It will be a long time before links between Africa and other emerging markets mean much for global investment banks’ profits. Perhaps this view is pessimistic given the announcements last month of two potential deals for billions of dollars involving emerging market firms buying African assets.
Nigeria’s National Council on Privatization said on February 16 that it had received a $2.5 billion bid for 75% of Nigeria’s former telecom monopoly. The bidding consortium, New Generation Telecom, supposedly included China’s second-largest mobile telephone carrier, as well as a group from Dubai, and a Nigerian operator.
But the Chinese firm, China Unicom, promptly denied any involvement in the bid. Some say it reflected wider problems, meaning the incident was hardly a good advertisement for the ease of conducting financial transactions in Nigeria.
The confusion might in some ways mirror the market’s difficulty in determining the exact managers of the sales of nine Nigerian banks that failed a central-bank audit. These sales were meant to attract international players, perhaps including Chinese.
It remained to be seen as Euromoney went to press whether India’s Bharti Airtel would succeed in its proposed $10.7 billion acquisition of mobile-phone assets in 15 African countries from Kuwait’s Zain, also announced in mid-February.
Over the previous 12 months not one of the top 30 Africa-targeted mergers and acquisitions involved emerging-market buyers from outside Africa, according to figures from Dealogic. There were two proposed purchases, each of more than $1 billion of African assets, by an Indian firm, and the other by China Petroleum Corporation.
China’s $1.3 billion acquisition of oil and gas assets in Angola was rejected last year. Bharti Airtel also withdrew its $13 billion planned investment in MTN, Africa’s largest mobile phone group, in 2009.
The importance of mobile phones is obvious in such a big, sparsely inhabited continent, with such undeveloped infrastructure. Increasing telecommunications traffic is representative of Africa’s increasing dynamism. After it became the biggest taxpayer in the majority of the 14 African countries in which it operated, Celtel, for example, was one of the biggest financial stories in sub-Saharan Africa outside South Africa, even before these assets were sold to Zain in 2005.
Nevertheless, the scarcity of investment banking opportunities in the growing links between Africa and other emerging markets might be underlined by the dominance of such deals by just one sector – telecommunications.
The UK’s Standard Chartered and South Africa’s Standard Bank have been more vocal than most banks about their ability to profit from ties between Africa and other emerging markets. Standard Bank’s advertising would suggest the link is an especially important part of its business model. But Standard Bank was not behind any of the deals mentioned above (or at least not publicly).
The competition would seem to be strong for such a small pie, even if the pie is growing.
