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Deal making in East and Horn of Africa amidst the current pandemic

By Wambua Mutua

Deal makers are looking forward for investments and M&A activities to pick up in last quarter of 2020.

East Africa investments are set to remain at low levels through 2020 with full recovery unlikely until first quarter of 2021 as the world continues to grapple with the current pandemic and its economic consequences. However, there are indications of continued investments in specific sectors and specific countries within the region. Mergers and Acquisitions (M&A) activity could start to pick-up, with some pockets of resistance in certain sectors such as tech, agribusiness, energy and healthcare. There are also signs that countries which will have managed to control the pandemic in coming few months will be in a more advantageous position.

As governments in the region reopen economies ravaged by the pandemic, investment committees are starting to think about deal making, as many have raised funds targeted to various sectors in the region. Industries such as technology and agri-tech may lead the way out, with deals also coming from badly hurt sectors such as tourism, hospitality, aviation and manufacturing.

What I have learned from the past is that sharp declines in the M&A market have led to sharp recoveries, so I am expecting a strong first quarter of 2021 to have higher levels of M&A.

Most investors have currently put negotiations on investment projects on hold but are set to deploy capital as soon as there is some confidence in the business environment. On the other hand, savvy investors with a long-term view, to buy under priced assets or acquire strategic assets will be set to gain tremendously because the markets will come out strong in long-run.

I have witnessed a trend whereby more companies are holding onto assets too long with considerable disruption of businesses which has resulted to delay in capital allocation decisions. Many investors and businesses will need to reshape their portfolios in short-to-medium-term.

There will be some industries like tourism, horticulture, energy (specifically mining reliant countries), manufacturing, financial sector and hospitality that suffered a double hit from the pandemic and may look to take an aggressive approach in re-align their portfolios.

In a different note, a market like East Africa and more so the Horn of Africa which is defined by disruption, finding the right data and insights can be a key to unlocking competitive M&A and investment advantage. To stay ahead, companies must develop both the insights that matter now, and the agility to change course for what’s next.

One would think the deal lifecycle will remain the way it was historically, but I believe that, financial advisors or transaction advisors will more than ever need to analyse the options of each deal from all angles.

I have no doubt that resilient investors have already got the gut instinct and business experience to make good decisions, however, that enhanced with data-backed deals insights will reveal options that couldn’t be seen before giving you the clarity and confidence to realize exponential potential.

Most businesses will require independent business reviews for good reasons such as, review of company’s financial position as part of debt refinancing for profitable activities, review of business plans and forecast cash flows and modelling of impact of refinancing impact on cash flows and bank covenants.

The pandemic is taking toll on regional economies significantly cutting its growth and creating enormous fiscal and external financing needs.

Notwithstanding the current pandemic, having worked on deals in the region, the challenges to doing deals in Horn of Africa include;

  1. General business etiquette and approach
  • Approaching the target – importance of local relationships, there is a need to build relationship before making formal deal proposals
  • Negotiation process – bottom-up, consensus style decision making, very slow negotiation/M&A process, “yes” does not mean agreement, inability to agree upon valuation methodology, the need to convince all stakeholders
  1. Information and process points
  • Low level of English fluency – preference to have meetings and documents in local language sometimes, though lack of English capability should not be confused with business “savvy”
  • Response time – a slow response or elongated M&A process (does not necessarily mean lack of interest)
  • Exchange of information – most often due diligence is performed via exchange of written questions and answers, rather than meetings with management
  • Insufficient information – oftentimes there is a lack of relevant information made available and management may not be able to answer all of your key questions

  iii.       Financial

  • Differences in accounting standards adopted as even local standards exists which could result to variances in fair market value
  • Finance functions may be less sophisticated – relevant information many not be readily available to analyse the business (e.g., sales and margin analysis, cash flow information, etc.)
  • Access to external audit information – fewer companies required to have an external audit, many deals are done (including carve-outs) without audited financials for the target company, access to auditor work papers is not common and difficult to achieve
  1. HR issues
  • Pensions are often a significant deal issue, including multi-employer plan exposure in certain industries
  • Understanding the complex organisational structure, morale, benefit programs and other motivational factors is critically important and most often very challenging
  • Culture is very different and post deals recommendations and support is very key.

Further, the commonalities in the East Africa deals market include;

  • Deal process is sometimes longer than other world regions.
  • High valuations driven by expected future growth rates
  • Strong local business culture with unique aspects
  • Local buyers often have the advantage (connections, less rigorous internal approval process, financing, market knowledge, etc.)
  • Sourcing quality acquisition candidates can be a challenge
  • Competitive auction processes are uncommon
  • Lack of investment bankers driving / putting structure into the sales process or even experienced deals experts in subjects such as synergy identification, post deal assessments, and deal value after execution.

Below I discuss the current investment climate in East and Horn of Africa countries:


Eritrea officially the State of Eritrea, is a country in East Africa situated in the Horn of Africa with its capital Asmara. The country has a population of approximately 4 million. Main working languages are ‎Tigrinya‎, Arabic, and English. Currency = Eritrean nakfa (ናቅፋ, ناكفا‎)

In Eritrea sectors with high prospects for development and lucrative investment opportunities includes agriculture, fisheries, fish processing, manufacturing, communications banking, transport, and tourism.

Notable companies include Total, Toyota, Cocacola, Asmara Textile, Santa Famiglia Pasta, Asmara Brewery, Red Sea Trading Corp, British American Tobacco, Asmara Soap factory rooted in the country for years among others, doing business here is dominated by strong big corporates.

Recent known significant investment activities despite the current pandemic

With Danakali closer to getting Eritrea Potash project off the ground, this will be a game changer the economy as the investment will be significant and lowest cost source of SOP, a premium grade fertiliser.


Somaliland officially the Republic of Somaliland is a self-declared state, internationally considered to be an autonomous region of Somalia situated in the Horn of Africa with its capital Hargeisa. The country has a population of approximately 4 million. The Main working languages are Somali, Arabic and English. Currency = Somaliland Shilling (Soomaaliland shilin)

The economy is characterized by its informality, and entrepreneurship. The country’s potential lies in its developing telecom sector and the port of Berbera. even though, the two most important sources of income (and foreign exchange) for this aspiring country are remittances and livestock exports.

Notable firms include, Bank of Somaliland, Hargeisa Taxi, Horn Cable Television, KAAH electric, Somaliland Beverage Industries, Somaliland National TV, Sompower, SomCable, Somtel Telesom, among others.

Recent known significant investment activities despite the current pandemic

In less than a year Somaliland and DP World is set to commission 1st Phase of Berbera Port, a USD 442 project which will boost the Berbera’s port economic investment, the largest port in the Horn of Africa.

In the private sector, national flour milling company, al-wataniya recently invested in its natural mill flour products.

Even though investment in Somaliland carries its risks and rewards, still the port remains an attractive site by investors. Long term returns are believed to outweigh the risks in a market which remains unexploited by big corporates.


Djibouti officially the Republic of Djibouti, is a country located in the Horn of Africa with its capital Djibouti City. The country has a population of approximately 1 million. The Main working languages are French and Arabic. Currency = Djibouti Franc (فرنك‎)

Djibouti’s economy has attracted extensive investments in infrastructure (port activities) and logistics, real estate, hotels and railway. After 8.4% in 2018 and 7.5% in 2019, growth is expected to slow to 1.3% in 2020.The recent growth has been driven by free zone dealings in transportation, logistics and telecommunication services.

Notable companies include, Air Djibouti, Djibouti Telecom, Ethio-Djibouti Railway, Puntavia, Silver Air, Bahabshil Bank International, Al Gamil, and Banque pour le Commerce et l’Industrie – Mer Rouge among others.

One of the country’s strategic advantage to other Horn of Africa countries is its stability both on political front, fiscal and monetary policies, representing a relatively low-risk investment profile. Although, Somaliland is following footsteps in providing competition on this front.

Recent known significant investment activities despite the current pandemic

The energy sector and specifically renewable energy has seen traction from investors. Djibouti – French IPP Engie’s 30MW Grand Bara Solar PV is on track. The project forms part of Euro 360 million grand bara project which will have a total of 300MW generating capacity from multiple technologies.


Ethiopia officially the Federal Democratic Republic of Ethiopia, is a landlocked country in the Horn of Africa with its capital Addis Ababa. The country has a population of approximately 105 million. The Main working languages are Amharic and English while Oromiffa and Tigrigna are widely spoken depending on the regional state. Currency = Ethiopian Birr (ብር).

Ethiopia economy has grown drastically in the recent past. Ethiopia is among the top FDI recipient in Africa and top destination in the Horn of Africa. Agricultural sector is the main-stay of the economy despite a recent decline in contribution to the economy by this sector, which saw a causation increase in service sector.

Agriculture contributes largely to the export with coffee, oil seeds, leather and related products, pulses, meat, fruits and vegetables and flowers been the main products.

The country’s economy is set to accelerate with implementation of the investment amended investment proclamation – specifically investment in some areas which were restricted to foreign investors. It is worth to mention that the participation of the private sector is very essential for the growth of the economy.

It’s worth to also note, various corporations are undergoing privatisation with an aim to enhance their operational efficiency and encourage private investments (both local and foreign).

Recent known significant investment activities despite the current pandemic

The country has issued an invitation to investors for the two licenses which are up for grabs in the telecom sector which is undergoing privatisation.

Other recent announced privatisations are in agricultural sector (state farm), industrial sector (cement company), among others.

A local private equity in the market has invested in an FMCG company. A recent deals announcement also indicates an investment by a private equity company in healthcare and a separate one on energy sector. A couple of feasibility studies are ongoing for strategic investments. This shows that the appetite of investment is actually there in mid-term to long-term.

A recent announcement of AFDB funding for the USD 50 million energy project, a 50 MW Tulu Moyo Geothermal Power Plant is also a testimony to the confidence the investors have in the country.


Rwanda, officially the Republic of Rwanda (Kinyarwanda: Repubulika y’u Rwanda), with its capital Kigali. The country is a member of East Africa community (EAC). The country has a population of approximately 12.5 million. The Main working languages are Kinyarwanda, French, Swahili and English. Currency = Rwandan Franc.

Rwanda’s growth is projected at 8 % in 2020 which will be partly driven by large-scale investments such as the Bugesera airport and electricity infrastructure. This might decline by 2% in 2020.

Investments in Rwanda have been negatively influenced by perception that the country has a small consumer market and high costs of financing, electricity and finance, particularly in manufacturing – it is a misconception and only misleading given that there is potential market for exports not considering local market. There is a considerable stability and favourable investment environment which could outweigh the aforementioned investor perceptions.

Some of the previous large investments include, Emerald Park (investment in Kigali diplomatic village, Millennial construction (investment in precast technology for construction sector), Rwanda innovation fund (provision of equity financing for SMEs), Mara Phones which partnered with Google to produce smart phones for Africa market among others.

Largest investments are recorded in manufacturing, mining, agriculture and agro-processing. More than 50% of investments are driven by local investors which can only mean there is clearly an opportunity to have foreign investments and synergy collaborations.

The county has also earned a reputation for innovation in many sectors, including health care.

Recent known significant investment activities despite the current pandemic

The country’s investment outlook is not gloomy at all, the Renewable Energy Performance Platform (REPP) just finalised lending additional USD 300,000 to mini-grid developer (ARC Power) with an aim to build over 120m mini grids in rural Rwanda, a sizeable investment in energy sector.


Tanzania officially the United Republic of Tanzania is a country in East Africa with its capital Dodoma. The country is a member of East Africa community (EAC). The country has a population of approximately 57 million. The Main working languages are Swahili and English. Currency = The Tanzanian Shilling.

The country has the fiscal policies which are believed to poise the country for growth. The country has spent significant investments in its industrialisation ambitions that include constriction of new rail line, hydro power plants and revival of national airline. The country has lowered its 2020 economic growth projections to 4% from 6.9% earlier projected.

Telecom and ICT, energy (excluding oil and gas), real estate, logistics and warehousing, and agribusiness have remained main areas of attraction for investors.

State interventions in areas of mining and agriculture will need government attention to attract investors in medium- to long-term.

Recent known significant investment activities despite the current pandemic

Tanzania is among one of the East Africa country’s that have been said to have relaxed rules in curbing the current pandemic with most of economic activities left to run as usual.

On investment side, Tanzania East Africa Fruits, an agri-tech company secured a funding of USD 2.05 million in series A-round from an impact investor and a further debt of USD 150,000 to help on social enterprise build essential supply chain infrastructure. The investment appetite has been significantly in question in the recent past, a trend which has been witnessed since the country moved its capital from Dar-es-Salam to Dodoma, this coupled with reduced promotion of investments by the country compared to other East Africa member countries, specifically Kenya and Rwanda.


Burundi officially the Republic of Burundi is a landlocked country in East Africa with its capital Gitega. The country is a member of East Africa community (EAC). The country has a population of approximately 12 million. The Main working languages are Kirundi, French and English. Currency = Burundian Franc.

The country’s stability and external position remains fragile. Various initiatives were mentioned by government such as Mulembwe power plant with an aim to improve energy infrastructure as well as, rehabilitation of port of Bujumbura.

The agricultural sector is the main stay of the economy contributing in excess of 40% to GDP despite agronomic, technological and institutional contractions. Even so, food security remains a big challenge in the country.

Recent known significant investment activities despite the current pandemic

There are no known M&A and investments reported. Foreign direct investment is very limited in the country due to challenges with policies towards FDIs (openness to and restrictions upon foreign investments despite there been no limits to foreign ownership or control of enterprises other than in mining licensing where the government must own at least 10% of shares in a foreign company. The ease of doing business is a wait and see situation as now the country has finalised its elections which was held on 20 May this year.


Uganda, officially the Republic of Uganda is a landlocked countryin East Africa, with its capital Kampala. The country is a member of East Africa community (EAC). The country has a population of approximately 43 million. The Main working languages is. The Main working languages is English and Swahili. Currency = Ugandan shilling.

Uganda has achieved GDP growth of 6.3% on average per annum for the last 30 years. Uganda is the most open country to FDI within the region with all the sectors fully liberalized for investment and 100% foreign ownership permitted.

Recent known significant investment activities despite the current pandemic

Investment has been halted or significantly reduced due to the current pandemic. According to some investors more investments are expected to start trickling towards the second quarter of 2021.

South Sudan

South Sudan officially known as the Republic of South Sudan (Dinka: “Paguot Thudan”), is a landlocked country in East Africa, with its capital Juba. The country is a member of East Africa community (EAC). The country has a population of approximately 11 million. The Main working languages is English, with local languages Bari, Dinka, and Murle widely spoken. Currency = The South Sudanese Pound.

South Sudan gained independence from Sudan on 9 July 2011 as the outcome of a 2005 agreement that ended Africa’s longest-running civil war.

80% of the economic mainstay is agriculture with petroleum sector leading from the public sector side. The national government has prioritised the agriculture (agro processing, palm oil and textile, etc.) and construction sectors for development.

The major opportunities lie in energy production and fishing industry. However, given the country is picking up from the continued support from foreign countries, sectors such as petroleum (oil), agriculture, mining, infrastructure and energy remain promising. Kenya is a key player in the country’s economic activity support.

Some of the notable companies in the country include; Bank of South Sudan, Buffalo Commercial Bank, Ivory Bank, Nile Commercial Bank, Southern Star Airlines, Southern Sudan Beverages and South Supreme Airlines among others.

Considering the market is young, there has been limited international investment in the country, however, the financial sector has seen attraction from some players in Kenya such as Co-operative Bank of Kenya, KCB Bank of Kenya and Equity Bank of Kenya which opened subsidiary banks in the country a while back. Other than the financial institutions and the multinational in oil sector, other international companies that operate in South Sudan include South African brewer SABMiller, telecommunications operator MTN, among others.

Recent known significant investment activities despite the current pandemic

There are no known M&A and investments in recent years. Foreign direct investment is very limited in the country due to weak private sector. With the country stabilising from the historical conflicts, there are opportunities posed for investors looking for high risk and calculated high return investments.


Kenya officially the Republic of Kenya (Swahili: Jamhuri ya Kenya), is a country in East Africa, with its capital Nairobi. The country is a member of East Africa community (EAC). The country has a population of approximately 52 million. The Main working languages is English and Swahili. Currency = Kenyan Shilling.

Kenya is the most developed economy in East Africa and the region. The country has made significant economic reforms, institutional strengthening and has the most political stability over years. It is one of the economies in the region which gets sizeable internal and external shocks due to global economic happenings, despite this, the country has been able to withstand the shocks.

The country is the home to global brands and it’s a hub of regional headquarters of biggest multinationals. Major companies invest here, as part of their strategies to access the wider regional markets and opportunities.

Agribusiness, FMCG manufacturing, financial services, health services, and energy sector remain promising sectors to investors in the short to medium-term.

The country’s GDP is expected to rise to about 5.9% in 2020 which will be majorly driven by a pick in industrial activity and strong performance by private sector and specifically service sector. However, with the current pandemic, the economy is set to grow at the rate of 0.8 in 2020, with reduced private consumption and decline in foreign investments.

Major companies have issued profit warning owing to the disruptions of their operation, despite this the economy is believed to pick up very fast post the pandemic. It is worth to note that, the financial crisis is unlikely due to the high levels of liquidity within the system.

Recent known significant investment activities despite the current pandemic

The pandemic has hit the investment climate and investors have retracted investment funds or held investment decisions in look out for better way of doing business post the pandemic.

Despite this, some investments are still happening, for instance, a Nairobi based agri-tech start up Apollo Agriculture has raised USD 6 million with an aim to reach smallholder farmers and maximise farm outputs. In addition, announcement of upcoming plans by KenGen on the continued investment in the 140MW Olkaria VI PPP project. Similar investments are still ongoing albeit slow progress in M&A decisions.