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The Impact of COVID-19 on Finance and Investment in Africa

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equities Investment Strategy

By Morne van der Merwe and Wildu du Plessis

The Coronavirus (COVID-19) has resulted in mass production shutdowns and supply chain disruptions due to port closures in China, causing global ripple effects across all economic sectors in a rare “twin supply-demand shock”.

With South Africa having just reported its first cases of COVID-19, Africa is beginning to feel its full impact and plans to control and manage the humanitarian challenges of the virus are underway across the continent.

Economically, the effects have already been felt – demand for Africa’s raw materials and commodities in China has declined and Africa’s access to industrial components and manufactured goods from the region has been hampered. This is causing further uncertainty in a continent already grappling with widespread geopolitical and economic instability.

The number of cases is reportedly slowing down in China, increasing expectations that it will eventually reach a plateau and be brought under control. However, in early March the Organisation for Economic Co-operation and Development noted that “annual global GDP growth is projected to drop to 2.4% in 2020 as a whole, from an already weak 2.9% in 2019, with growth possibly even being negative in the first quarter of 2020”, with global markets plunging in the days thereafter.

Although Chinese growth will fall in the short term, it is expected to rebound quickly, some suggesting this could even happen in the second quarter of 2020 when the virus will hopefully be contained. In the meantime, central banks are implementing measures to mitigate the effects of the virus on the economy, cutting interest rates and injecting liquidity into the banking systems in some countries.

In early March, the World Bank announced it would commit $12 billion in aid to developing countries to help them to deal with the impact of the virus and limit its spread.

The bank said it would prioritise the most at-risk countries. The World Bank also introduced a pandemic bond in 2017, which, as part of the Pandemic Emergency Finance Facility intended to provide money to help developing countries in the event of a pandemic reaching certain thresholds and conditions. So far, these criteria have not been met and the bond has not paid out.

Uncertainty regarding the spread of COVID-19 is high and its impact on Africa is expected to be serious, given the continent’s exposure to China. So far, cases have been reported in Algeria, Cameroon, Egypt, Morocco, Nigeria, Senegal, South Africa, Togo and Tunisia. If there is a widespread outbreak of COVID-19 in Africa it could overwhelm already weak healthcare systems in the region.

According to ratings agency, Fitch, the Coronavirus outbreak will have a downside risk for short term growth for sub-Saharan African growth, particularly in Ghana, Angola, Congo, Equatorial Guinea, Zambia, South Africa, Gabon and Nigeria – all countries that export large amounts of commodities to China.

Impact on Merger & Acquisition activity

Africa has come through a period of prolonged political and economic uncertainty, but signs of future economic improvement, were pointing to a modest increase in M&A activity in Africa over the next few years. COVID-19 is likely to hamper this predicted upturn and result in increased short-term uncertainty in terms of how it will affect investment opportunities in Africa, the continent’s productivity and consumer demand.

There are other transactional risks. If the virus spreads rapidly in Africa, countries might have to introduce similar measures to those taken in China where areas were locked down, factories were shut, quarantines enforced and travel bans imposed.

As such, these events could potentially be significant enough to trigger a change to the terms of an M&A transaction currently in progress, and deals could be delayed as a result. COVID-19 conditions could also cause delays to M&A due diligence, necessary for a transaction to progress to finalisation. Further, the virus could qualify as a force majeure event causing more delays or terminations.

We are hopeful the rebound from COVID-19 will coincide with the implementation of the African Continental Free Trade Area (AfCFTA) in July 2020, which should provide an additional boost to deal activity in Africa the coming years. The AfCFTA is the first continent-wide African trade agreement, with the potential to facilitate and harmonise trade and infrastructure development in Africa. This boost to the investment environment will be welcome after the additional uncertainty of dealing with COVID-19 impacts.

Impact on Capital raising and IPOs

African issuers have been waiting several years for an improvement to political and economic instability in Africa before going ahead with any planned capital raising. As a case in point, Baker McKenzie’s Global Transactions Forecast showed that there were no IPOs in South Africa in 2019.

Also eroding investor confidence were the numerous global trade tensions, with capital raisers watching for signs of resolution before launching IPOs. With Africa looking to benefit from new global and regional trade agreements, the forecasts had been pointing to a potential recovery in capital markets in the next few years, but this might be delayed as the uncertainty around the impact of COVID-19 in Africa reaches its peak.

IPOs in the region are therefore expected to decline, not directly because of the virus as is the case with equities, but because COVID-19 will have an effect on the underlying business case for IPO companies, which will impact on their ability to raise capital

Impact on financial institutions

Global financial institutions are currently assessing the impact of COVID-19 and reacting to its economic impact, ensuring they are able to adjust to new and unprecedented circumstances brought about by the virus. It remains to be seen whether the huge global economic downturn caused by decreased output in China will impact on African lenders and compel financial institutions on the continent to be more lenient towards borrowers and cut them some slack.

Impact on Local Markets

Since global economic growth is a key driver of commodity prices, local prices have been driven down by the virus’s global impact. The uncertainty of the impact of COVID-19 on local markets is expected to lead to increased risk aversion from investors who are waiting to see its potential impact in Africa. On the plus side, a temporary fall in share prices provides opportunities for prudent investors.

Impact of the Insurance sector

Both businesses and individuals in Africa might find they are uninsured for any COVID-19 impacts as losses related to an epidemic or pandemic would usually not be covered in insurance policies, irrespective of whether the insurance covers business interruption, property damage, product losses or personal life and non-life insurance or even travel insurance.

As COVID-19 is a new disease, it would not have been specifically listed in existing insurance contracts. Many business interruption policies will include clauses for extended damage, but it is unlikely that these extensions will provide coverage under the current circumstances. As such, the wording of policies should be carefully checked.

Some insurance companies who provide cancelled event coverage that specifically includes references to epidemics or pandemics could be impacted. Reuters reported that financial services firm Jefferies estimated the insured cost of the Tokyo Olympics to be around USD 2 billion – including television rights, hospitality and sponsorship.

Morne van der Merwe, Managing Partner, and Wildu du Plessis, Head of Africa, Baker McKenzie Johannesburg

Modupe Gbadeyanka is a fast-rising journalist with Business Post Nigeria. Her passion for journalism is amazing. She is willing to learn more with a view to becoming one of the best pen-pushers in Nigeria. Her role models are the duo of CNN's Richard Quest and Christiane Amanpour.

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Senate Voids SPAC Arrest Warrant Against Ex-NNPC Boss Mele Kyari

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By Adedapo Adesanya

The Senate has nullified a warrant of arrest purportedly issued by the Senate Public Accounts Committee (SPAC) against the former chief executive of the Nigerian National Petroleum Company (NNPC) Limited, Mr Mele Kyari.

The motion, sponsored by the Senate Leader, Mr Opeyemi Bamidele, also formally dissociated the Senate from comments attributed to Senator Adams Oshiomhole, who reportedly described the state oil company as “a bunch of criminals and thieves” during a Public Accounts Committee hearing earlier on Wednesday.

The Senate emphasised that legislative oversight must be conducted within the framework of the Constitution, due process, and the principles of fair hearing.

Presenting the motion, Mr Bamidele argued that while Sections 88 and 89 of the Constitution grant investigative and oversight powers to the National Assembly, the authority to issue warrants compelling the attendance of witnesses is clearly vested in the presiding officer of the legislative chamber.

According to him, Sections 4, 5 and 6 of the Legislative Houses (Powers and Privileges) Act confer the power to issue warrants exclusively on the President of the Senate in matters relating to Senate proceedings and committees.

Mr Bamidele warned that any attempt by a Senate committee to independently issue or execute a warrant of arrest without authorisation from the Senate President could amount to an unlawful exercise of power.

“The power to issue a warrant affecting the liberty of a citizen is an extraordinary statutory power which must be exercised strictly in accordance with the procedure prescribed by law,” the lawmaker noted.

He further maintained that legislative investigations are not substitutes for criminal prosecution and that neither individuals nor institutions should be presumed guilty before the conclusion of investigations or judicial determination.

“The constitutional doctrine of fair hearing and the presumption of innocence require that no person or institution be adjudged guilty except by a court of competent jurisdiction after due process of law.”

A major aspect of the motion focused on personal remarks attributed to Mr Oshiomhole during deliberations of the Public Accounts Committee.

Mr Bamidele argued that describing NNPC as “a bunch of criminals and thieves” was capable of conveying a conclusion of criminal culpability before the completion of any lawful investigation, warning that such statements could be interpreted by the public as the official position of the Senate and undermine confidence in the impartiality of ongoing oversight proceedings.

“Such statements, if left unclarified, may be misconstrued by the public as representing the official position of the Senate and may undermine confidence in the impartiality and objectivity of ongoing legislative oversight proceedings.”

The Senate subsequently adopted a resolution formally dissociating itself from the comments and clarifying that they do not represent the findings, opinion, resolution or official position of the upper chamber.

Deputy Senate President, Mr Barau Jibrin, strongly backed the motion, describing it as part of the constitutional responsibilities of the Senate Leader.

Reading from Senate rules and constitutional provisions, Mr Barau stressed that committees are subordinate organs of the Senate and may only make recommendations rather than independently exercise powers reserved for the chamber.

“The committee overstepped its bounds, and he has done the right thing by drawing attention to it.”

He maintained that the Senate must always operate in accordance with both its rules and the Constitution.

“We need to do things in line with our rules and with the law of the land.”

For his part, Senator Mohammed Tahir Monguno described the motion as a necessary intervention to preserve the credibility of the legislature.

According to him, it would be contradictory for lawmakers to make laws for national governance while simultaneously violating those same laws.

“The Senate, being the highest law-making body of the country, should not only be above board but should be seen manifestly to be above board.”

He characterised the motion as both a wake-up call and a reminder for committees to strictly comply with constitutional provisions and Senate rules.

Senator Abba Moro emphasised the importance of maintaining decorum and avoiding statements capable of damaging reputations.

“We should not make statements that seek to impugn the character of public officers or individuals in society.”

Mr Moro cautioned that Nigerians closely monitor Senate proceedings and warned that inappropriate conduct could undermine public trust in the institution.

On his part, Senator Adamu Aliero was among the strongest critics of Oshiomhole’s comments, describing the statement as “reckless” and arguing that it could damage Nigeria’s investment image internationally.

“The NNPC is the cash cow of this country. Such reckless statements send wrong signals to outsiders and can jeopardise foreign direct investment.”

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Customs to Curb Vegetable Oil Smuggling to Protect Local Investments

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By Adedapo Adesanya

The Nigeria Customs Service (NCS) has signalled intensified efforts to combat the smuggling of vegetable oil into the country, with the launch of special operations aimed at protecting local investments, preserving jobs, and supporting the growth of the agricultural value chain.

The Comptroller-General of Customs (CGC), Mr Adewale Adeniyi, disclosed this during a meeting with stakeholders in the vegetable oil industry at the Service Headquarters in Maitama, Abuja, according to a statement issued by the service on Wednesday.

Mr Adeniyi said his organisation remains committed to tackling smuggling through strategic enforcement, intelligence gathering, and stakeholder collaboration, noting that customs and operators in the vegetable oil sector share a common objective of protecting legitimate businesses, encouraging investment, and strengthening the national economy.

He explained that addressing smuggling requires sustained cooperation between government agencies and the private sector, particularly in sectors that contribute significantly to employment generation and economic development.

Mr Adeniyi also called on stakeholders to support enforcement efforts by providing credible intelligence on smuggling routes and illicit trade activities.

Also speaking, the Deputy Comptroller-General in charge of Enforcement, Inspection and Investigation, Mr Timi Bomodi, highlighted the Service’s achievements in curbing the illegal importation of vegetable oil products.

Mr Bomodi disclosed that Customs recorded several seizures across key border corridors and assured stakeholders that surveillance would be intensified in vulnerable locations.

“We recorded about 65 seizures of vegetable oil products in 2025 and another 23 seizures in 2026, with a combined Duty Paid Value of approximately N1.314 billion,” he said, noting that many of the seizures were made along major smuggling corridors, including Seme and Idiroko, adding that surveillance would also be strengthened in other identified vulnerable locations.

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Airtel Africa Foundation Interventions Gulp $6.2m in One Year

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airtel africa foundation

By Aduragbemi Omiyale

About $6.2 million was spent by Airtel Africa Foundation to execute some of its interventions in its first full year, with education receiving the largest share of investment.

In a report made available to Business Post on Thursday, the organisation said the funds were used across its four strategic pillars of Financial Inclusion, Education, Environmental Sustainability and Digital Inclusion (FEED).

The foundation said it aims to scale proven interventions in the year ahead, including expanding its School Adoption Programme to over 80 schools, increasing scholarships to more than 600 youth, providing free internet connectivity to an additional 2000 schools, and extending digital skills and financial inclusion initiatives to underserved communities.

In the period under review, a total of 1,028 schools were connected to the internet through its partnership with UNICEF, bringing the total to 3,296 schools connected across 13 countries, reaching over 2 million learners and nearly 39,000 teachers. In addition, 64 zero-rated digital platforms enabled over 11 million learners to access free educational content.

Further, it improved the condition of public schools, with seven fully renovated and 43 undergoing upgrades under the School Adoption Programme that integrates infrastructure improvements with digital access and holistic student development.

Through the Airtel Africa Tech Fellowship, 257 full university scholarships were awarded in Malawi, Nigeria, Tanzania, the Democratic Republic of Congo, and Uganda, expanding access to STEM (Science, Technology, Engineering and Mathematics) education and building a pipeline of high-potential African technology leaders. In addition to this, 30,530 youth and women were trained through digital skills initiatives delivered with national, multilateral, and private-sector partners.

“The Airtel Africa Foundation was established to help dismantle barriers caused by unequal access to opportunity. While talent and ambition are abundant, access to education, digital tools and economic participation remains uneven. Through partnerships and our continental reach, we are committed to investing in communities furthest from opportunity,” the chairman of Airtel Africa Foundation, Mr Segun Ogunsanya, stated.

“As a Foundation, we are positioned to deliver skills development and lasting change at the individual and household level, while partnering with governments to unlock Africa’s economic transformation,” he added.

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