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Ghost Bites (Alexander Forbes | Oceana | Omnia | RCL Foods)

The Finance Ghost
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Ghost Bites (Alexander Forbes | Oceana | Omnia | RCL Foods)

Get the latest recap of JSE news in the Ghost Wrap podcast, brought to you by Mazars:

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The cash is raining down at Alexander Forbes (JSE: AFH)

Management is rewarding shareholders with fat dividends

Alexander Forbes has released results for the year ended March 2024. The last couple of years have been intense for the group, with major corporate activity to reshape the group into a more desirable financial services operation.

The acquisitions have a significant impact on the growth rates in income and expenses, as the group has effectively bought earnings. They’ve acquired six businesses in the past three years, with OUTvest and TSA Administration highlighted by the group as performing well. It’s hard to get every acquisition right, with an impairment recognised for EBS International.

Operating income increased by 12% overall (including acquisitions, while operating expenses jumped by 16%. The cost-to-income ratio has moved from 77.4% to 79.5%, which isn’t entirely unexpected in a period with corporate activity and related integration expenses. Alexander Forbes will look to reduce this over time.

The growth in expenses obviously blunted the benefit of top-line growth, with profit from operations up just 2%. Cash generated from operations was flat during the prior year.

HEPS tells a different story though, driven by an uptick in investment income. This led to HEPS from continuing operations increasing by 16% and normalised HEPS up by 31%. This would’ve driven the decision to not just increase the total annual dividend by 19% to 50 cents per share, but to add on a special dividend of 60 cents per share as well. On the current share price of R6.88 at time of writing, that’s a meaty return of cash to shareholders.

More than just Lucky Stars at Oceana (JSE: OCE)

HEPS is up dramatically in the latest period

Oceana has reported numbers for the six months to March and they look excellent. Revenue increased by 12.1% and this set the tone for the rest of the income statement, with operating profit up 57.1% and HEPS up 84.6%. The interim dividend is up by a juicy 50%.

It wasn’t just Lucky Star that did well here, although their second quarter benefitted from improved canned food sales volumes. Daybrook in the US was the star of the show, with record earnings. They had strong inventory levels coming into this period and this allowed them to take advantage of record prices for fish oil.

And of course, the weaker rand made the translation of those US-based earnings even more appealing.

Thanks to the stronger pricing in the market, gross margin from continuing operations was up 700 basis points to 34.1%. Although there were some offsetting factors like lower wild caught volumes and the impact on margins, this was clearly a great period.

The substantial jump in profits relative to revenue was achieved through overheads only increasing by 3.5% in continuing operations. This is the joy of operating leverage when it works with you, rather than against you.

The loss from joint ventures and associates of R25 million was mainly due to the Westbank Fishing operation, which was in its off-season for most of this period. That didn’t dampen the overall group earnings party.

The bigger negative in the result was the wild caught seafood business, which saw operating profit fall substantially from R108 million to R17 million. The business suffered various operational issues that plagued the results.

The finance costs line bucked the broader trend in the market and decreased by R3 million to R93 million. This also did wonders for the HEPS jump relative to the revenue increase. Net debt ended the period 16.7% lower and the net debt to EBITDA ratio improved from 1.6 times to 1.2 times.

The group is investing in future growth. Cash from operations was up 12.6%, giving the group confidence to ramp up capital expenditure by 44.9% to R297 million. R132 million of this was to upgrade the West Coast plants and the rest of the capex was replacement in nature.

And here’s an interesting one: Lucky Star is acquiring a 75% stake in a canned chicken liver business in Graaff-Reinet that supplies school feeding schemes in the Eastern Cape and Gauteng. This is interesting diversification.

Oceana will be presenting on Unlock the Stock on 13th June at midday. You can register to attend this online event for free at this link.

Omnia feels confident to pay a much higher dividend (JSE: OMN)

This is despite a decline in earnings

At first blush, it hasn’t been a good year for Omnia. Revenue fell 16% for the year ended March 2024 and operating profit was down 10%. Adjusted HEPS was roughly flat at 737 cents.

This isn’t the typical precursor to a dividend increase of 87%, yet here we are.

As you might have guessed based on that percentage increase, there’s a special dividend for this period. It comes in at 325 cents vs. the ordinary dividend of 375 cents. Management is feeling a lot more confident about the outlook, notwithstanding the recent results. I’m sure a 15% decrease in net working capital helped with the cash flow outlook.

It’s important to look at the segmental performance in a diversified group like Omnia. Starting with agriculture (excluding Zimbabwe), revenue fell by 22% and operating profit decreased by 21%. This means the operating margin increased every so slightly. South Africa had decent sales volumes, so the worst pressure was felt in Africa. They are reviewing their business models in the region in response to these challenges.

Moving on to mining, revenue fell by 3% but operating profit increased by 26%. This means that operating margin expanded significantly. They managed to grow volumes in a difficult market in South Africa, but it seems like the international operations delivered the big uptick in this segment. Markets like Canada, Indonesia and West Africa are key here.

In the chemicals segment, revenue was down 23% and operating profit collapsed by 92% to just R11 million, so this was a disastrous outcome with operating margin of just 0.5%. It sounds like just about everything went wrong in the local market, with macroeconomic conditions giving them plenty of headaches.

The fight with SARS regarding the 2014 to 2016 years of assessment is ongoing, with the Alternative Dispute Resolution (ADR) proceedings underway. Other avenues may be possible if needed, like court adjudication.

So, it was a rather odd year in which the mining division did the heavy lifting. The special dividend will be seen as a positive outlook for the group, with the share price up 11% by late afternoon trade in response.

RCL Foods publishes Rainbow’s pre-listing statement (JSE: RCL)

And to help shareholders further, there’s an independent research report

The Rainbow Chicken business isn’t new to investors, as it has been part of RCL Foods throughout. This means that the market is already fairly familiar with Rainbow. Of course, with the pre-listing statement now published as part of the plan to unbundle the business to shareholders, there’s more public information than ever before on Rainbow.

With 165 farms, there are a lot of chickens at Rainbow. The group is dividend into three segments though: chicken (self-explanatory), animal feed and Matzonox (a waste-to-value operation based at the Chicken division’s Worcester and Rustenburg chicken processing sites which processes wastewater from chicken processing plants and poultry manure from chicken farms to generate electricity, heat and recycled water). Talk about vertical integration.

This excerpt from the pre-listing statement gives you a good idea of how volatile this industry can be, especially with all the craziness over the past few years of avian flu, load shedding and wild macroeconomic swings:

If you want steady profitability, the chicken business isn’t for you. If you enjoy opportunities that require a more active approach to managing the position, then this sector might appeal.

The independent research report will only be published on 11th June, the day after the pre-listing statement. In the meantime, you can read the pre-listing statement here.

Little Bites:

  • Director dealings:
    • MTN (JSE: MTN) made a pretty bad mistake in its SENS announcement last week. I must say, I was surprised to see the announcement of a director of a major subsidiary buying over R4 million worth of shares. That surprise was warranted in the end, as he actually sold the shares rather than purchased them.
    • Finbond (JSE: FGL) announced that Protea Asset Management, managed by director Sean Riskowitz, bought shares worth R1.7 million.
    • Two directors of OUTsurance (JSE: OUT) have acquired shares worth a total of R1.09 million.
    • The CEO of Capital Appreciation (JSE: CTA) has purchased R900k worth of shares on the market. This is a positive signal after the recent release of excellent numbers.
    • A director of Hyprop (JSE: HYP) bought shares worth R374k.
  • Exemplar REITail (JSE: EXP) announced the acquisition of Eerste Rivier Mall in Stellenbosch, marking its first steps into the Western Cape. The purchase price is R282 million.
  • Primeserv (JSE: PMV) released a trading statement for the year ended March 2024. There’s a juicy jump in HEPS of between 31% and 41%, coming in at between 30.70 cents and 33.10 cents. On a share price of R1.39 at time of writing, this low single digit Price/Earnings multiple is typical of what we see on small caps.
  • There has been decent uptake of the Equites Property Fund (JSE: EQU) dividend reinvestment alternative, with holders of 65.91% of shares in issue electing to reinvest their dividends in the shares at R12 per share. This helps with retaining equity on the balance sheet and many property funds take this approach.
  • Labat Africa (JSE: LAB) is currently suspended from trading and in the process of appointing new auditors. The business continues regardless. It takes on new meaning when they say that the “group is continuing to grow” as Labat is focused on medical cannabis. Retail division CannAfrica has opened more than 20 franchises in the past year.
  • Visual International (JSE: VIS) announced that the proposed related party acquisition of a 20% stake in Tuin Huis has been cancelled due to weak performance in the residential property sector in the past year. The acquisition of the Stellandale Gardens land has also been pushed out until after February 2025 to allow the company to focus on Stellandale Junction.
  • Powerfleet (JSE: PWR) is certainly playing the listed game, announcing that the company will be joining the small-cap Russell 2000 Index with effect from 1 July when the index is reconstituted. Being included in an index is helpful not just for visibility, but for ETFs and unit trusts who have a specific mandate related to that index. This does good things for liquidity in the stock. The much more exotic part of the announcement is Powerfleet calling itself an “artificial intelligence of things (AIoT) software-as-a-service (SaaS) provider” – a wonderful example of buzzword bingo. To drive that message home, the stock ticker for the Nasdaq listing will change to AIOT. It doesn’t look like the JSE listing ticker will change.
  • Oasis Crescent Property Fund (JSE: OAO) is unusual for a few reasons, not least of all the lack of debt in the fund to meet Shari’ah requirements. One of the other nuances is that the default for the recent distribution was for shareholders to reinvest the distribution in the fund. Investors have to specifically elect to receive cash. Unitholders of 95.5% of units in the fund elected to receive cash, so maybe they should give the default a rethink.
  • Efora Energy (JSE: EEL), which is suspended from trading, is in the process of catching up on its financial reporting. We know this because the company released a trading statement for the six months to August 2023. I have no idea why suspended companies need to release trading statements, as you can’t trade in the stock anyway and an early warning of major movements isn’t necessary. They should just release results once finalised.
  • If you hold preference shares in Ibex Investment Holdings (JSE: IBX), then check out the finalisation announcement related to the scheme to repurchase the shares. Their listing will be terminated on 25 June.

Ghost Wrap #71 (Capital Appreciation | MultiChoice | Spar | The Foschini Group)

The Finance Ghost
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Ghost Wrap #71 (Capital Appreciation | MultiChoice | Spar | The Foschini Group)

Listen to the show here:

The Ghost Wrap podcast is proudly brought to you by Mazars, a leading international audit, tax and advisory firm with a national footprint within South Africa. Visit the Mazars website for more information.

In just a few minutes, you can get the latest news and my views on Capital Appreciation, MultiChoice, Spar and The Foschini Group. Use the podcast player above to listen to the podcast.

Steal, hustle and lie: the Monopoly story

Dominique Olivier
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Steal, hustle and lie: the Monopoly story

Is there a better way to lose friends and alienate family members than through a spirited game of Monopoly? You probably won’t be surprised to learn that the game that always upsets at least one player has controversy baked into its DNA.

A movie based on the classic board game Monopoly is finally getting ready to roll the dice, and Margot Robbie’s production company is taking the lead. According to the Hollywood Reporter, the Monopoly film has been in development for more than a decade, facing more twists and turns than an actual game of Monopoly along the way. The latest is that Robbie’s production company, LuckyChap Entertainment, will be producing the film.

And they’re not doing it alone. Hasbro Entertainment, the entertainment wing of the famous American toy and board game company, is also on board as a producer. See what I did there?

While no details have been shared yet on how exactly the film will portray the famous game pieces (can we expect Sir Patrick Stewart to voice the top hat? I hope so!) or how writers will create a story around those Community Chest and Chance cards, I can tell you that a far juicer subject for a film would actually be the history of the game itself.

The Landlord’s Game

Back in 1903, Elizabeth Magie, known to all as Lizzie, faced a world brimming with big issues. Income inequality in the US was sky-high and monopolies ruled the roost. A stenographer by trade, Lizzie was a smart, progressive woman and a staunch feminist who dreamed of making a dent in society’s problems. But instead of writing pamphlets or giving lectures, Lizzie chose a different avenue with which to educate the masses about the inequality that surrounded them. She created a board game.

Night after night, Lizzie would hunker down at home, sketching, brainstorming and tweaking. She was a woman on a mission to infuse her board game with her progressive political beliefs. This wasn’t as outlandish an idea as it sounds, if you consider that board games were all the rage in middle-class households as the 20th century dawned, and inventors were realising they could be more than just a diversion – they could be a form of expression. So clever Lizzie got cracking.

Soon enough, she began spreading the word about her brainchild, the Landlord’s Game. “It’s a hands-on lesson in land-grabbing and its consequences,” she wrote in a political magazine. “You could call it the ‘Game of Life,’ mirroring the pursuit of wealth that seems to drive us all.” In Lizzie’s game, players dealt in play money, deeds and properties, navigating loans, taxes and a circular board layout that defied the linear paths of other games. Poverty, parks and prisons dotted the landscape, alongside a nod to her idol, economist Henry George. His ideas about taxing wealthy landowners fueled Lizzie’s game, with one corner of the board proudly proclaiming his motto: “Labour upon Mother Earth Produces Wages”.

From the get-go, the Landlord’s Game tapped into humanity’s competitive streak. Incredibly, Lizzie crafted the game with two rule sets: one anti-monopoly, where wealth creation benefitted all, and one pro-monopoly, encouraging players to crush the competition and gather as many resources for themselves as they could. It was a smart study in contradictions between opposing ideologies which Lizzie hoped would open the eyes of players to the benefits of an anti-monopoly utopia. Little did she know then that it would be her set of pro-monopoly rules that would capture the interest of players, while the anti-monopoly set would all but be erased from history.

This is how you really play monopoly

Magie’s creation really took off on college campuses and soon became public domain, as students across the country made their own versions of the board. The game eventually landed in the hands of a Quaker community in Atlantic City, who added their local street names – like Oriental Avenue, Marvin Gardens, and, of course, Park Place and Boardwalk – to their boards.

Years later, during the Great Depression, a Quaker couple invited their friends, Charles Darrow and his wife, to play the game. For Darrow, who was unemployed, this was a lightbulb moment. Seeing a potential escape from his financial troubles, he asked his hosts for a replica of the board and a typed copy of the rules. Armed with these, Darrow began producing and marketing the game himself. In 1935, he sold his “invention” to the struggling Parker Brothers.

As Monopoly’s popularity skyrocketed, Parker Brothers scrambled to cover up the fact that their bestselling game was actually in the public domain. Somehow, the US Patent Office granted Darrow a patent on his version, even though the Landlord’s Game was its clear predecessor and had been patented by Lizzie Magie in 1904.

Determined to monopolise Monopoly itself, Parker Brothers set out to buy and destroy old folk versions of the game, which had sprung up all over the country. Their efforts paid off, and they managed to keep the true origins of the game under wraps for decades, amassing hundreds of millions of dollars in profits along the way.

For the patent to the Landlord’s Game and two other game ideas, Lizzie Magie reportedly received $500 from Parker Brothers, and no further royalties. Initially she was happy about this, thinking that her role in creating the game would stay connected to its lore. But she soon realised that this was not the case.

Go to jail court

The true story behind Monopoly might have stayed hidden forever if not for the dogged determination of Ralph Anspach, an economics professor and passionate anti-monopolist. For readers who enjoy spotting a pattern repeat itself, this part of the story will be particularly satisfying. Frustrated by the OPEC oil cartels and gas shortages of the 1970s, Anspach created a game called “Anti-Monopoly.” His game kept the fun of the original but flipped the script, making monopolists the bad guys. Sounds a bit like Lizzie’s long-forgotten second set of rules, doesn’t it?

Unsurprisingly, General Mills, which owned Parker Brothers at the time, was not thrilled by Anspach’s invention. They sued Anspach, demanding he stop selling his game. In response, Anspach decided to challenge the Monopoly trademark’s legitimacy. To do this, he dug into the game’s early history, long before Parker Brothers got their hands on it. What he found was a story of corporate manoeuvring and forgotten pioneers, which he managed to trace all the way back to Lizzie Magie.

The legal battle with General Mills took over a decade of Anspach’s life, taking him to the brink of bankruptcy and eventually all the way to the US Supreme Court. In the end he was vindicated, and his relentless pursuit uncovered the real origins of America’s favourite board game in the process.

And yet, the history remains nothing more than a bit of trivia, known only by a few. By the time that Hasbro absorbed Parker Brothers in 1991 as part of its acquisition of Tonka Corp, Lizzie Magie’s name had all but been erased from the history books once more. In the game’s official instructions, the historical timeline of Monopoly begins in 1935, the year Charles Darrow is falsely credited with inventing the game.

This corporate narrative is carefully crafted, with its most revealing aspects being the details it leaves out: the contributions of Lizzie Magie, the existence of a second set of rules, the involvement of Quaker communities and the participation of the numerous early players who were integral to the game’s development.

About the author: Dominique Olivier

Dominique Olivier is the founder of human.writer, where she uses her love of storytelling and ideation to help brands solve problems.

She is a weekly columnist in Ghost Mail and collaborates with The Finance Ghost on Ghost Mail Weekender, a Sunday publication designed to help you be more interesting.

Dominique can be reached on LinkedIn here.

Ghost Bites (African Rainbow Capital | Kibo Energy | Novus | Sibanye-Stillwater | The Foschini Group)

The Finance Ghost
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Ghost Bites (African Rainbow Capital | Kibo Energy | Novus | Sibanye-Stillwater | The Foschini Group)

Get the latest recap of JSE news in the Ghost Wrap podcast, brought to you by Mazars:

ARC’s investments are mostly in line with expectations (JSE: AIL)

And Tyme has initiated its Series D raise as that story goes from strength to strength

African Rainbow Capital (commonly called ARC) has released a portfolio update dealing with the three months to March 2024. On the whole, it looks pretty good despite the unforgiving backdrop for companies of high interest rates and consumers taking strain.

Over at rain, monthly financial targets are being met and they are experiencing decent uptake of the RainOne offering. Bluespec is also on track and is the controlling shareholder of WeeLee, which recently opened its first wholesale mega vehicle warehouse in a clear play for the market segment that WeBuyCars has been enjoying. Ooba has maintained market share and performance despite a difficult environment for property sales. On the agri side, ARC is consolidating various investments and is building out a vertically and horizontally integrated group, which sounds interesting. At Upstream, which offers technology-focused platforms for debt review and related services, the current environment is proving to be favourable.

The thorn among the roses in the non-financial services portfolio is Kropz, where Elandsfontein has faced challenges in production. Various management interventions have taken place to improve production. ARC provided an additional R113 million in capital during the quarter.

Moving on to financial services, the focus is of course on TymeBank. They now have 12.4 million customers across South Africa and the Philippines, with 450,000 new customers monthly. The flywheel is really spinning now, with an annualised gross revenue run rate of $175 million and annualised operating income of $110 million. They have a deposit base of $600 million and loan portfolio of $165 million.

In South Africa, TymeBank’s sustained profitability is expected by June 2024 after breaking even in December 2023. In the Philippines, GoTyme is projecting breakeven by Q4 2025. They are pushing hard in that market, with the acquisition of Savii (a salary-based lender in the Philippines) unlocking a wider range of financial and lending products. TymeBank is also expanding its product range, including targeting SMEs.

Importantly, Tyme completed the Series C capital raise in January 2024 and has initiated its Series D raise to take GoTyme to profitability and to keep growing the lending portfolio. This is an exciting story.

Elsewhere in the financial services portfolio, we find Crossfin as a FinTech business focusing on payments in emerging markets. Lesaka Technologies agreed to acquire Adumo, a Crossfin subsidiary, in a deal worth R1.6 billion that is expected to be finalised in Q3 of this year. ARC has opted to be paid in Lesaka shares.

Capital Legacy, the estate administration business, has continued growing and is focused on making the most of the partnership with Sanlam that saw Sanlam take a 26% stake in the business. As part of the deal, Capital Legacy acquired the entire Sanlam Trust business.

Finally GoSolr’s solar installations remained consistent in this quarter, but that was before load shedding magically disappeared. Demand has been lower than anticipated as you would expect, with the business shifting focus beyond just load shedding solutions.

After languishing for so long, Kibo Energy is taking big steps (JSE: KBO)

Even after this announcement, there isn’t a single bid in the market

There really is no point in Kibo Energy remaining listed on the JSE and it seems that the company has recognised that. After all, on the day of an announcement entitled “corporate restructuring and repositioning” there was still no trade. As part of a major shake-up of the group, the listing on the JSE will be reviewed and possibly cancelled.

The company has been selling down its stake in Mast Energy Development (MED) over time to pay down its debt, while releasing all kinds of detailed SENS announcements about exciting projects at MED. I think the market is just tired of the size and obscurity of this group. It also doesn’t help that MED is so broken that the receivable from that company is seen by Kibo has having limited recoverability (43 pence in the pound), with Riverfort willing to buy the debt from Kibo at that price.

Wholesale changes to the board have been proposed, which will include the current CEO stepping down. The company has a capital raise on the table, but it is conditional on the new board appointments being concluded. This will help with bringing the balance sheet to a sustainable level.

I won’t miss Kibo Energy from my SENS feed if they do decide to cancel the listing. It’s a scrappy thing that hardly ever makes it off R0.01 per share.

Get the calculator out for Novus (JSE: NVS)

You won’t see a 1,000% improvement too often

Novus has released a trading statement for the year ended March 2024. The headline loss per share of -7.35 cents has improved by at least 1,000%, which isn’t an easy thing to interpret without stopping and thinking carefully.

A 100% improvement would be break-even, as the group was loss-making. A 1,000% improvement therefore suggests HEPS of 66.15 cents by my calculation, which puts the group on a Price/Earnings multiple of roughly 8.2x at the current price of R5.40 per share.

Notably, the improvement was by at least this extent, so the earnings might even be higher. We will know when they are released on 14th June.

Sibanye-Stillwater is trying to give the balance sheet some headroom (JSE: SSW)

The group has pro-actively engaged with banks around debt covenants

Sibanye-Stillwater is preparing for what could be an extended period of low commodity prices. PGMs need to move higher for the group to do well and there’s no guarantee whatsoever of that happening. In a pro-active risk management strategy, the group has negotiated with lenders of the Revolving Credit Facilities and the Silicosis Guarantee Facility to increase the leverage limits under the covenants.

There are 11 international banks and 4 South African banks in the lender consortium, so I’m glad that I didn’t need to try and arrange those Teams calls. They’ve agreed to lift the covenants for all facilities from 2.5x net debt to adjusted EBITDA to 3.5x from June 2024 to June 2025, and to 3.0x for July 2025 to December 2025. Other covenants have also been amended.

The group is exploring other alternatives like pre-pays and streams to try to maximise balance sheet flexibility.

As useful as this flexibility is, this isn’t the type of behaviour that you see from a company with a rosy outlook. The PGM cycle is tough to predict at the best of times and electric vehicles are making it even harder.

Finance costs are eating almost all the gains at The Foschini Group (JSE: TFG)

And yet the share price closed 11.3% higher after results

The Foschini Group (TFG) isn’t shy of taking on debt for acquisitions. If this works out, shareholders end up doing very well. If it fails, they pay dearly. And along the way, whichever way you cut it, finance costs eat up much of the growth in profits.

Thankfully, the impact of finance costs should be far less significant in the coming year. Net debt excluding lease liabilities has been reduced by 31.3% to R4.9 billion, driven by the strong cash result detailed below.

But before we get to that, this result needs to be contextualised by finance costs at TFG jumping from R1.37 billion to R1.77 billion, devouring R400 million of the R530 million increase in operating profit before finance costs. This is why the results for the year ended March 2024 reflect a really great story up until operating profit, followed by tepid growth in HEPS. The bankers are enjoying the fruits of TFG’s growth at the moment.

Group revenue increased by 8.9% and gross profit was up 8.6%. Operating profit before finance costs came in 9.9% higher. That all sounds strong. HEPS was unfortunately up by just 0.2%.

Despite this, the market celebrated these numbers with the share price closing over 11% higher on the day, surely because of the quality of the performance in the underlying businesses rather than the growth in HEPS. The significant slowdown in growth in the second half of the year vs. the first half seemed to be brushed off by the market.

One of the main highlights was growth in cash generated from operations of 76.5%, driven by a much-improved inventory situation. Inventories were 11.6% lower despite the jump in sales, with the problems of the prior period having been worked out the system.

This cash performance helped drive a 33.3% increase in the final dividend. If we include the interim dividend and consider the full-year dividend, the increase is 9.4%. If you’re wondering how this is possible when HEPS was only slightly higher, the answer lies in the low payout ratio that leaves plenty of headroom for increases. On HEPS of 970.7 cents, the dividend is still only 350 cents.

If we dig deeper, we find that TFG Africa and TFG London each grew by 10.4% in ZAR terms, while TFG Australia was up just 0.3% in ZAR terms as the retail industry in that country suffers.

The ZAR results are hiding the underlying pressure in TFG London, with store turnover down 6.6% in GBP and online turnover down 0.8%. They managed to grow gross profit by 1.4% in that business though, as they focused on margins. Over in Australia, the local currency performance was a 5.6% decline in retail turnover. The mix was interesting though, with online up 7.5% and stores down 6.5%.

While TFG London managed to limit the decline in operating profit before finance costs to 5.3%, TFG Australia wasn’t so lucky. It saw that metric decline by 28.9%.

It’s worth noting that the overall 8.6% increase in group sales includes the benefit of Tapestry Home Brands only being acquired during the previous period rather than at the beginning of it. Without that impact, retail turnover would’ve been up 6.9%.

Another important detail to note is that online turnover increased by 22% and contributes 9.9% to total group turnover. That’s impressive in my books, particularly as shopping behaviour has normalised after the pandemic. They’ve put a lot of effort into the Bash platform and it is working, with online retail turnover in TFG Africa up by 44.4%.

After the recent uptick we’ve seen in credit sales in some retailers, it’s pleasing to note that cash turnover at TFG Africa grew by 13.3% and credit turnover was only 2.8% higher. Although it is true that sales growth will also be a reflection of where management is focusing (and the likes of Pepkor are pushing credit sales), it’s also important to see cash sales demand coming through.

On the acquisition front, TFG acquired Street Fever, integrating its 91 stores into Sneaker Factory. This has scaled that business to 213 stores within TFG Africa.

Little Bites:

  • Director dealings:
    • A director of MTN Nigeria has bought shares in MTN (JSE: MTN) worth R4 million, which is significant I think.
    • An independent non-executive director of Zeda (JSE: ZZD) – who was previously group financial director at Barloworld – sold shares in Zeda worth R236k. As a shareholder in Zeda myself, I’m not thrilled to see that.
    • Associates of the CEO of Spear REIT (JSE: SEA) bought shares worth nearly R64k.
  • Vukile Property Fund (JSE: VKE) will lend €60 million to Spanish subsidiary Castella Properties. This will be used to partially repay debt with Aareal Bank AG, which bears interest at 5.75% per annum. The shareholder loan will convert to equity by the end of July 2024. The broader refinancing of Castellana’s Aareal loan is expected to be implemented by Q3 2024.
  • Mpact’s (JSE: MPT) relationship with Caxton & CTP Publishers and Printers (JSE: CAT) appears to still be troublesome. At the Mpact AGM, important special resolutions weren’t passed thanks to roughly 40% of votes being against those resolutions. Caxton holds roughly 34% in Mpact and has voted against these resolutions before. These are resolutions that usually go through without any issue at most companies, including paying remuneration to non-executive directors! Mpact has found ways to carry on without these resolutions passing, but it’s really not an ideal situation for anyone involved.
  • In another absolute disaster for Conduit Capital (JSE: CND), the Prudential Authority has declined the sale of CRIH and CLL for R55 million. The decision has taken an extremely long time and has now gone against the company. The purchaser has the right to appeal the decision.
  • Oando (JSE: OAO) has participated in a structured oil-backed forward-sale finance facility sponsored by the Nigerian National Petroleum Company. A subsidiary of Oando contributed $550 million out of a total facility of $925 million. This forms part of Project Gazelle, which is the largest syndicated loan ever raised by Nigeria in the international market. Oando refers to itself as the “indigenous partner of choice” in the Nigerian market.
  • Those still following the Tongaat Hulett (JSE: TON) business rescue may want to check out the latest report (being the 17th such report!) available here.

Ghost Bites (Copper 360 | Gemfields | MultiChoice | Spar)

The Finance Ghost
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Ghost Bites (Copper 360 | Gemfields | MultiChoice | Spar)

Get the latest recap of JSE news in the Ghost Wrap podcast, brought to you by Mazars:

Copper 360 is the best example of “if my grandmother had wheels…” (JSE: CPR)

“…she would’ve been a bicycle”

Copper 360 isn’t off to a great start as a listed company. Investors don’t enjoy surprises, especially of the negative kind. Copper 360 had a pretty terrible year ended February 2024, with much effort put into the announcement to explain why.

Too much effort, perhaps. The announcement takes us to a parallel universe where the group might have broken even, if not for *cue long list of problems*.

Although I’m not quite sure how they’ve estimated these numbers with such certainty, the announcement suggests that they would’ve managed revenue of R162 million were it not for load shedding, the three-month stoppage for the cyclone circuit installation and the poor recoveries. Unfortunately, those things all happened, so they made R38 million instead.

The group raised R490 million in capital and has been spending like mad, with R30 million now in the bank. This has included funding cash losses (R118 million), the Nama Copper acquisition (R131 million) and various capex projects.

Management is bullish on copper prices and on the year ahead in general. Hopefully they will get the company on the right track now, as markets aren’t famous for being patient with new listings that don’t perform as promised.

Gemfields has a gold project in Mozambique (JSE: GML)

You would be forgiven for not knowing this

Gemfields is known for its emerald and ruby assets. There is some other stuff in there though, like Nairoto Resources Limitada, a gold project in Mozambique. Gemfields has a 75% stake in this company. The 25% partner is the same partner that Gemfields has in Montepuez Ruby Mine.

These are very, very early days, as the company is only working towards an indicated mineral resource by the end of the year. This doesn’t mean there is any economic viability at this stage. Gemfields also notes that gold mining is not even part of the company’s long-term strategy, so the goal here would be to either sell the project or find a suitable partner when the resource is understood.

In other words, this might bring some upside optionality to Gemfields in the future, but isn’t worth putting any value on now.

Showmax is devouring capital at MultiChoice (JSE: MCG)

Canal+ is clearly playing the long game here

MultiChoice has released one of the most confusing trading statements that I’ve seen in my life.

The odd footnote below, along with the expected movement range that looks more like a BODMAS maths test than anything else, could’ve been entirely avoided by just having a column showing the expected range for the year ended March 2024, instead of just the expected movement. Then there would be no confusion.

I reckon there’s at least a 50% chance that whoever designed this reporting approach also designed the user interface on the DSTV App:

Once you’ve read it, re-read it and then re-read it again, you’ll see that the headline loss per share got worse. Quite a lot worse, actually. Even on their core earnings metrics, MultiChoice is in the red.

There are a few factors at play here. Aside from the weaker macroeconomic environment, there’s the depreciation of the Nigerian naira (the same problem that has given MTN a bloody nose) and the level of investment in Showmax, which is a nice way of saying that Showmax is incurring huge start-up losses as we’ve seen elsewhere in the streaming industry.

The loss per share (rather than the headline loss per share) has been impacted by a once-off impairment of IT systems of R1 billion. After fighting with the DSTV App yet again the other day as it kept freezing, I have some speculation around which systems those might be.

The metric that has moved higher is trading profit on an organic basis, which means constant currency and excluding M&A. They reference inflation-led pricing and cost optimisation as the reason for this. The foreign exchange impact then ruins that party and takes earnings into the red.

If I was a large MultiChoice shareholder, I would take the Canal+ money.

There’s another drop in earnings at Spar (JSE: SPP)

When does this tide turn?

Pick n Pay is getting all the attention at the moment as the disaster of the grocery sector, but Spar isn’t exactly showing much improvement either. In fact, for the six months to March 2024, things have only gotten worse.

Excluding Spar Poland, HEPS from continuing operations has fallen by between -13% and -3%. This implies a range of 437.9 to 488.2 cents vs. 503.3 cents in the comparable period.

Spar Poland is being shown as a discontinued operation and the company will be recognising a “material impairment” on its assets, with more details to come at the results presentation. Many South African companies have done well in Eastern Europe. Spar isn’t one of them.

Including Spar Poland, HEPS will be down by between -12% and -2%, which is actually better in terms of year-on-year movement than if Poland is excluded. The impairments come through in earnings per share (EPS) and lead to group profitability being crushed by between -98% and -88%.

The pressure on earnings in the core business has come from cost growth above turnover growth, with top-line performance being disappointing. This is particularly poor when Pick n Pay is in so much pain, as Spar should be feeding off that carcass. Of course, the IT issues at the KZN distribution centre at Spar don’t help and are still an issue. The group also notes higher interest costs as a source of downward pressure on profits.

The disastrous SAP implementation in KZN is a gift that just keeps on giving.

Little Bites:

  • Director dealings:
    • A director of a major subsidiary of African Rainbow Minerals (JSE: ARI) sold shares in the company worth R4.75 million.
    • A prescribed officer of ADvTECH (JSE: ADH) has sold shares in the company worth R2.1 million.
  • Sanlam (JSE: SLM) has confirmed to the market that Paul Hanratty has agreed to extend his term as CEO until December 2027.

Who’s doing what this week in the South African M&A space?

Marylou Greig
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Who’s doing what this week in the South African M&A space?

Exchange-Listed Companies

In a move to further bolster its fibre (wood) security and reduce the company’s dependency on external third-party log purchases, York Timber has acquired additional farms. Six properties, including the water rights and standing timber have been acquired from Stevens Lumber Mills for an aggregate R75 million. The farms comprise a total of c. 1,365 hectares.

Marshall Monteagle subsidiary, Monteagle Tool & Machinery, will dispose of its entire shareholding in Monteagle Merchant Group Southern Holdings, which holds a 50% stake in L&G Tool and Machinery Distributers. The stake, which is to be sold to Des Lyle Family Holdings for R64,3 million, is part of the company’s strategic focus to simplify its group structure and to dispose of unlisted investments, which are not wholly owned.

Canal+ and MultiChoice have released the combined circular which sets out the terms of Canal+’s mandatory offer. The offer, at a mandatory offer price of R125.00 per share, opened on 5 June 2024 and will close on 25 April 2025. The French streaming service has acquired in on/off market transactions since its announcement on 8 April 2024, a further 37,9 million MultiChoice shares valued at R4,49 billion increasing its stake to 45.2%. The shares were acquired at a price below the mandatory offer price of R125.00 per share.

Unlisted Companies

Only Realty Holdings has introduced a new specialist division within the group following the acquisition of real estate company Forge Homes. The integration of Forge Homes will expand the group’s capabilities in the new residential development sector. Financial details were undisclosed.

German distribution and services company Biesterfeld Group has acquired Cape-based Aerontec, a supplier and distributor of advanced composite materials and related technology. Its product offering includes an extensive range of materials for marine, transportation, consumer goods and aerospace industries with warehousing and distribution facilities in Cape Town, Johannesburg, Jeffreys Bay and Durban. Financial details were not disclosed.

Eco Atlantic, a TSX-V and AIM-listed Atlantic Margin-focused oil and gas exploration company has, through its subsidiary Azinam South Africa, announced the Farm-In into Block 1 Offshore South Africa Orange Basin. The company will farm-in and acquire a 75% working interest from Tosaco Energy and will become operator of a new exploration right. Tosaco Energy intends to transfer its remaining 25% interest to newly formed BEE entity OrangeBasin Oil and Gas.

DealMakers is SA’s M&A publication.
www.dealmakerssouthafrica.com

Weekly corporate finance activity by SA exchange-listed companies

Marylou Greig
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Weekly corporate finance activity by SA exchange-listed companies

The proposed recapitalisation of Brait will include a fully underwritten equity capital raise of up to R1,5 billion with the proceeds retained by the company for general working capital purposes, potential investment in existing portfolio companies and repayment of Brait Group debt. Titan Financial Services will underwrite the offer which will be priced and underwritten at a 25% discount to the 5-day VWAP preceding the announcement. Brait has secured irrevocable undertakings to support the capital raise from Titan and other shareholders collectively holding 43% of the Brait’s ordinary shares.

RCL FOODS has released further details on the unbundling to shareholders and the listing of Rainbow Chicken. The company will undertake a pro rata distribution in specie of Rainbow shares in the ratio of 1 Rainbow share for every 1 ordinary RCL FOODS share held. The unbundling, which does not require shareholder approval, is anticipated to be on 1 July 2024. The trading of Rainbow shares on the Main Board of the JSE will commence on 26 June 2024.

Capital & Regional PLC will issue 8,089,516 new shares at an issue price of R11.67/£0.48 per share in lieu of a final dividend resulting in retained profits of R94,4 million.

Sirius Real Estate will not be offering a scrip dividend alternative to shareholders but for those wishing to receive a dividend in the form of shares, the Dividend Reinvestment Plan (DRIP) will be available.

The Odd-Lot Offer price per Putprop share of 311.60038 cents represents a 5% premium to the 30-day VWAP of the share at the close on 3 June 2024. The company intends to repurchase 5,959 Putprop shares for an aggregate R19,486. The results of the offer will be released on 25 June 2024.

Gaia Fund Managers a South African impact infrastructure specialist asset manager has listed the Gaia Renewables 1 Limited (GR1) B Preference Share on the Cape Town Stock Exchange’s Equities Market and Impact Board on 31 May 2024. Gaia will apply for secondary listings for the GR1 B Preference Share on the Botswana Stock Exchange, Nairobi Stock Exchange, and Ghana Stock Exchange.

The suspension of trading on the JSE by Oanda PLC was lifted on 5 June 2024 following the publication of outstanding financial statements.

Powerfleet will delist from the Tel Aviv Stock Exchange with effect from 29 August 2024. The company’s shares will continue to trade on The Nasdaq Global Market and the Johannesburg Stock Exchange.

A number of companies announced the repurchase of shares:

On 3 June Thungela Resources completed its share repurchase programme with the repurchase of 3,307,667 ordinary shares. The shares, which represent 2.35% of issued share capital were repurchased at an average price of R133.21 per share for an aggregate R441,6 million.

In line with its share buyback programme announced in March, British American Tobacco this week repurchased a further 124,055 shares at an average price of £24.26 per share for an aggregate £3 million.

Prosus and Naspers continued with their open-ended share repurchase programmes. During the period 27 – 31 May 2024, a further 3,173,298 Prosus shares were repurchased for an aggregate €107,32 million and a further 231,995 Naspers shares for a total consideration of R886,46 million.

Three companies issued profit warnings this week: Copper 360, MultiChoice and The Spar Group.

One company withdrew a cautionary notice this week: Trustco.

DealMakers is SA’s M&A publication.
www.dealmakerssouthafrica.com

Who’s doing what in the African M&A space?

Vanessa Aitken
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Who’s doing what in the African M&A space?

DealMakers AFRICA

Morocco’s YoLa Fresh has announced a US$7 million pre-Series A funding round led by Al Mada Ventures. Other investors in the round include Algebra Ventures, E3 Capital, Janngo Capital and Dutch entrepreneurial development bank, FMO. The YoLa Fresh platform connects farmers directly with retailers and food service companies. The agritech plans to expand across the rest of Africa in the future.

Construction e-commerce platform, Bosso has raised US$400,000 in pre-seed funding from Leonard, Launch Africa Ventures, Renew Capital, Change.com and a number of angel investors. The Zambian startup says it has already onboarded over 1,000 hardware stores and has served over 400 homebuilders since it was founded in 2022.

LAfricaMobile, a cloud communication and mobile marketing platform head quartered in the Senegalese capital, Dakar, has announced a €4,3 million Series A fundraise. The round was led by Janngo Capital and also included Aurélien Tchouaméni, Jules Koundé (of the French Football team), the founders of Expensya, Karim Jouni and Jihed Othmani as well as investment funds SouthBridge Investments and Ciwara Capital.

Nigerian oil palm company Presco Plc is seeking shareholder approval for a proposed 100% acquisition of Ghana Oil Palm Development Company (GOPDC) from SIAT SA. The board is seeking to acquire all 70,580,000 GOPDC ordinary shares in issue for c.US$1,77 each. The consideration will be settled through and initial payment of $64,96m, with the balance settled at a future time.

DealMakers AFRICA is the Continent’s M&A publication
www.dealmakersafrica.com

Bridging Gaps: the art of infrastructure investment in South Africa

Anneline Sonpal and Malcom Mangunda
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Bridging Gaps: the art of infrastructure investment in South Africa

South Africa’s infrastructure sector combines significant challenges with vast potential, making it a prime target for private equity investment.

As urbanisation and population growth accelerate, it is projected that there will be a R4,8 trn funding gap by 2030, underscoring both a critical concern and a compelling opportunity for investors. Over the past decade, the population has surged by 30%, intensifying the need for robust infrastructure development, and presenting an attractive prospect for private equity firms. Reflecting this urgency, infrastructure investments constituted over 36% of total private equity inflows in Southern Africa in 2022, according to the Southern African Venture Capital and Private Equity Association (SAVCA). This substantial share highlights the sector’s importance, and its promise for significant returns.

Recognising the growing demand and attractiveness of infrastructure investments, we address three pivotal questions that have emerged from our decade-long experience with infrastructure private equity funds: How can we target plays to achieve growth with minimised risks in volatile markets? How can we creatively source competitive deals within these target plays? And what are our options when deals in our target plays are not available?

Where to play

Before delving into the strategies for success, it’s crucial to understand “where to play” – that is, how to identify viable market sectors that offer the best investment opportunities. Investors should consider three factors: conducting a market opportunity analysis to check for end-user demand or government support; evaluating asset availability through recent venture capital deals; and assessing how these opportunities align with the firm’s capabilities. These elements create a robust starting point for future strategic endeavours.

How to de-risk portfolio growth

To mitigate risks in portfolio growth, investors should focus on two main strategies: identifying value chains linked to global megatrends, and constructing scalable platforms.

• Identifying value chains positively linked to trends: This entails identifying viable investments by mapping and investigating value chains in infrastructure sectors bolstered by megatrends, such as the green economy, urbanisation, social development, agriculture and food security, and smart infrastructure and technology. These megatrends ensure continuous demand, fostering industry growth and reducing risks of demand fluctuations. For example, in the renewables sector, Singular has observed investments encompassing both photovoltaic manufacturing and energy services merged with site and construction management, as well as operations. In logistics, we have seen the establishment of an integrated logistics, ports services and cold storage platform.

• Building platforms to de-risk growth: Investors can further mitigate growth risks by using their existing competencies to sell similar products to new customer segments, thus achieving growth through market diversification. For example, expanding their addressable market presence from investments in companies that solely target the grid, to selling solar generation directly to consumer and industrial segments, allows firms to minimise risk. This proximity to core operations enables testing opportunities before making substantial investments, and capitalising on market opportunities early, requiring very little time to develop new products/services. Additionally, entering new value chains enhances financial stability by diversifying revenue and creating resilience against market shocks.

How to creatively source investment options

In the competitive landscape of infrastructure investing, innovative sourcing is essential to access new growth avenues.

• Substituting imports for local production: Investors can explore opportunities in local value chains that are overly reliant on imports. By partnering with key importers – especially from regions like China – to establish local production, firms not only fortify local industries, but also gain an early-mover advantage. This strategy can lead to competitive dominance, as previously imported goods are replaced with locally produced alternatives.

• Influencing policy to unlock growth: Additionally, investors can identify sectors that are ripe for growth, but are currently hindered by restrictive policies. By understanding policymakers’ interests, and demonstrating how their investments align with those interests through a compelling case (e.g., through case studies or impact calculations), investors can advocate for beneficial changes. Such advocacy can open new growth avenues and secure an early-mover advantage. For instance, reforms that encourage renewable energy adoption can create a conducive environment for investing in solar and wind projects.

• Identifying carveouts from non-infrastructure companies: Targeting carveouts from sectors like retail, oil and gas, mining, manufacturing and pharmaceuticals offers strategic acquisition opportunities that are less competitive and potentially undervalued. These companies often possess extensive but underutilised infrastructure assets, presenting ripe opportunities. By systematically identifying these assets, from physical infrastructure to logistical capabilities, firms can integrate them into their existing operations, creating synergies and enhancing portfolio strength.

How to move outside of your core sectors

Diversification is critical, particularly as current sectors begin to saturate, and given the dynamic nature of infrastructure investments tied to external developments (e.g. rise of the internet, shifted investments to new areas like data centres). Investors should consider investing in emerging sectors to spread risks. While this requires significant time and resource investment to build new competencies, the benefits of diversification can lead to early-mover advantages and increased funding by addressing critical infrastructure gaps. However, expanding into less familiar sectors can dilute a firm’s focus, unless managed with a clear strategy. The aim should be to select sectors where the firm can use its existing strengths or acquire new competencies that complement its core operations.

Closing Thoughts

Investing in South Africa’s infrastructure sector offers lucrative opportunities but demands strategic foresight and adaptability. By de-risking portfolio growth, sourcing investments creatively, and diversifying into emerging sectors, investors can thrive in this dynamic market. As South Africa progresses, wise investors can play a pivotal role in driving development while earning substantial rewards.

Anneline Sonpal is a Partner and Malcom Mangunda an Associate | Singular Group.

This article first appeared in DealMakers, SA’s quarterly M&A publication.

DealMakers is SA’s M&A publication.
www.dealmakerssouthafrica.com

Unlocking Africa’s potential: The rise of AI investment on the continent

Tayyibah Suliman and Lutfiyya Ramiah
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Unlocking Africa’s potential: The rise of AI investment on the continent

Investing in Artificial Intelligence (AI) technologies is no longer a luxury. It is a necessity to make sure countries are prepared for the changes and challenges that lie ahead.

In the dynamic landscape of technological innovation, AI stands out as a transformative force with seemingly endless potential.

Lloyd’s Register Foundation conducted a study in 2021, to assess whether people across the world believed that AI would hurt or help. African participants in the survey expressed significant scepticism, with some regions in Africa indicating concerns that AI would prove to be dangerous. This scepticism is perhaps not unfounded when considering that similar reservations have been expressed by the likes of Stephen Hawking about the possibility that AI will outwit and oust humans altogether over time.

Notwithstanding any scepticism, experts concur that AI will be transformative, and is here to stay. In Africa, the use of AI tools is currently more likely to be embedded in broader technology solutions to address civic and socio-economic imperatives. In line with this, several key investments were made in AI across Africa, in 2023 and 2024, with a focus on sectors such as healthcare, agriculture, finance and education.

While these investments are a positive indicator, it is important to note that Africa is still contending with a digital literacy divide. Statista reports published in 2024 indicate that the highest level of internet penetration in Africa is in Morocco, at 91%, and the lowest level of internet penetration is a startling 10.6% in the Central African Republic. This digital divide is likely to continue to affect the prospects of AI investment in Africa, with more investments being focused on territories where there is access to internet connectivity, and where there are higher levels of digital literacy across the citizenry. The unfortunate result of this is that the countries that are most in need of AI tools that can improve their lives are unlikely to be the recipients of these technology developments without investment in reducing the digital divide at the outset.

In its Heartbeat report on the TOP AI companies in Africa in 2023/2024, Sovtech found that the global AI market was valued at “$428 billion and is projected to escalate dramatically from $515,31 billion in 2023 to an astounding $2025,12 billion by 2030”. In terms of Africa, it reports a startling contrast for the AI market in Africa, which was only projected to reach “$5,20 billion in 2023, with an expected annual growth rate of 19.72% leading up to 2030, culminating in a market volume of $18,33 billion”.

These statistics provide a positive outlook that the use of and investment in AI is likely to grow substantially in Africa and the rest of the world, albeit disproportionately.

Chat GPT and Gemini have dominated the headlines as AI tools suited to mainstream use; however, the use of AI has far more novel and extensive uses in various other industries across Africa.

Cliffe Dekker Hofmeyr’s Pro Bono and Human Rights practice has been involved in supporting and advising Kwanele, a non-profit organisation that has integrated an AI chatbot into an app that will support victims of gender-based violence to get the necessary guidance and assistance from any location in South Africa.

Some other notable developments are highlighted below, with reference to various industries in Africa that have already been the beneficiaries of AI investments.

AGRICULTURE

In 2023, KaraAgro reported on an AI project empowering Ghanaian cashew farmers by employing unmanned aerial vehicles equipped with AI-driven disease detection capabilities. These aerial robots meticulously collect data from the leaves, stems, and trunks of cashew trees. By identifying pest and disease symptoms before they become visible, farmers can take timely action to prevent serious crop damage. Another AI initiative predicts post-harvest shortages and excesses; this technology aims to improve the prediction models for crop yield, supporting greater food security for Ghana and the broader region. Given the unpredictability inherent in managing smallholding farms, the project will assist farmers to gain a more sustainable income. These innovative AI solutions hold promise and are key developments in the areas of agricultural productivity and food security, directed to enhance crop monitoring, pest control and yield optimisation, addressing food security challenges across the continent.

FINTECH

The use of AI has flourished in the fintech industry, where investments in AI-based fintech solutions have expanded to provide access to financial services, improve credit scoring, and combat fraud in the banking and financial sectors. Sygnia Itrix FANG reports that it has taken the initiative to allow South African investors to align with the Johannesburg Stock Exchange’s first AI-focused, actively-managed, exchange-traded fund, and secure access to high-growth technology and AI stocks at the touch of a button.

EDUCATION

In the education sector, AI-driven educational tools and platforms have been implemented to enhance learning outcomes, personalise learning experiences, and develop skills for the future workforce. Mtabe, an education-tech start-up uses AI to provide personalised learning to students in Tanzania by analysing every student’s learning style and progress, and then generating learner-specific content tailored to each student’s individual requirements.

INFRASTRUCTURE

Omdena – a Palo Alto-based, grassroots AI organisation – participated in a challenge to leverage AI to predict the infrastructure needs of African countries (by considering various data sources, such as satellite images; socio-economic data; climate and topological data; population and demographic data; Google Trends; Google business data; and social media data) and to understand the aspirations, needs and sentiments of people living in the region. This project is indicative that AI will be a formidable tool in assessing and planning for infrastructure development across the continent.

CONCLUSION

These are good examples of how – by fostering an enabling environment that encourages innovation, entrepreneurship and skills development – Africa can fully harness the transformative power of AI to drive socio-economic development, and to address the multiple and monumental challenges that have not been addressed, through the use of technology augmented by AI.

The prospect of any investment in AI in Africa is promising, but it is clear that more can be done to support the reduction of the digital divide, and to ensure that there are proactive policies and a commitment to inclusivity for Africa to chart a course towards a future where AI serves as a catalyst for prosperity, empowerment and sustainable development across the continent.

“In investing, what is comfortable is rarely profitable.” — Robert Arnott

Tayyibah Suliman is Sector Head of Technology & Communications and Lutfiyya Ramiah a Candidate Attorney at Corporate & Commercial | Cliffe Dekker Hofmeyr

This article first appeared in DealMakers AFRICA, the continent’s quarterly M&A publication.

DealMakers AFRICA is a quarterly M&A publication
www.dealmakersafrica.com

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