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BUSINESS DAY
FT
Friday 22 November 2019
NATIONAL NEWS
Angola raises $3bn from yieldstarved bond investors IMF warns of ‘borrowing binge’ among already indebted economies Tommy Stubbington
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ngola has raised $3bn from its first bond sale since securing an IMF support package last year, in the latest demonstration that investors’ hunger for higher-yielding debt has spread into frontier markets. The oil-rich African country, which has a debt pile that is close to 100 per cent of its GDP, attracted more than $8bn of orders for the 10- and 30-year debt. Buyers were drawn in by the chunky yields on offer — 8 per cent and 9.125 per cent respectively — and tentative signs that president João Lourenço’s economic turnround programme was bearing fruit. Since taking over in 2017, Mr Lourenço has vowed to wean the country off its dependence on oil revenues while tackling the rampant corruption that set in under his predecessor José Eduardo dos Santos, who led Angola for 38 years. “There has been a genuine change in Angola — a clear-out of the old guard and a more professional approach to running the public finances,” said Kieran Curtis, a fund manager at Aberdeen Standard Investments who bought bonds in the sale. “It’s not an uncontroversial story because the debt stock is so high, but the yield is very attractive,” added Mr Curtis. Maryam Khosrowshahi, a senior debt banker at Deutsche Bank, one of the banks that arranged the sale, said: “Angola came to market at a good time, when benchmark yields are still so low.”
Rock-bottom interest rates in developed economies have made it relatively easy for so-called frontier markets such as Angola to raise cash, prompting the IMF to warn of a “borrowing binge”. Debt issuance by frontier economies — a grouping of lower-rated emerging nations that typically lure investors by paying higher yields — is on course to equal 2017’s record of $38bn. “There can be too much of a good thing,” the IMF said earlier this week. “Countries that don’t put the money to good use may have trouble servicing their loans and find themselves at risk of default.” Angola’s bond sale, its first this year, comes amid pressure to open up its economy after signing a $3.7bn credit facility with the IMF in December, the biggest ever such arrangement made by an African country. The country’s currency, the kwanza, has plunged since it was allowed to float freely last month, and is down roughly a third against the dollar this year. Sub-Saharan Africa’s third-largest economy is struggling with dwindling output from its oilfields, which account for roughly 95 per cent of foreign revenue. Can João Lourenço cure Angola of its crony capitalism? “Their focus has been to diversify, but this is still an oil economy,” said Ms Khosrowshahi. Substantial dollar-denominated oil income is a comfort to bond investors who worry less about a mismatch between the government’s revenues and liabilities, she added.
Louis Bacon to shut Moore Capital hedge funds Closure to external money after three decades follows run of poor returns Ortenca Aliaj, Miles Kruppa in San Francisco and Laurence Fletcher
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ouis Bacon, the veteran hedge fund manager, is closing his flagship hedge funds to external money and stepping back from day-to-day trading at his 30-year-old Moore Capital Management, according to a letter sent to investors on Thursday. The decision, which would mark one of the industry’s most high-profile retreats to date, follows years of diminished performance and outflows at Moore’s global macro hedge funds, which trade stocks, bonds, currencies and other financial instruments. “Intense competition for trading talent coupled with client pressure on fees has led to a challenging business model for multi manager funds such as ours,” Mr Bacon wrote in a letter to investors seen by the Financial Times. “Our move to a proprietary funded asset base will allow us to be more opportunistic in acquiring investment talent and more competitive with those whom have a ‘pass through’ structure.” The New York-based firm, which expects to return most of its outside capital in the first quarter of next year, will consolidate its three flagship funds into one proprietary fund to manage internal money. The letter cited “disappointing results of these funds of the last few years,” but said that “our long term track record is one we remain proud of.” Mr Bacon also told investors that he is scaling back his involvement to
allow “more personal time for a large family, philanthropic pursuits and to continue to develop a number of sports oriented properties.” Moore is “not morphing into a family office as some others have done of late”, the letter added, and it intends to launch individual funds managed by its best performing portfolio managers. “These individual manager offerings will remain inside of Moore,” it said.* Over the past decade Moore’s assets under management have declined to $8.9bn at the end of last year, according to regulatory filings. Returning money to outside investors would see Mr Bacon, 63, joining other prominent hedge fund managers such as Leon Cooperman‘s Omega Advisors and Michael Platt’s BlueCrest who have called time on external money in recent years, amid an increasing regulatory burden, pressure on fees, and a prolonged period of low interest rates that has frustrated many macro managers. Raised in North Carolina, Mr Bacon began his trading career at Commodities Corporation in the 1980s, where he cut his teeth alongside future hedge fund stars Bruce Kovner and Paul Tudor Jones. Mr Bacon is viewed by peers as one of the most successful traders of his generation, known for his ability to shift between positions based on macroeconomic judgments. He won early acclaim for making gains of 86 per cent in 1990 after betting on the crash of Japanese markets, and returning 45 per cent in 1992 when the European Exchange Rate Mechanism collapsed. www.businessday.ng
The sector was pioneered in east Africa by Kenya’s Safaricom and its dominant M-Pesa service © Reuters
Investors pour almost $400m into African fintech in a week
Interswitch, OPay and PalmPay are expanding payments networks across the continent Neil Munshi
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nvestors have poured almost $400m into payments companies based in Nigeria in the past week, in a sign of how seriously venture capital firms are taking the opportunity to build financial networks across the continent. OPay, the Africa-focused, Chinese-backed payments company founded by Opera, on Monday announced it had raised $120m from a group of investors including Sequoia Capital China and SoftBank Ventures Asia, following a $50m fundraising in June. The news came just days after Visa announced a $200m investment in Lagos-based Interswitch and another local fintech company, PalmPay, said it had raised $40m in a round led by China’s Transsion. “The growth in the payments space is probably like no other on the continent at the moment,” said Segun Agbaje, chief executive of Guaranty Trust Bank, Nigeria’s largest lender by customer base and a pioneer in digital payments. “There is so much untapped potential . . . this is a space where people are growing 20-30 per cent, month on month — that tells you why the money is pouring in.” The tally announced by the three companies in the past week is a significant slice of the total $1.2bn in venture capital raised across all of Africa last year, according to data from Partech Ventures. All three companies suggested they would use the infusion of cash to expand across sub-Saharan Africa, where only a third of adults have bank accounts. Each is aiming to become the first pan-African payments company, a goal that has been hamstrung by complicated foreign exchange controls, inefficient cross-border trade and complicated, diffuse regulatory regimes. All are using Nigeria — the biggest economy in Africa — as a launch pad for their expansion.
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Nigeria’s central bank recently opened the gates for mobile money — a sector pioneered in east Africa by Kenya’s Safaricom and its dominant M-Pesa service — and is pushing towards a more cashless society. Roughly 95 per cent of transactions in Nigeria are still done in cash, and about 60m adults do not have bank accounts, representing a tantalising opportunity. “When it comes to payments, the Nigerian market is probably big enough [to sustain a business]”, said Omobola Johnson, Nigeria’s former ICT minister and now a partner at TLcom’s Africa-focused venture fund. “And it’s much easier to start here and expand to other parts of the continent than the other way around.” Lagos has become a centre for the continent’s fintech sector in the years since Interswitch was founded in 2002. Interswitch built most of the mobile applications for Nigerian banks, creating the system through which digital payments run more smoothly — and are much more widely accepted — than in many developed economies. The company has since become the dominant infrastructure through which digital payments are made in Nigeria, and has issued 19m of its pan-African Verve debit cards. But founder Mitchell Elegbe said the company has a broader goal, even as his home market expands, with Nigeria’s population having grown from 160m when Interswitch was founded to 200m today. “Despite the growth that we’ve done, it’s like we’re chasing an accelerating vehicle on foot, so the opportunity in Nigeria is huge and it still remains,” he said. “I believe the opportunities in other African countries are similar [and] the [Visa] partnership allows us to replicate the same thing in multiple markets at the same time.” Interswitch reported $15m in profits after tax in 2016, $19.2m in 2017 and $23.3m in 2018. The company said Visa’s $200m @Businessdayng
investment valued it at more than $1bn, making it Africa’s first true homegrown ‘unicorn’, ahead of a long-gestating initial public offering in London that is expected early next year. In March, Mastercard invested $300m in rival, Dubai-based, Network International, the largest payments processor in the Middle East and Africa, ahead of its London IPO. Interswitch is at the vanguard of a payments scene that also includes Opera, the Chinesebacked, Nor way-based web browser that launched OPay in Nigeria last year. Its green-helmeted ORide motorcycle drivers are ubiquitous on Lagos’s crowded streets, ferrying people and goods, and the company has also moved into food delivery with OFood, and marketing for small businesses with OLeads. All are essentially vehicles for its payments business, which it plans to expand across Nigeria, Ghana, South Africa and Kenya using the infusion of cash. OPay has been able to attract major investment in part because of the exponential growth of Lagos-based companies such as Paystack and Flutterwave, which has its own partnership with Visa and another with Chinese ecommerce giant Alibaba’s Alipay to offer digital payments between China and Africa. Iyinoluwa “E” Aboyeji, Flutterwave co-founder and one of the leaders of the Lagos tech scene, said global players were teaming up with domestic companies because they needed local expertise to gain access to Nigeria’s fastgrowing young population. “When you consider that half of the world’s working population is going to be in Africa over the next 35 years, then you start looking at the total market opportunity differently because ultimately all those people can hopefully get jobs and make money . . . and spend money,” he said. “You’ll be the ultimate conduit for that.”