Economy
M&A Value in Africa’s Energy Sector to Hit $4.5b in 2018—Report
**Drops to $3.3b in 2020
By Dipo Olowookere
A new report by Baker McKenzie in Johannesburg, South Africa, has revealed that the value of Mergers and Acquisitions (M&A) in the energy sector in Africa and the Middle East will rise to $4.5 billion in 2018.
According to the Baker McKenzie’s Global Transaction Forecast for the Energy Sector, M&A transactions in 2017 was $4.4 billion.
In 2019, the value will increase again $5.2 billion before dropping to $3.3 billion in 2020.
Head of the Energy, Mining and Infrastructure Sector Group at Baker McKenzie, Mr Kieran Whyte, disclosed that in Africa, greenfield investment continued in the energy sector, particularly in renewables, which was forecast to grow in coming years.
“The extent of the power deficit across Africa is well known and increasing electricity generation, whether on-grid or off-grid, across the continent is the focus of a number of initiatives.
“The African Development Bank’s New Deal on Energy for Africa has set as its target universal access to electricity across Africa by 2025,” Mr Whyte said.
According to AfDB, to achieve this, 160GW of new on-grid generation and some 75 million new off-grid connections will be needed, through a mix of conventional and renewable energy sources. Complementary initiatives by Power Africa, the EU and other multilateral and development finance institutions will also play a greater role.
“There is clearly a lot of opportunity for the energy sector in Africa, which is reflected in forecast increases in M&A activity in the next two years,” he said.
However, Mr Whyte noted that investment in the energy sector had in some instances stalled due to regulatory and political uncertainty, as well as economic conditions in particular countries in Africa.
“In South Africa, uncertainty surrounding the country’s future energy policy, the delay in the publication of the Integrated Resource Plan, anticipated additional political changes, as well as financial and governance concerns at the State-owned electricity supply company, Eskom, have all resulted in an uncertain energy landscape and a loss of potential direct foreign investment in the electricity sector,” he noted.
Mr Whyte said that it was hoped that under the leadership of new South African President, Mr Cyril Ramaphosa, investors in the sector would receive the clarity they were looking for, which would act as a catalyst for renewed investor confidence.
“The recent appointment of a new Energy Minister, Jeff Radebe is considered to be a positive move in that he is the country’s longest serving continuous cabinet minister, with experience across numerous portfolios. In addition, changes in leadership at Eskom, and President Ramaphosa’s commitment to finalising mining regulation, closing the fiscal gap, stabilising debt, addressing unemployment and restoring state-owned enterprises to health are all moves that will encourage investment in the sector,” he noted.
“What the South African energy sector now needs is more certainty and consistent implementation of energy legislation and policies. Certainty is also needed across other sectors that rely on the energy sector including the mining, industrial and commercial sectors.
“This will restore confidence in South Africa as an investment destination and facilitate direct foreign investment, which will in turn assist in much needed job creation and skills development.
“It will also be necessary to ensure transparency and integrity in the procurement of all goods and services as well as robust and independent energy regulation,” he opined.
“In addition, the government must support and breathe new life into the stalled renewable energy programme, which will be the catalyst for the implementation of other energy programmes. This will ensure South Africa an energy mix that is progressive, capable of meeting customer demands, and that will assist in South Africa discharging its sustainability obligations,” noted Mr Whyte.
Mr Whyte said clarity was also needed on whether, how and when the South African nuclear programme would go ahead.
President Ramaphosa said at the World Economic Forum in early 2018 that the country’s economic situation meant that South Africa could not afford to build a major nuclear plant and this sentiment has been echoed in recent announcements by the Minister of Finance.
“Going forward, bearing in mind the World Economic Forum’s theme of Creating a Shared Future in a Fractured World, and the evolution of the Fourth Industrial Revolution, we need to ensure that energy sector infrastructure investment in Africa is fit for purpose, and based on sustainable development principles,” Mr Whyte noted.
“This means taking cognisance of technological innovation, decarbonisation and climate change, connectivity and digitization, regionalisation and integration, urbanisation and industrialisation and inclusive economic growth models. We also must ensure that we adhere to the UN Sustainability Development Goals and principles for responsible investment,” he explained.
“Further, civic participation in the entire process is essential to ensure that there are no trust deficits across all the supply chains. This will help to ensure procurement integrity and further bolster South African energy sector investment,” Mr noted Whyte.
Baker McKenzie’s Global Transaction Forecast noted that the global energy sector was expected to undergo greater diversification in years to come as companies prepared for advances in technology and renewables.
By Adedapo Adesanya
President Bola Tinubu on Friday presented a budget proposal of N58.47 trillion for the 2026 fiscal year titled Budget of Consolidation, Renewed Resilience and Shared Prosperity to a joint session of the National Assembly, with capital recurrent (non‑debt) expenditure standing at 15.25 trillion, and the capital expenditure at N26.08 trillion, while the crude oil benchmark was pegged at $64.85 per barrel.
Business Post reports that the Brent crude grade currently trades around $60 per barrel. It is also expected to trade at that level or lower next year over worries about oil glut.
At the budget presentation today, Mr Tinubu said the expected total revenue for the year is N34.33 trillion, and the proposal is anchored on a crude oil production of 1.84 million barrels per day, and an exchange rate of N1,400 to the US Dollar.
In terms of sectoral allocation, defence and security took the lion’s share with N5.41 trillion, followed by infrastructure at N3.56 trillion, education received N3.52 trillion, while health received N2.48 trillion.
Addressing the lawmakers, the President described the budget proposal as not “just accounting lines”.
“They are a statement of national priorities,” the president told the gathering. “We remain firmly committed to fiscal sustainability, debt transparency, and value‑for‑money spending.”
The presentation came at a time of heightened insecurity in parts of the country, with mass abductions and other crimes making headlines.
Outlining his government’s plan to address the challenge, President Tinubu reminded the gathering that security “remains the foundation of development”.
He said some of the measures in place to tame insecurity include the modernisation of the Armed Forces, intelligence‑driven policing and joint operations, border security, and technology‑enabled surveillance and community‑based peacebuilding and conflict prevention.
“We will invest in security with clear accountability for outcomes—because security spending must deliver security results,” the president said.
“To secure our country, our priority will remain on increasing the fighting capability of our armed forces and other security agencies by boosting personnel and procuring cutting-edge platforms and other hardware,” he added.
By Aduragbemi Omiyale
The deadline for the recapitalisation of the Nigerian pension industry has been extended by six months to June 2027 from December 2026.
This extension was approved by the National Pension Commission (PenCom), the agency, which regulates the sector in the country.
Addressing newsmen on Thursday in Lagos, the Director-General of PenCom, Ms Omolola Oloworaran, explained that the shift in deadline was to give operators more time to boost the capital base, dismissing speculations that the exercise had been suspended.
“The recapitalisation has not been suspended. We have communicated the requirements to the Pension Fund Administrators (PFAs), and we expect every operator to be compliant by June 2027. Anyone who is not compliant by then will lose their licence,” Ms Oloworaran told journalists.
She added that, “From a regulatory standpoint, our major challenge is ensuring compliance. We are working with ICPC, labour and the TUC to ensure employers remit pension contributions for their employees.”
The DG noted that engagements with industry operators indicated broad acceptance of the policy, with many PFAs already taking steps to raise additional capital or explore mergers and acquisitions.
“You may see some mergers and acquisitions in the industry, but what is clear is that the recapitalisation exercise is on track and the industry agrees with us,” she stated.
PenCom wants the PFAs to increase their capital base and has created three categories, with the first consists operators with Assets Under Management of N500 billion and above. They are expected to have a minimum capital of N20 billion and one per cent of AUM above N500 billion.
The second category has PFAs with AUM below N500 billion, which must have at least N20 billion as capital base.
The last segment comprises special-purpose PFAs such as NPF Pensions Limited, whose minimum capital was pegged at N30 billion, and the Nigerian University Pension Management Company Limited, whose minimum capital was fixed at N20 billion.
By Adedapo Adesanya
Three securities weakened the NASD Over-the-Counter (OTC) Securities Exchange by 0.68 per cent on Thursday, December 18.
According to data, Central Securities Clearing System (CSCS) Plc led the losers’ group after it slipped by N2.87 to N36.78 per share from N39.65 per share, Golden Capital Plc depreciated by 77 Kobo to end at N6.98 per unit versus the previous day’s N7.77 per unit, and FrieslandCampina Wamco Nigeria Plc dropped 19 Kobo to sell at N60.00 per share versus Wednesday’s closing price of N60.19 per share.
At the close of business, the market capitalisation lost N16.81 billion to finish at N2.147 billion compared with the preceding session’s N2.164 trillion, and the NASD Unlisted Security Index (NSI) declined by 24.76 points to 3,589.88 points from 3,614.64 points.
Yesterday, the volume of securities bought and sold increased by 49.3 per cent to 30.5 million units from 20.4 million units, the value of securities surged by 211.8 per cent to N225.1 million from N72.2 million, and the number of deals jumped by 33.3 per cent to 28 deals from 21 deals.
Infrastructure Credit Guarantee Company (InfraCredit) Plc remained the most traded stock by value with a year-to-date sale of 5.8 billion units valued at N16.4 billion, followed by Okitipupa Plc with 178.9 million units transacted for N9.5 billion, and MRS Oil Plc with 36.1 million units worth N4.9 billion.
Similarly, InfraCredit Plc ended as the most traded stock by volume on a year-to-date basis with 5.8 billion units traded for N16.4 billion, trailed by Industrial and General Insurance (IGI) Plc with 1.2 billion units sold for N420.7 million, and Impresit Bakolori Plc with 536.9 million units exchanged for N524.9 million.
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