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EAST AFRICA

THE INVESTMENT OUTLOOK


James Kamau, Chairman, DLA Piper Africa
and Managing Partner, IKM

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DLA Piper Africa
East Africa PE Present in

19 countries in Africa

#1 Global/international
Mergermarkets (DLA Piper)

Covering

10 key sectors

Represented in

Global,
6 countries in
East Africa

national and Leading Regional Law


regional Firm Networks Africa wide
expertise (Chambers and Partners,
Global 2015 – 2018)

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DLA Piper Africa
Pan African Developments

Forty African nations

40 sign continental free


trade deal to reduce
tariffs
Agriculture sector continues to
be main driver

Growing middle class


demand for goods
Nigeria that refused
agreement, saying Region continued spending
1 of 11 it would devastate
economy
on infrastructure

Inflation predicted
to slow down
East Africa economic
growth expected to
continue to increase
in 2018 - 2019

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Private Equity Outlook
for Kenya

POLITICAL CLIMATE IMPACTING POLICY MATTERS RISING SECTORS/CHALLENGING HEADWINDS

 Political outlook going


forward is more stable “Big Four Agenda” Rising Headwinds
following the 'hand shake' Food Security  Agribusiness  Financial Sector
 Kenya economic growth Affordable housing  Real Estate  Transport and Logistics
reduced in 2017 compared to Manufacturing  ICT – Fintech  Power sector project
2016 due to: Affordable universal healthcare  Tourism and Hospitality delays/cheaper pricing
– Uncertainty associated  Renewable Energy  Land challenges -
with the prolonged infrastructural projects
 Manufacturing
electioneering period  Court injunctions
– Adverse weather
conditions in 2017 -
affected food production INVESTMENT CLIMATE THE FUTURE

 Concerns about exclusion of


some communities Positives Key opportunities
Stable political and economic outlook Government initiatives related to the Big 4 Agenda are likely to
Significant Government investment in Infrastructure open up additional investment opportunities. Government
policy intervention to propel growth:
Improved rankings on the Global Competitive Index
(from a previous score of 3.90 to 3.98 out of 7) and  food security
Ease of Doing Business (from a previous ranking of 92  affordable housing
to 80)  manufacturing
 reduce dependence on rain-fed agriculture
Things to look out for  promote use of appropriate fertilizers and quality seeds
Review of interest rate cap law  enhance agro-processing and actualize the competition
Proposed increase in Capital Gains Tax (CGT) rate  protect local manufacturing
Public debt  focus on challenges facing Micro and Small Enterprises
Corruption  encourage research and innovations
Increased activity in the Public-Private Partnership  diversify and intensify efforts to attract visitors
(PPP) space
ICT Sector driven by young and innovative Kenyan generation

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Private Equity Outlook
for Uganda

POLITICAL CLIMATE IMPACTING POLICY MATTERS RISING SECTORS/CHALLENGING HEADWINDS

 Relatively stable political


The recent amendments to several tax laws are of Rising Headwinds
climate.
concern. Affecting 2 key sectors: technology and financial  Manufacturing • Energy (power, HFOs vs
 Entrenchment of political
services: hydros): Government
power  Tourism
policy seems to be
 Services: education, shifting with more
Excise duty on over the top services health, etc stringent requirements for
Mobile money tax  Agriculture cheaper energy even
Corporation tax of loss-making entities  Technology affecting M&A in the
Repeal of thin capitalization rules sector
Tax procedures code
 Financial services:
Withholding of VAT pressure on interest rates
and margins, taxes on
Licensing requirements under the CMA Amendment Bill of digital money, excise
2016 duties on bank
transactions (increased
National content requirements in upstream and midstream from 1% to 1.5%)
operations

INVESTMENT CLIMATE THE FUTURE

Positives  Implementation of venture capital approval provisions under


Government policy is still focused on attracting the CMA Amendment Act – what will the rules look like and
investors with certain incentives e.g. land for how easy will it be to establish/conduct VC investments in
development in place Uganda.
 Proposed enactment of National Payment Systems law as
Things to look out for
well as a Landlord-Tenant law, Competition law
Poor ranking in ease of doing business ratings by
World Bank
Land policy and acquisition

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Private Equity Outlook
for Tanzania

POLITICAL CLIMATE IMPACTING POLICY MATTERS RISING SECTORS/CHALLENGING HEADWINDS

 Political stability since it


became independent in the  Ambitious development agenda aimed at closing
Rising Headwinds
early 1960s infrastructure gaps and supporting human development
as well as promoting industrialization.  Agriculture  Recent changes in
 President prioritized efforts  Forestry legislation in the Mining
to clamp down on corruption, and Telecom sector.
improve public  Fishing
Leading to uncertainty
administration and manage  Industry and construction
 Foreign investors wait
public funds to improve INVESTMENT CLIMATE  Infrastructure and see position
social outcomes.
 Financial sector and
 Concerns regarding political capital markets
dominance  Increased consumer Things to look out for
and credit demand
due to rise in population • Government’s
commitment to protect
 Increased demand for THE FUTURE
foreign investments
social amenities and
infrastructure.
 Economic growth is Key Opportunities
expected to average Energy and minerals
6.2% between 2017 and Logistics & warehousing
2026.
 Infrastructure
Industrialization
Capital markets
Tourism
Agriculture
Financial sectors

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Private Equity Outlook
for Ethiopia

POLITICAL CLIMATE IMPACTING POLICY MATTERS RISING SECTORS

 Considerable improvement
in political climate  Opening up of majority of sectors
Rising
 Exception of Financial Services
FMCG,
 Release of political
prisoners, including Manufacturing,
opposition figures Hospitality & Leisure,
INVESTMENT CLIMATE Telecoms,
 Opposition political parties
invited to dialogue with PPP Ventures,
Government  Consumer base of 107 million people Industrial Parks,
 Huge potential for PE investment into manufacturing, Energy and Power
 The economy is showing
signs of uplift agriculture and service sectors
 Heavy investment already into infrastructure
 Signs of Government
economic sectors opening THE FUTURE
up

 Partial acquisitions by Key Opportunities


private interests in Ethio-
Hospitality & Leisure, PPP Projects
Telecome, Ethiopian
Airlines, Ethiopian Electric Energy & Power
Mining
Airlines (Ethiopian Airlines
Telecom (Ethio- Telecom)

Key Challenges
Availability of foreign currency
Repatriation of profit payments/payments of dividends to
foreigners

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Private Equity Outlook
for Rwanda

POLITICAL CLIMATE IMPACTING POLICY MATTERS RISING SECTORS/CHALLENGING HEADWINDS

 Politically stable since


Genocide in 1994.  Implementation of Vision 2020 aimed at transforming
Rising Headwinds
the country into a middle income country
 Important economic and  Energy  Affordable housing
structural reforms, to sustain  "Made in Rwanda”
 Health Services
its economic growth  Special Economic Zone (SEZ) in Kigali.
 Construction, Tourism
 Aviation
 Mining
INVESTMENT CLIMATE  Agro-Processing
(Tea and Coffee).

 African Continental Things to look out for


Free Trade Area  Tourism, Agriculture
(AfCFTA) THE FUTURE
 Energy, Aviation
 Positive Attitude to
 Manufacturing
Foreign Direct
Investment  Agro-Processing  Manufacturing industry gradual diversification

 No Restrictions on  Real estate and  Airlines (Rwandair) opportunity if Government chooses


Foreign Investment construction to open to investment

 Zero tolerance to  ICT


corruption  Financial services
 Positive credit rating  Mining, Infrastructure
 No security concerns for  Health Services and
investors Education
 11.9 million people with
rapidly growing middle
class

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Private Equity Outlook
for Burundi

POLITICAL CLIMATE IMPACTING POLICY MATTERS RISING SECTORS/CHALLENGING HEADWINDS

 Burundi economy slowed as


a result of political tensions  Mobile banking and internet based payment systems Rising Headwins
have now been adopted
 2017 saw small positive  Mining,  Prolonged political
 Foreign exchange regulation is under review uncertainty undermining
growth  Energy,
 Medium term economic  Revision of Investment Code investor confidence
 Tourism
growth is projected to  The regulatory framework is under development to  Banking, Financial
 Food products
improve modestly enhance the financial sector Services, Insurance and
Pensions Sectors largely
 Amendment of Burundi
underdeveloped
Constitution INVESTMENT CLIMATE
 President Pierre Nkurunziza
announced will not contest
2020 presidential election  Offers access to  Tea and Coffee remains
markets across entire major export
East Africa Community  Agriculture biggest driver
and wider common of economy THE FUTURE
market for East and
Southern Africa
(COMESA)
Private Equity and Venture Capital Markets at early stage
but evolving
 Agriculture growth
expected to recover
 Increased mining output
 Industrial growth

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Private Equity Outlook
for Mauritius

POLITICAL CLIMATE IMPACTING POLICY MATTERS RISING SECTORS

 Political and economic


stability contributes  Parliament adopted the Limited Partnership Act in 2011  Financial Services
to further attract setting up of private equity funds
significantly in attracting  Coal, oil and natural gas
global players to use  Slow initial uptake of limited partnerships but is starting
 Real estate
Mauritius as African to see a shift
platform  Alternative/renewable energy
 Government positively  Chemicals
promoting Mauritius as a INVESTMENT CLIMATE  Communications
platform for investments in DOMESTIC/INTERNATIONAL  Building and construction materials
Africa.
Note: These are key sectors using Mauritius for investment in Africa &
 Government keen to  Africa and Mauritius have enjoyed long and close elsewhere
promote the financial cultural, business and bilateral ties
services industry  Strategic geographical position midway between Asia
and Africa
THE FUTURE
 Mauritius successfully positioned itself as an
attractive, secure and competitive location for cross-
border investments  No recent new announcements
 Developed business, banking and technological  Government keen to grow the PE industry and
infrastructure. remaining the main conduit for PE investments via
 Numerous DTAs allow for efficient tax Mauritius in Africa.
 Investment promotion and protection agreements help  The Mauritius budget will be taking place on today
in mitigating risks. (14 June)
 Member of SADC & COMESA

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DLA Piper Africa is a Swiss Verein whose members are comprised of independent law firms in Africa working
with DLA Piper.

DLA Piper is a global law firm operating through various separate and distinct legal entities.

Further information on DLA Piper Africa can be found at www.dlapiper.com/africa.

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