KPMG holds ‘Transacting in Africa’ discussion panel

EDMUND SMITH-ASANTE

KPMG, a global network of professional firms providing Audit, Tax and Advisory services, has convened a panel of experts for the sixth episode in its Africa Conversations Series, to discuss the most pertinent trends and challenges related to investing in Africa today.

Named ‘Transacting in Africa’ the discussion held in Johannesburg, South Africa, July 30, 2012, was aimed at addressing the complexities of doing business in Africa.

According to the conveners, with the 'Great Africa Business Migration' well under way, discussions around the realities of doing business on the continent are now at a critical point. In KPMG’s view, the discussions are very critical because Africa is far from being a homogeneous continent, as all of its 55 countries operate in different regulatory, tax and competitive environments.

Stressing the importance of the panel discussion, it said transacting in Africa poses complexities that companies need to factor in. 

Stating that historically multi-nationals and larger listed South African companies have conducted investment into and across Africa, John Geel, Head of Transactions and Restructuring at KPMG said, “However, we are now witnessing an increasing number of smaller companies undertaking investments due to improved growth opportunities and regulatory and tax regimes. This means that companies are now seeking out the right entity to transact with, negotiate details of collaboration and sign legal contracts.” 

In addition to this, KPMG says it has noticed that the banking sector on the African continent has improved, and there continues to be consolidation and expansion appetite. It further announced in a press statement issued on the panel discussion that in May 2012, KPMG Africa released the Africa Banking Survey of 14 countries, to provide a better understanding of regulatory frameworks on the continent, which provides information in several areas including the commercial, legal and tax, and banking environments, as well as governance and reporting issues.

Commenting on the survey, Alan Field, KPMG Head of Tax and Legal, said, “Much depends on the kind of investment you are making and what kind of legislative framework exists for the investment in a particular country. Of course, banks need to examine this since they want a stable environment to reap investment rewards – so while some countries in Africa offer attractive investment opportunities, some are still complex.”

He further pointed out that in spite of the financial crisis of 2008, there is now more private equity available in Africa.

“Private equity on the African continent is relatively new but has started to gain momentum and there are funders who are very excited about the opportunities. However, even with the increased awareness, capitalisation rules and regulations regarding extraction of funds are still missing. It is uncharted territory at this stage, but it is developing. Funders will compete about opportunities in Africa in the future,” Alan Field maintains.

In the view of Heloise Smith, Executive Vice President, Business Development, Standard Bank however, companies and banks still need to manage risks carefully while investing. According to the Standard Bank official, “More banks and companies are gaining a better understanding of the continent. However, there is always a trade-off between risk and return on investment. Banks still need to find ways of mitigating the risks.” 

Unanimous that China is now Africa's biggest trading partner, the panelists agreed that China's engagement in Africa is increasingly to the benefit of Africans and that China is an important partner in infrastructure development, which enables economic growth.

Elucidating on this, Habil Olaka, Chief Executive Officer of the Kenyan Bankers Association, imputed that “Unlike the Chinese, many African companies have limited capacity to deliver on major infrastructure projects.” “In Kenya, we have seen increased side opportunities for local companies, and this helps people on the ground. African collaboration with the Chinese is a win-win scenario,” he stressed.

The panelists also observed that even though recently, regional blocks such as the Economic Community Of West African States (ECOWAS) and East African Community (EAC) have become stronger economic groupings, besides reducing trade barriers and enhancing informal economic exchange, little impact is visible regarding foreign direct investment.

Potential investors prefer to follow country-specific opportunities, rather than engage with a regional block and investors into Africa may take advantage of gateway countries to access a region, such as South Africa for the Southern African region, they said. 

Contributing to this assertion, Carel Smit, KPMG Africa Head of Energy and Natural Resources, also a panel participant, added: “Investors want to see predictability and Africa has to provide the necessary frameworks. Africa is so rich with natural resources. As long as the world comes after these resources, Africa will do economically well. The world's population is growing rapidly and needs resources. A resource hungry world cannot ignore Africa.”

CNBC Africa broadcast the panel discussion live across the continent while KPMG made the session available globally via live webcast.