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Reuters articles Africa

Money, minerals make for Africa-China

marriageFri, Mar 11 2011By Jon Herskovitz

JOHANNESBURG (Reuters) - China has been Africa's No. 1 investor for years and its newly affluent could soonfollow by sending large flows of cash into the quickly emerging continent looking for better returns than in Asia.

But any money that comes from private investors in China and other parts of Asia will pale in comparison to thebillions of dollars Beijing has sent as it looks to secure the mineral resources it needs to power its hard-chargingeconomy.

Zambia President Rupiah Banda said China understands Africa better than most of the world and has proved itself atrusted ally. His country, with a World Bank-estimated $12.7 billion GDP in 2009, is expected to see about $2.4 billionin Chinese investment this year.

"They have big, big industries with great appetites for what Africa has to offer," Banda told the Reuters Africa

Investment Summit this week."In the process, they are making it easier for us to achieve what we want. What we want is to rebuild our countries."

China forged partnerships with many African states decades ago in their liberation struggles to end colonial rule andlater invested in roads, schools, power plants and infrastructure to help the countries grow -- helping it import moreminerals from countries such as Zambia, Africa's biggest cooper producer.

As Africa has grown, so has trade with China, which leaped to $126.9 billion in 2010 from about $10 billion in 2000,China's state news agency Xinhua reported.

"The Chinese have selfish interests, naturally," Banda said. "We are prepared to do this with anybody else. It is notthat this is reserved for China. It is that they are the only ones who seem to see it the way that we see it."

China, whose biggest African trade partners are its most prominent suppliers of natural resources, has reapedrewards from its largess, but its success has not been as broad as some planners in Beijing would perhaps haveliked.

RISK FACTORS

The Eurasia Group said the resources-for-infrastructure deals have helped Chinese construction, telecom and hydrocompanies, but its oil and mining companies have often failed to overtake Western firms, which dominate thosesectors.

"Chinese companies will begin more systematically to incorporate sovereign risk factors and Western best businesspractices, but their budgetary constraints will remain looser than those of their Western counterparts for some time tocome," it said in a report.

Chinese aid has also helped prop up African leaders scorned and sanctioned by the West for suspected human rightsabuses, such as Zimbabwe's President Robert Mugabe, whose government plans to take majority stakes in allforeign mining firms except those from China.

But China has also stood by major democracy South Africa and helped it ascend to the BRIC grouping of fast-emerging economies that also includes Brazil, Russia and India.

The move was seen as a signal by Beijing that it viewed South Africa, the continent's largest economy, as a politicallyimportant state and entryway into Africa even though its economy is less than a quarter the size of the smallest BRIC,

Russia.

"It signals that South Africa has something to offer," Standard Bank (SBKJ.J: Quote, Profile, Research, Stock Buzz)head Jacko Maree told the summit.

And Africa may offer Chinese and other Asians a place to park their cash.

The Hong Kong bourse has unique space for investors looking for exposure to Angola's massive oil industry with alisting of national oil company Sonangol under China Sonangol (1229.HK: Quote, Profile, Research, Stock Buzz).

Moscow-based RenCap has annual road shows in Hong Kong where it tries to marry private-wealth investors withcapital-hungry African corporates.

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Japanese, who park the bulk of about $15 trillion in private savings in domestic bank accounts at just a hair abovezero-percent interest, could also be in line to take a look at Africa, home to some of the world's fastest-growingeconomies.

"It is infinite. It is massive. The high-nets in Asia, some of them are institutional in size," Clifford Sacks, Africa head ofRenCap, told the summit.

(Editing by David Holmes)

Nigeria to restructure bourse, sees more IPOs

Thu, Mar 10 2011

LAGOS (Reuters) - Nigeria's stock exchange needs to be restructured before it presses ahead with demutualizationplans, interim administrator Emmanuel Ikazoboh said on Thursday.

"What we intend to do is restructure the exchange to prepare it as an entity ... We are going to change the council toa board of directors, we are going to look into the corporate governance structure," Ikazoboh told Reuters.

He said regulators had visited Brazil, Malaysia and South Africa to look at their various models and that one of thekey issues would be determining the valuation for the bourse.

Ikazoboh also said he expected a few initial public offerings (IPOs) in the second half of the year, after Nigeria'selections, but that more would start "trickling in" in 2012.

(Reporting by Chijioke Ohuocha; Writing by Nick Tattersall; Editing by Jon Loades-Carter)

Profile: Africa's burgeoning middle class

Thu, Mar 10 2011

NAIROBI/LAGOS (Reuters) - Africa's middle classes are growing, providing the backbone of an economic revolutionthat is attracting billions of dollars of foreign capital and changing the face of the poorest continent.

Following are examples of the new African consumer:

BEN KIILU, KENYAN

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As with many of Kenya's burgeoning middle class, Ben Kiilu, a senior manager at a power firm in east Africa's biggesteconomy, spends most of his free time and money in shopping malls.

Westgate, Kenya's swankiest and largest mall, Galleria in the leafy suburbs on the edge of the capital, and NakumattJunction are his favorite haunts, and sipping mochaccinos and chatting with friends his favorite pastimes.

"Chances are if there were no shopping malls in Kenya, I would be at home," said Kiilu, an avid reader in his mid-thirties.

An alumnus of the University of Nairobi, Kiilu started off in a moderately paid job, but quickly realized he wanted toget ahead of the pack.

"I had to distinguish myself by doing something different," he said.

After working for two years, he sold everything he had to pay for a masters degree at Cambridge University in Britain.Ultimately, he wants to send his children to Cambridge too.

Kiilu, who is unmarried, does not restrict his holidays to Kenya, traveling frequently to Zanzibar, the palm-fringed,paradise islands off the coast of neighboring Tanzania.

"There is one place in the world I would like to go -- a drive through the Atacama Desert in Chile," he said.

Kiilu would like to pursue more professional courses such as leadership training, and to move up the career ladder,ultimately to become a chief executive or run his own real estate business.

TAYO ABEJI, NIGERIAN

Clutching a brown patent Jimmy Choo handbag, a gift from a relative who lives in France, Tayo Abeji is spendingFriday afternoon browsing at a mall in Lagos.

"My sister works for the Foreign Affairs ministry, so she used to send me clothes from France and the UK," says the26-year-old, who studied sociology in Nigeria and now runs a grocery store selling packaged goods such as pasta.

However, in recent years, she has had to rely less on her sister in Europe and can now find almost everything shewants in Lagos -- as long as she is prepared to pay for it.

She splashes out once a month on an item of western clothing or traditional ankara fabric at Palms, an upmarket mallclose to the city's new free trade zone.

She wanders between shops selling brands such as Mango, the Spanish high street retailer, Britain's TM Lewin,America's Converse, and Nigerian boutiques where dresses are made to order.

Abeji will spend up to 15,000 naira ($100) on one piece of clothing and 5,000 naira on a single item of importedmake-up.

She and her fiance are currently setting up a new home and last week forked out 157,000 naira for a Samsungtelevision and an LG stereo. Abeji likes to change her BlackBerry twice a year to stay up-to-date with the latest

models.Abeji is pleased that she can find almost anything she wants in Lagos these days, but complains about the price ofgoods from red wine to trainers.

Nigeria's dependence on oil has led to the neglect of other industries, leaving most consumers with little choice otherthan costly imported goods.

Other young shoppers buy clothes and gadgets online from western high street retailers, get items delivered tofriends or relatives in the west, and then wait for them to visit. Even those who pay for shipping say they still savemoney.

"Over the last two years things have really got better here, but it's too expensive," Abeji says. "When I went to Dubai,I saw handbags that you could buy for 10,000 naira. Here the same bag is 40,000 naira -- and it might be fake."

(Reporting by Beatrice Gachenge and Shyamantha Asokan, Editing by Ed Cropley)

Patience, tenacity key to business in AfricaFri, Mar 11 2011

By Marius Bosch

JOHANNESBURG (Reuters) - Doing business in Africa is not for the faint-hearted and requires patience, good localstaff and above all respect for the continent, bankers and executives say.

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Speakers at this week's Reuters Africa Investment Summit said that with Africa firmly on investor radars and sevensub-Saharan African countries expected to be among the world's 10 fastest growing economies over the next fiveyears, it cannot be ignored.

"Africa's time is now," said Jonathan Auerbach, co-founder and Managing Director of New York-based brokerageAuerbach Grayson, who has been doing business on the continent for 15 years.

"The developments throughout Africa are quite extraordinary for those of us who have been traipsing around thispatch."

Despite lucrative prospects for investment banks involved in transactions ranging from urban renewal projects inKenya to project finance for a road construction project in Nigeria, bankers needed local contacts, knowledge andstaff.

"If you are going to briefcase in professionals from London, New York and other places, you are going to find it tough.If you are prepared to invest in local talent and train them on the ground, I think it is a lot different," said CliffordSachs, CEO Africa for Rennaisance Capital.

RenCap has representative offices in six African countries with experienced local staff on the ground, unlike biggerinvestment banks which typically fly in dealmakers -- so-called "briefcase bankers."

RED TAPE, BUREAUCRACY Michael Larbie, Head, Investment Banking & Coverage, Africa, for South Africa's RandMerchant Bank, said the difficulty of striking a business deal varied from country to country and is often tied up in redtape.

"You may encounter a project where there are multiple government departments and in some cases they are not allon the same page. So you are essentially the facilitator between the sponsor, various government ministries and theregulator," Larbie said.

Sub-Saharan Africa is near the bottom of the World Bank and International Finance Corporation's 2011 list of mostbusiness-friendly regions -- with a ranking of 137 on a scale up to 183 compared to OECD countries with 30 andEastern Europe and Central Asia with 72.

The higher the ranking, the harder to do business.

RMB's Larbie said engagement with regulators in each country was essential for any transaction to be completed.

"There are a lot of difficult projects, all of them have their uniqueness and their particular challenges but as a bankeryou have to be tenacious and see it through," Larbie added.

Returns from investments can be astounding.

Jacko Maree, Chief Executive Officer of Standard Bank (SBKJ.J: Quote, Profile, Research, Stock Buzz) -- Africa'sbiggest bank by assets -- said his bank was pushing ahead with starting a bank from scratch in oil-rich Angola,currently the domain of local and Portuguese banks.

"The published profits of some of these entities are phenomenal," Maree said.

(Editing by Matthew Tostevin)

Reuters Summit-Kingdom Zephyr eyes $300mln in Africa dealsThu, Mar 10 2011

(For other news from the Africa Investment Summit, click here)

* To take minority stakes in 6-7 pan-African companies

* Sees opportunities in housing development, telecomsBy Tiisetso Motsoeneng

JOHANNESBURG, March 10 (Reuters) - Africa-focused private equity firm Kingdom Zephyr plans to invest about$300 million over the next three years by taking minority stakes in six or seven companies across the continent, itsmanaging partner said.

Kingdom Zephyr Africa Management, whose biggest investor is Saudi billionaire Prince Alwaleed Bin Talal, is in theprocess of investing more than $400 million of committed capital from a 2008 fund.

The firm has already spend 30 percent of that amount on three deals and is looking to spend the rest over the nextthree years, managing partner Kofi Bucknor told the Reuters Africa Investment Summit in Johannesburg.

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"Our focus will continue to be around the investment opportunities coming from the consumption patterns of thegrowing middle class in Africa as they relate to industries such as banking, insurance, housing, telecommunicationsand cement," Bucknor said on Wednesday.

Consumer spending in the world poorest continent is expected to roughly double by 2020 as high commodity pricesand economic expansion lift disposable incomes and give rise to a nascent middle class.Bucknor also said the fund would focus on Egypt, South Africa, Kenya, Nigeria, Angola, Algeria and Morocco forcompanies to invest in.

"I think the obvious places to look are the large markets where we can find companies of critical size more easily," hesaid. "We seek significant minority positions."

Kingdom Zephyr already owns stakes in South African building materials group Buildworks BWKJ.J and Ivory Coastcanned tuna maker Thunnus Overseas Group.

The fund also sees opportunities in infrastructure sectors such as housing and electricity, and is keeping an eye outfor opportunities in the natural resources sector.

"A number of African countries have a strong competitive advantage there," Bucknor said.

Over time, Bucknor said he expected to attract more capital from pension funds, colleges, universities andendowments.

"The other investor base that is looking increasingly interested in Africa private equity is Africa-based funds. Nigeria istalking about a sovereign wealth fund," he said. (Editing by Jon Loades-Carter)