Value of East Africa deals up on rising confidence

What you need to know:

  • Transaction Sh8.9bn deals were sealed in April from Sh1.9bn in March
  • In the first four months of the year, the region recorded 27 deals, compared to 24 in a similar period in 2017.
  • The Kenyan economy is recovering from the strain caused by extended politicking during last year’s General Elections

The number and value of corporate deals in the region rose last month compared to March, backed by renewed investor optimism and business confidence in Kenya.

I&M Burbidge Capital said in its April East African financial review that the disclosed value of deals in the region stood at $89 million (Sh8.94 billion) last month, compared to $19 million (Sh 1.9 billion) in March.

Kenya accounted for 10 of the 11 deals, with mergers, acquisitions and private equity deals dominating the space.

“The second quarter kicked off to a strong start with 11 corporate deals valued at approximately $89 million announced in April, a significant rise from the previous month, which recorded seven deals worth about $19 million and the same month in 2017 that recorded five deals worth $26 million (Sh2.6 billion),” said I&M Burbidge in its report.

“We have witnessed a resurgence in investor optimism and business confidence and expect that it will translate into significantly higher deal flow through the year.”

Political strain

The Kenyan economy is recovering from the strain caused by extended politicking during last year’s General Elections and the drought which affected the key agriculture sector and raised the cost of food.

Businesses had responded to the tough economic times by slowing down investments as they waited to see the direction Kenya would take, negatively affecting the number of deals.

Indicators in the past two months have, however, shown improving business sentiment.

The Markit Stanbic Purchasing Managers Index (PMI) climbed to 56.4 in April from 55.7 in March, driven by rising demand for goods and services from both the local and external markets.

In the first four months of the year, the region recorded 27 deals, compared to 24 in a similar period in 2017.

Sh13.8 billion deals

The total disclosed value of the deals in the four months to April 2018 is $137.4 million (Sh13.8 billion), but due to the absence of a big ticket deal so far this year, it is much smaller than the $1.07 billion (Sh107.5 billion) recorded in the corresponding period last year.

The value of deals last year was boosted by the $900 million (Sh90.5 billion) acquisition of a stake in the Uganda oil fields by French oil giant Total from British explorer Tullow in January.