Seeds of Opportunity: The African Growth Series
July 2023 | Issue 1
In this week's issue, you will learn more about:
- DUE DILIGENCE in AFRICA – Stagger to Save Time and Money?
- AFRICA OPPORTUNITY: Africa's Critical Energy Transition Metals
- AFRICA TREND: Boosting Climate Resilience Financing in Africa
- UPCOMING EVENT: Transport Evolution Africa Awards
- TODAY: IFAT Africa
DUE DILIGENCE in AFRICA – Stagger to Save Time and Money?
Conducting due diligence (DD) in Africa (new markets, new investments, acquisitions, etc.) can be a costly and time-consuming exercise.
With data availability still low in the region, the question is: HOW DO WE LIMIT THE COST OF DUE DILIGENCE?
The answer is a fairly simple one – if time allows, front-load your commercial DD.
A typical due diligence consists of between 5 to 7 elements – commercial, financial, technical, tax, legal, operational and environmental. Executing these workstreams on the ground in Africa is often a challenging task. Without strong direction, the teams must consider various opportunities and risks (given the abundance of both in developing regions).
By front-loading your commercial DD, you not only confirm that the opportunity is real and properly aligned with your objectives but also focus on the other workstreams by eliminating a large number of risks and/or options these would typically take into consideration.
A good commercial DD will not only confirm the business opportunity but provide a roadmap (or at least a thorough evaluation) of the growth/integration path of the new investment. Once you have a solid understanding of the synergies, focus areas, growth levers, areas of divestment, etc., the other workstreams can focus their attention on what the business will look like over the foreseeable future based on the changing commercial context, competitive positioning, economic conditions, policy, etc.
The result is cheaper, faster, and more in-depth due diligence of much greater value to the investor AND the target post-deal.
AFRICA OPPORTUNITY: Africa's Critical Energy Transition Metals
The world is increasingly shifting towards renewable energy technologies to respond to climate change and the need for sustainable energy sources. This transition is driven by the declining costs of renewables, technological advancements, and global efforts to reduce carbon emissions, with renewable energy becoming an integral part of the energy mix, contributing to a cleaner and more sustainable future. Essential critical metals required for this transition, such as copper, manganese, cobalt, nickel, lithium and more, are currently very scarce. Still, demand for these is expected to grow to 20x the current production for certain metals. While the recycling of these metals is undoubtedly advancing, the forecasted demand will not be met by recycling and requires increased mining activities. Africa possesses significant resources of critical energy transition metals, including cobalt, PGMs, lithium, rare earth elements, and copper, among others. These metals are crucial in producing renewable energy technologies, electric vehicles, and energy storage systems. Africa's potential to increase metal production and establish value-add production facilities presents a unique opportunity for economic growth and socioeconomic development on the continent. By tapping into its vast mineral reserves and investing in sustainable mining practices, Africa can attract foreign direct investment, create new job opportunities, and foster technology transfer. Additionally, establishing value-add production facilities, such as battery manufacturing or renewable energy component production, can drive local industrialisation, enhance domestic value chains, and reduce reliance on raw material exports. This holistic approach positions Africa as a key player in the global energy transition and supports the continent's broader development agenda, promoting inclusive growth and fostering socio-economic progress for its people.
AFRICA TREND: Boosting Climate Resilience Financing in Africa
Climate change today will cost Africa a fortune tomorrow if unattended. The region is estimated to require between $130 and $150 billion in climate resilience finance as received in the last decade and requires $2.8 trillion between 2020-2030 to implement its Nationally Determined Contributions under the Paris Agreement. Africa is one of the world’s most vulnerable regions to climate change, although a smaller polluter and suffers from energy poverty. It is important to drive the urgency for green energy financing and collaboration to close the $41.3 annual financing gap. Multilateral development financers such as the African Development Bank have been the lead financers, but more private sector financing through investors including venture capital, private equity, and debt finance institutions is crucial to close the gap. In 2020, only 14% of the $29.5 billion climate finance was from private actors. In contrast, private actors' contributions were higher in Latin America and the Caribbean (49%), East Asia and the Pacific (39%), and South Asia (37%). However, progress is ongoing, with the AfDB committed to mobilising $25 billion by 2025, representing 41% of its total funding commitments. Other recent commitments include collaborative support for the Alliance for Green Infrastructure in Africa fund in mobilising $500 million for green infrastructure projects. Important partners include African Union Commission (AUC), the AfDB, and Africa50. Senegal and Rwanda have inked strategic deals expected to unlock climate financing support of $2.7 billion and nearly $327 million respectively from partners such as the International Monetary Fund, Agence Française de Développement, European Investment Bank (EIB), CDP Cassa Depositi e Prestiti, and G7 nations.
UPCOMING EVENT: Transport Evolution Africa Awards
As part of the Transport Evolution Africa Forum & Expo, the Women in Transport Awards has evolved into the Transport Evolution Africa Awards. Running in Durban on 21 September 2023, the awards will bring together Africa’s most renowned transport industry professionals, many of them longstanding attendees of the Transport Evolution Africa Forum & Expo.
This platform will recognise, reward and celebrate the success of trailblazers who are transforming the transport sector, as well as those who have made significant impact in terms of driving enterprise development, sustainability, and inclusivity.
Looking for more information or have a nominee in mind? Click the link below to learn more about the Awards and to submit your entry - https://lnkd.in/eEdGqBqk
Please note: Nominations close on 31 July 2023.
TODAY: IFAT Africa
Africa’s already limited water infrastructure will likely face increased strain as the continent continues to experience rapid urbanisation. Already, the liveability of certain major cities is compromised as the bulk water supply runs short. As such, water insecurity is a developmental challenge in Africa, exacerbated by the climate emergency and the lack of infrastructure development.
In an exciting panel discussion moderated by Yaa (Agyare - Dwomoh) Ngonyama at IFAT Africa, six key experts will discuss some of South Africa’s water infrastructure challenges and how we can address these challenges while investigating how the country can potentially avoid a water crisis.
To ensure you do not miss out on this exciting topic discussion, Register here and see you at IFAT Africa 2023 - https://lnkd.in/dZ5qjHcD
To find out more about opportunities in Africa, please get in touch with Lynne Martin.
