The trade and investment landscape in Africa has continued to draw interest from lenders, particularly in West Africa, with notable changes in origination strategies.
In Q1 2021, Orbitt reported a 26% increase in the number of unique enquiries from lenders originating funding opportunities when compared with the same period in 2020. Some lenders have seemingly decided to focus more on particular regions (and in some cases, individual countries) citing “due diligence processes being disrupted due to travel restrictions” as a main reason, and “risk mitigation strategies” as the second most common reason.
These have prompted lenders to focus on regions and/or countries where they have representative offices or a deep and reliable network.
Agriculture remains the sector with the most interest, present in almost 70% of investor mandates. Financial services and manufacturing (including FMCG) are also quite prominent, being flagged as sectors of interest in 64% and 44% of investor mandates respectively.
Two hundred and thirty-one unique lender enquiries were recorded in Q1 2021. Of these, 58% of the companies are either headquartered in West Africa or have their main operations in West Africa; 17% are based in East Africa and 16% are based in Southern Africa. Only 5% of these companies have cross regional operations, compared to the 14% recorded in Q1 of 2020 (pre-pandemic).
A considerable portion of the lender enquiries included a working capital component in the proposed transaction structure (35%). Supply chain finance and asset financing components were also notably present in discussions (34% and 30% respectively).
This quarter, the average ticket size was recorded as $12m, an increase from the $10m average recorded in the same time period for 2020. Twenty percent of the companies receiving enquiries from lenders reported annual revenues between $100m and $250m, and a further 13% reported annual revenues of between $250m and $500m, showing lender appetite for the larger companies.
However, a considerable amount of enquiries were received by companies reporting annual revenues of between $1m and $5m – particularly from the more impact-focused lenders.
The Orbitt perspective
Africa-focused lenders may have adjusted their origination strategies this year, with international lenders working around travel restrictions and disruptions to due diligence processes, but activity on the continent continues to increase. Lenders are considering larger transactions and employing additional credit enhancements to mitigate perceived risks in transactions.
TPG fund to invest $191m in Airtel
Airtel Africa is set to sell an undisclosed minority stake in its pan-African mobile money business to private equity firm TPG for $191m, underlining the huge value of mobile financial service platforms in Africa.
Brikor acquires 40% stake in transportation company Zingaro
South African Brick manufacturer and supplier Brikor has acquired a 40% stake in multi-product road transportation services provider Zingaro Holdings for $3.4m.
E-hailer Bolt gets $23.8m capital injection from IFC
Bolt has received a $23.8m capital injection from the International Finance Corporation (IFC) to expand mobility solutions that create earning opportunities, improve access to transportation, and stimulate entrepreneurship in African and Eastern European markets.
ARISE acquires 35% of Aera Group
ARISE, the pan-African infrastructure developer and operator, has bought a 35% stake in Aera, a trader of environmental certificates in Africa, based on a valuation of €28.5m ($33.6m).
Equity Group gets $75m from AGF to support MSMEs
Equity Group has received $75m from African Guarantee Fund Group to support the bank in scaling up its lending activities to MSMEs in Kenya, Uganda, Rwanda, and the Democratic Republic of Congo.
SunFunder lends $2m to Winch Energy
SunFunder has disbursed a $2m loan to Winch Energy for the construction of 25 mini-grids in Northern Uganda.
The news on this page was brought to you by Orbitt www.orbitt.capital