Weekly Investor Update (May-WeekFour-2024)

11 min Read May 24, 2024 at 5:00 PM UTC

Tuesday

Ivory Coast overtakes SA to become best-rated in sub-Saharan Africa

Ivory Coast has risen to the top spot as the highest-rated sovereign in sub-Saharan Africa for foreign debt, surpassing South Africa, according toS&P Global Ratings.Both countries maintained their BB- ratings, but Ivory Coast’s outlook shifted to positive due to its improving debt profile, contrasting with South Africa’s stable outlook.This development underscores Ivory Coast’s growing fiscal strength, propelled by its recent issuance of$2.6 billion in Eurobondsin January. This not only bolstered the country’s finances but also marked sub-Saharan Africa’s return to the international capital markets after nearly two years.

Ivory Coast’s economy continues to outpace its regional counterparts, with the International Monetary Fund (IMF) projecting a robust growth rate of 6.5% for 2024, up from 6.2% in the previous year. Despite a notable decline of about a third in cocoa production during the 2023-24 season, the Ivorian government has taken proactive measures to fortify its financial position. In a strategic move to bolster its reserves and financial stability, Ivory Coast secured a significant funding agreement worth $4.8 billion with a prominent Washington-based lender. This infusion of capital has provided a crucial buffer, enabling the country to navigate challenges stemming from fluctuations in cocoa production and external economic pressures.

OpenseedVC hits first close of $10m fund to back operators in Africa

OpenseedVC, a venture capital firm focused on supporting operator-launched startups in Africa and Europe, has announced the first close of its $10 million early-stage fund.General PartnerMaria Rotilurevealed that the first close is “well into the millions,” though she did not specify the exact amount. Fundraising efforts are ongoing, and the firm aims to reach the final close of its $10 million fund within the next 12 months.The London-headquartered firm plans to invest up to $150,000 in startups operating in sectors such as B2B software, artificial intelligence, fintech, digital health, and the future of work. OpenseedVC has already made investments in two undisclosed AI startups based in Nigeria and the UK.

A lack of domain expertise among founders has been identified as the leading cause of failure among startups. OpenseedVC prioritizes founders who demonstrate a clear understanding of their market and possess the necessary skills to navigate its challenges and opportunities. OpenseedVC’s approach ensures that capital is directed toward businesses with a higher likelihood of effectively solving real, scalable, and impactful problems. With the launch of OpenseedVC, African startups gain a new funding alternative at a time when investment in the region has declined. In 2023, funding for African startups fell by 33% compared to the previous year, with only about $3.2 billion raised.

Starlink becomes third largest internet provider in Nigeria by users

Starlink, led by Elon Musk, has become the third-largest internet service provider by subscriber count in Nigeria within less than a year since itslaunchin January 2023.That’s per data from theNigerian Communications Commission(NCC), which showed that by the end of 2023, Starlink had amassed 23,897 active subscribed customers – a significant 113% increase from the previous quarter’s 11,207 customers.However, despite itssuccessin certain markets, Starlink faces challenges in expanding its presence across Africa. Just a month ago, the Zimbabwean government ordered the company to halt its services. Starlink has also experienced difficulties in South Africa, Botswana, and Ghana.

Despite its higher costs relative to local ISPs, Starlink, which entered the Nigerian market in January 2023, has generated significant interest among Nigerians seeking to switch their service providers. The widespread availability of its satellite service is particularly appealing to individuals in regions with limited internet connectivity. In just one year, Starlink has attracted a substantial customer base, surpassing the customer counts of many local ISPs that have operated in Nigeria for several years. Recognizing the potential for further expansion, Starlink recently announced a 45% reduction in the price of its router in Nigeria. This strategic move aims to capture more customers in the Nigerian market and solidify Starlink’s position as a leading internet service provider in the country.

Nigeria’s central bank delivers big rate hike amid stubborn inflation

The Central Bank of Nigeria raised its key interest rate to a new record high of 26.25% from 24.75% to curb persistent inflation and support the nation’s weakened currency. This marks the 11th consecutive rate hike by the monetary policy committee.This is the third rate increase this year, following hikes of200 basis points in Marchand400 basis points in February. Factors driving inflation include a threefold increase in electricity tariffs, higher transport costs, and a more than 27% depreciation of the naira over the past month.Since the tightening campaign began in May 2022, the central bank has raised the key rate by 1,475 basis points. Inflation has been accelerating since January 2023, now reaching a 28-year high of 33.7% year-on-year in April.

The depreciation of the currency by 28% against the dollar in the past four weeks “means additional and sizeable rate hikes are needed. The slide is the latest bout of volatility since President Bola Tinubu, who marks his first year in office next week, relaxed foreign exchange controls in June. The unit has declined around 69% against the greenback since then, fanning inflation that quickened to 33.7% last month — more than triple the 9% ceiling of the central bank’s target range. Foreign investors are advised to consider strategies such as diversification, hedging, and focusing on stable sectors to mitigate risks, while closely monitoring central bank policy decisions and seeking professional advice to navigate the challenges posed by currency depreciation and inflation in Nigeria.

Cameroon’s ST Digital to build more data centres in francophone Africa

Cameroon-based pan-African cloud service provider ST Digital has announced plans to construct three data centers in the Francophone region of Africa, amid a continent-wide boom in a market that hasattracted even the largest tech companiesglobally.The first two data centers, slated for Gabon and Cote d’Ivoire, are expected to become operational this year. The third in Togo is scheduled for completion in 2025. Specifications for the centers have not been disclosed butST Digitalaims to bolster its presence in the region and enhance its cloud infrastructure.These projects come on the heels of a recent €10 million ($10.86 million) investment from UHURU Investment Partners into ST Digital. The company has also initiated discussions with subsea cable operators to facilitate interconnectivity for its new data centers.

Digital adoption in the Francophone region experienced a notable surge starting in 2020, propelled by the COVID-19 lockdown, which prompted businesses worldwide to embrace digitalization. In addition to established businesses transitioning to digital platforms, numerous online companies have emerged since then. According to a report, over 300 digital financial services were launched between 2020 and 2023. However, the quality of digital services has been hindered by inadequate digital infrastructure, such as data centers. As of 2023, the total number of data centers in Africa was just above 100, with 61 of them located in South Africa. By expanding its data center footprint and strengthening its infrastructure, ST Digital aims to meet the growing demand for cloud services and connectivity solutions across the Francophone region of Africa.

Afreximbank provides Spiro with $50m debt to ramp up EV supply

Spiro, an electric vehicle company, has secured a $50 million debt financing agreement withAfreximbank, a pan-African supranational multilateral financial institution. The funding aims to accelerate Spiro’s expansion in Cameroon and Morocco this year.The funds will be allocated towards expanding Spiro’s network of automated swap stations and introducing new electric bike models. This initiative aims to make green mobility solutions more accessible and convenient for consumers in the target markets.Kaushik Burman, CEO of Spiro, expressed gratitude for the debt facility, highlighting its significance in enhancing the company’s operational capabilities and in facilitating Spiro’s expansion into more African countries.

Spiro boasts a fleet of over 14,000 bikes and operates in six African countries: Nigeria, Ghana, Kenya, Uganda, Togo, and Benin. To create an integrated EV ecosystem in Africa, the company seeks to mitigate environmental impact while enhancing urban mobility. This involves collaborating with various stakeholders and developing extensive charging infrastructure, including battery swapping and direct charging options. In February 2024, Spiro partnered with the Ogun State government in Nigeria to establish swap stations for electric motorcycle batteries, and last August, it secured a $63 million loan from GuarantCo, a member of the Private Infrastructure Development Group (PIDG), and the French bank Société Générale. This funding aims to support the expansion of Spiro’s fleet of electric motorcycles, along with associated batteries and swap stations, in Benin and Togo.

Fitch renews Cameroon’s “B” rating on diversified economy, GDP growth

Fitch Ratings has reaffirmed Cameroon’s “B” credit rating with a negative outlook, citing resilient GDP growth, a low budget deficit, and a slowdown in the debt level of the largest CEMAC economy.The American rating agency anticipatesCameroon’s debt-to-GDP ratioto decline below 40% by 2025, reflecting improved debt management and robust GDP expansion. Fitch’s analysts forecast Cameroon’s economy to grow by 3.9% in 2024 and 4.1% in 2025, compared to an estimated 3.8% in 2023.Despite a projected decline in oil production in 2024 and 2025, growth is expected to be propelled by non-oil sectors such as agriculture, forestry, transport, and energy infrastructure.

Credit ratings by agencies like Fitch are crucial as they assess a country’s creditworthiness and ability to repay debt. They influence borrowing costs, investment decisions, and overall economic confidence, making favorable ratings desirable for attracting investments and ensuring financial stability. Fitch’s credit rating is more optimistic compared to ratings from Moody’s and Standard & Poor’s. While Cameroon has cleared its external arrears and remains current with debt service obligations, the country faces challenges in cash management. These issues include inflexible security spending, incomplete fuel subsidy elimination, and the accumulation of domestic arrears, which reached 1.6% of GDP by March 2024.

Canada’s Montage discovers largest gold deposit in Ivory Coast

Canadian mining company Montage Gold has discovered what is believed to be the largest gold deposit at the Koné mining project in Ivory Coast. The mineral resources of the deposit are estimated at 5 million ounces, or 155.5 tons of gold, with an average grade of 0.72g/t.Construction of the mine, which is expected to have a lifespan of around 20 years, is scheduled to commence in the last quarter of 2024,Montagesaid. The processing plant is projected to require an initial investment of 400 billion CFA francs ($663 million) with production slated to begin in 2027 and nearly 4,500 direct and indirect jobs created.The Koné Project mine is anticipated to boast a processing capacity of 11 million tonnes of ore per year, positioning it as the third-largest in West Africa. This places it behind mines in Burkina Faso and Guinea, which have capacities of 12.3 million tonnes and 12 million tonnes, respectively.

The recent discovery of a significant gold deposit in Ivory Coast follows shortly after the country commenced production at a major oil and gas deposit. Côte d’Ivoire is a key producer of gold, ranking as the sixth-largest producer in Africa, alongside manganese and oil and gas, among other mineral resources. While agriculture remains the primary sector, the extractive industry contributed around 13% to total export values and 6% to government revenues in 2022. Over the past decade, there has been a notable increase in gold production in the country. Recent discoveries in the oil and gas sector have prompted the government to implement reforms aimed at attracting more investment into these emerging industries. These developments underscore the growing importance of the extractive sector in Côte d’Ivoire’s economy and its potential for further growth.

Google to connect Africa, Australia with new subsea cable

Google has announced Umoja, the first-ever fiber optic cable project to directly connect Africa and Australia. Starting in Kenya, Umoja will traverse several countries, including the Democratic Republic of the Congo, Rwanda, Uganda, Zambia, and Zimbabwe, ending in South Africa.This terrestrial path, completed in collaboration withLiquid Technologies, is designed to extend benefits to other countries along the route. The cable will pass through theGoogle Cloud regionbefore crossing the Indian Ocean to Australia.Umojahas joined Google’s Africa Connect initiative, which also includesEquiano, a private subsea cable launched in 2019 to link Africa and Europe.

Google’s goal in developing the Umoja fiber optic cable is to enhance network resilience in a region that has experienced significant outages. This new route aims to provide a stable alternative to existing connectivity paths. In March 2024, several African countries suffered Internet outages due to undersea cable damage. Further disruptions occurred in May when the Eassy and Seacom submarine cables, which connect South Africa and Kenya, failed, affecting Internet services in multiple East African countries, including Kenya and Tanzania. By introducing Umoja, Google seeks to mitigate the impact of such outages and ensure reliable connectivity across the continent.

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