JOHANNESBURG, South-Africa, July 30, 2012/ — With the ‘Great Africa
Business Migration’ well under way, discussions around the realities
of doing business on the continent are now at a critical point. Africa
is far from being a homogeneous continent, with 55 countries all
boasting different regulatory, tax and competitive environments.
Transacting in Africa poses complexities that companies need to factor
in. In light of this, KPMG (http://www.kpmg.com) convened a panel of
experts for the sixth episode in its Africa Conversations Series, to
discuss the most pertinent trends and challenges related to investing
in Africa today. CNBC Africa broadcast the panel discussion, entitled
Transacting in Africa, live across the continent while KPMG made the
session available globally via live webcast.
John Geel, Head of Transactions & Restructuring at KPMG, noted that
historically multi-nationals and larger listed South African companies
have conducted investment into and across Africa. “However, we are now
witnessing an increasing number of smaller companies undertaking
investments due to improved growth opportunities and regulatory and
tax regimes. This means that companies are now seeking out the right
entity to transact with, negotiate details of collaboration and sign
legal contracts.”
Coupled with this increased investment appetite, KPMG have also
noticed that the banking sector on the continent has improved, and
there continues to be consolidation and expansion appetite. In May
2012, KPMG Africa released the Africa Banking Survey to provide a
better understanding of regulatory frameworks on the continent. The
survey provides information in several areas including the commercial,
legal and tax, and banking environments, as well as governance and
reporting issues. Fourteen countries were analysed covering all
African regions. Alan Field, KPMG Head of Tax & Legal, said, “Much
depends on the kind of investment you are making and what kind of
legislative framework exists for the investment in a particular
country. Of course, banks need to examine this since they want a
stable environment to reap investment rewards – so while some
countries in Africa offer attractive investment opportunities, some
are still complex.”
Recent over-banking trends in Africa have led to regulatory
challenges, but these are increasingly being addressed. For Heloise
Smith, Executive Vice President, Business Development, Standard Bank,
companies and banks still need to manage risks carefully while
investing. “More banks and companies are gaining a better
understanding of the continent. However, there is always a trade-off
between risk and return on investment. Banks still need to find ways
of mitigating the risks.”
Despite the financial crisis of 2008, there is now more private equity
available in Africa. As KPMG’s Alan Field points out, “Private equity
on the African continent is relatively new but has started to gain
momentum and there are funders who are very excited about the
opportunities. However, even with the increased awareness,
capitalisation rules and regulations regarding extraction of funds are
still missing. It is uncharted territory at this stage, but it is
developing. Funders will compete about opportunities in Africa in the
future.”
Substantive investment comes from China, now Africa’s biggest trading
partner. The panellists agree that China’s engagement in Africa is
increasingly to the benefit of Africans. China is an important partner
in infrastructure development, which enables economic growth. Says
Habil Olaka, Chief Executive Officer of the Kenyan Bankers
Association, “Unlike the Chinese, many African companies have limited
capacity to deliver on major infrastructure projects. In Kenya, we
have seen increased side opportunities for local companies, and this
helps people on the ground. African collaboration with the Chinese is
a win-win scenario.”
Recently, regional blocks such as the Economic Community Of West
African States (ECOWAS) and East African Community (EAC) have become
stronger economic groupings, but panellists believe that besides
reducing trade barriers and enhancing informal economic exchange,
little impact is visible regarding foreign direct investment.
Potential investors prefer to follow country-specific opportunities,
rather than engage with a regional block. Investors into Africa may
take advantage of gateway countries to access a region, for example
South Africa for the Southern African region.
Carel Smit, KPMG Africa Head of Energy & Natural Resources, also a
panel participant, added: “Investors want to see predictability and
Africa has to provide the necessary frameworks. Africa is so rich with
natural resources. As long as the world comes after these resources,
Africa will do economically well. The world’s population is growing
rapidly and needs resources. A resource hungry world cannot ignore
Africa.”
About KPMG International
KPMG (http://www.kpmg.com) is a global network of professional firms
providing Audit, Tax and Advisory services. We operate in 153
countries and have 145 000 people working in member firms around the
world. The independent member firms of the KPMG network are affiliated
with KPMG International Cooperative (“KPMG International”), a Swiss
entity. Each KPMG firm is a legally distinct and separate entity and
describes itself as such.
For further information please contact:
Contact: John Geel
Title: Head of Transactions and Restructuring at KPMG
Tel: 011 647 7111
Contact: Carel Smit
Title: Africa Head of Energy & Natural Resources, KPMG
Tel: 011 647 7111
Contact: Alan Field
Title: Head of Tax & Legal, KPMG
Tel: 011 647 7111
SOURCE
KPMG International
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