market and capital conditions to leverage domestic investment and growth.

The result is that less vigorous flows of global capital to the continent following the financial crisis have, to a large extent, been offset by increased domestic saving and investments. This certainly explains, Africa’s sustained higher GDP growth figures throughout the global financial crisis and its aftermath – even in the face of a protracted commodity price slump.While Africa will continue to need to import global capital for generations to come, today, this is no longer the continent’s only option.

Many African countries are approaching the ‘golden standard’ at which legislation, market size and technology-enabled domestic efficiencies come together to produce reasonably predictable investment and growth outcomes. The result is that, today, Africa is increasingly driving is own growth agenda.

Technology has been, and will continue to be, an important element in creating the domestic conditions – and ability – to leverage capital and drive growth. Disruptive technology in less developed environments has the potential to leapfrog large, manual, paper-based systems – directly to mobile and other mediums.

Countries without legacy financial services architecture, like Zimbabwe for example, were able to migrate from T+5 trade clearing to T+3 in two months. The same migration in South Africa, with a large and established financial services architecture, took three years.

This kind of technology-enabled leapfrogging has huge implications for the aggregation of capital and cross border trade as well as the paperless movement of goods along with electronic money flow. Technology is also broadening Africa’s tax base and making revenue collection more efficient. In other words, it’s not only private capital that stands to gain. With more cash in the system, including state coffers, the ability of African governments to actively plan and constructively implement their own development agendas increases.

Technology and especially the ways that Africa has demonstrated that it can adapt and deploy technology means that, “the time lag between underdeveloped and high risk – and developed and low risk – shrinks from decades to months in some instances.

Standard Bank’s own work in developing technology to leverage African opportunity was recently recognised when its Shyft global digital foreign exchange App won the 2017 MTN ‘App of the Year’ as well as MTN’s ‘Best Financial App’ awards. Ahead of its launch in 2016 Shyft had also won a bronze medal for ‘The Most Disruptive Innovation in Financial Services’ at the 2016 Efma–Accenture Distribution and Marketing Innovation Awards in Barcelona.

As important as the role of technology in reducing risk in Africa, is policy and legislation. The potential for legislation to disrupt risk can, overnight, change the fortunes of countries when properly deployed. When perceptions of risk decline it becomes easier and cheaper to drive and sustain growth as well as manage shocks since markets can use their own resources to adapt to change.

Legislation that deepens domestic market resilience has equipped many countries in Africa to manage shocks better. The experience of those African countries that have crafted legislation that mobilises domestic capital for growth – even in turbulent times, “hold powerful lessons for legislators seeking to manage Africa’s traditional capital and liquidity challenges.

For example, Nigeria offering returns on fixed income of 9% or more presents a compelling case to global investors seeking yield. Yet the inability to repatriate these earnings from the country means that the domestic market continues to battle liquidity and capital constraints. Getting the policies, legislation and systems right – all easily achieved in a digital age – could change this dynamic overnight.

Certainly, outcomes in East African countries where legislators have sought to free currencies, diversify production, liberalise markets and promote cross-border integration through rational multi-sector infrastructure development stand in stark contrast to regions where legislation has failed to aggregate local resources for growth, or free global capital to invest.

In time, as more African markets demonstrate their ability to marshal domestic capital effectively they will achieve investment grade status and feature in the strategies of developed world pensions funds.

For now, however, private wealth funds able to allocate part of their portfolios to higher risk jurisdictions, are finding opportunities in those African markets where legislation allows the reasonable repatriation of profits.

The lesson emerging from contemporary Africa is that by creating the domestic legislative and market conditions and deploying the technology to leverage local capital and savings, African economies are poised – for the first time in history – to take charge of their own development dynamics. This has profound implications for sustained long-term growth on the continent as Africa truly comes of age as a globally recognised and accessible investment destination.


About The Author

Guest Contributor

A Guest Contributor is any of a number of experts who contribute articles and columns under their own respective names. They are regarded as authorities in their disciplines, and their work is usually published with limited editing only. They may also contribute to other publications. - Ed.

Following reverse listing, public can now acquire shareholding in Paratus Namibia

Promotion

20 February 2020, Windhoek, Namibia: Paratus Namibia Holdings (PNH) was founded as Nimbus Infrastructure Limited (“Nimbus”), Namibia’s first Capital Pool Company listed on the Namibian Stock Exchange (“NSX”).

Although targeting an initial capital raising of N$300 million, Nimbus nonetheless managed to secure funding to the value of N$98 million through its CPC listing. With a mandate to invest in ICT infrastructure in sub-Sahara Africa, it concluded management agreements with financial partner Cirrus and technology partner, Paratus Telecommunications (Pty) Ltd (“Paratus Namibia”).

Paratus Namibia Managing Director, Andrew Hall

Its first investment was placed in Paratus Namibia, a fully licensed communications operator in Namibia under regulation of the Communications Regulatory Authority of Namibia (CRAN). Nimbus has since been able to increase its capital asset base to close to N$500 million over the past two years.

In order to streamline further investment and to avoid duplicating potential ICT projects in the market between Nimbus and Paratus Namibia, it was decided to consolidate the operations.

Publishing various circulars to shareholders, Nimbus took up a 100% shareholding stake in Paratus Namibia in 2019 and proceeded to apply to have its name changed to Paratus Namibia Holdings with a consolidated board structure to ensure streamlined operations between the capital holdings and the operational arm of the business.

This transaction was approved by the Competitions Commission as well as CRAN, following all the relevant regulatory approvals as well as the necessary requirements in terms of corporate governance structures.

Paratus Namibia has evolved as a fully comprehensive communications operator in Namibia and operates as the head office of the Paratus Group in Africa. Paratus has established a pan-African footprint with operations in six African countries, being: Angola, Botswana, Mozambique, Namibia, South Africa and Zambia.

The group has achieved many successes over the years of which more recently includes the building of the Trans-Kalahari Fibre (TKF) project, which connects from the West Africa Cable System (WACS) eastward through Namibia to Botswana and onward to Johannesburg. The TKF also extends northward through Zambia to connect to Dar es Salaam in Tanzania, which made Paratus the first operator to connect the west and east coast of Africa under one Autonomous System Number (ASN).

This means that Paratus is now “exporting” internet capacity to landlocked countries such as Zambia, Botswana, the DRC with more countries to be targeted, and through its extensive African network, Paratus is well-positioned to expand the network even further into emerging ICT territories.

PNH as a fully-listed entity on the NSX, is therefore now the 100% shareholder of Paratus Namibia thereby becoming a public company. PNH is ready to invest in the future of the ICT environment in Namibia. The public is therefore invited and welcome to acquire shares in Paratus Namibia Holdings by speaking to a local stockbroker registered with the NSX. The future is bright, and the opportunities are endless.