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Kuranga & Associates VC Fund (Update)

12 Apr

David O. Kuranga, Ph.D.

The author is the Managing Director and Principal of Kuranga and Associates, a full-service investment, political and economic risk consultancy, and asset management firm that specializes in Africa. He is also the author of The Power of Interdependence with Palgrave Macmillan Press.

We are in the process of wrapping up our seed round for our SME Venture Fund for Nigeria. Kuranga and Associates Venture Capital is a new 30 million dollar Venture Capital Fund for Nigeria specializing in Small to Medium-size Enterprises (SMEs). The fund expects to hold its first closing in 2013. SMEs have a vital role to play in developing economies as they account for a large percentage of the overall growth in the economy. For a myriad of reasons it is difficult for international capital investors to access privately owned businesses across Africa. The goal of Kuranga & Associates Venture Capital is to help remove this obstacle and provide international capital for talented African entrepreneurs starting in Nigeria. Kuranga and Associates is currently forming strategic partnerships with individual and institutional investors.

Our target investors and institutional partners seeking high-yielding investments also have a desire to make an impact through socially responsible investing (SRI). The fund targets a capital of $33 million USD (first closing at $18 million USD). Along with our partners, the fund seeks to acquire additional individual and institutional investment commitments. The growth of the SME sector in Nigeria far outpaces the growth found in many of the conventional financial markets. Individual investors that are seeking to diversify their portfolio to include high-yielding investments in Africa should take a close look at our fund. For details contact us by email or phone.

David O. Kuranga; Ph.D. Managing Director
Kuranga & Associates Global Consultancy
Phone: 212.363.0936
david.kuranga@kaglobal.net
https://kurangaandassociates.wordpress.com
http://us.macmillan.com/thepowerofinterdependence/DavidOladipupoKuranga

Kuranga & Associates Venture Capital

7 Nov

Kuranga & Associates Global Consultancy
Office: 646.481.6263
New York, NY
david.kuranga@kaglobal.net
https://kurangaandassociates.wordpress.com/

Kuranga and Associates Venture Capital Fund

25 Sep

Kuranga and Associates is launching a new 30 million dollar Venture Capital Fund for Nigeria specializing in Small to Medium-size Enterprises (SMEs). The fund is currently in fund-raising stage and expects to hold its first closing by the beginning of 2013. SMEs have a vital role to play in developing economies as they account for a large percentage of the overall growth in the economy. For a myriad of reasons access to credit is a major obstacle for talented entrepreneurs across Africa. The goal of Kuranga & Associates Venture Capital Fund is to help remove this obstacle for talented African entrepreneurs starting in Nigeria. Kuranga and Associates is currently forming strategic partnerships with individual and institutional investors. For more information about the fund contact Kuranga and Associates MD, David Kuranga directly by email: david.kuranga@kaglobal.net, or phone: 646.481.6263.

Kuranga & Associates Global Consultancy
Office: 646.481.6263
New York, NY
david.kuranga@kaglobal.net
https://kurangaandassociates.wordpress.com/

Calling Investors

5 Jul

We are looking for any individual or institutional investors interested in investing in a new VC Fund focused on SME’s in Nigeria. Investments will be targeted at renewable energy, agriculture, and firms that have a solid history of profitability and growth. The minimum investment is 1,000,000 USD for individuals and 5,000,000 USD for institutional investors. If you or anyone you know is interested and would like further details, please contact me directly.

David O. Kuranga, Ph.D.
Managing DirectorKuranga & Associates Global Consultancy
Office: 212.363.0936
New York, NY
david.kuranga@kaglobal.net
https://kurangaandassociates.wordpress.com/
http://us.macmillan.com/thepowerofinterdependence/DavidOladipupoKuranga

Capitalizing on Private Public Partnership’s In Africa

4 Jun

David O. Kuranga, Ph.D.

The author is the Managing Director and Principal of Kuranga and Associates Global Consultancy, a political and economic risk management firm that specializes in Africa. He is also the author of The Power of Interdependence with Palgrave Macmillan Press.

With the onset of the Global Financial Crisis, governments all over the world have straddled with the limited availability of capital alongside the need for capital intensive development projects in order to meet the Millennium Development Goals (MDG’s). In increasing trend in the developing world has been for governments to forge partnerships with private partners as a means of leverage limited resources. There have been several Private Public Partnerships (PPP’s) in Africa over the last few years. The growing trend is that these will increase in the years to come. Political risk assessment and subsequent risk management is the key to succeed in these ventures for both private and public partners.

LEKKI TOLL ROAD, LAGOS NIGERIA

A key example of a recent PPP is the Lekki toll road where the growing population in Nigeria’s largest city, Lagos has created a substantial transportation infrastructure hurdle and some of the worst traffic conditions in the country. The need for new roads and transportation corridors to accommodate the growing population and new housing developments is substantial. One area of expansion has been the Lekki Peninsula Phase I and II. The government of Lagos State in Nigeria oriented a PPP toll bridge from the Lekki Peninsula to the Lagos Island and mainland connection. The partnership was a result of a joint loan taken between the government, the African Development Bank and the Lekki Concession Company Limited (LCC), a subsidiary of ARM Investment Managers. The project expands the existing 50km of the Lekki-Epe Expressway in Phase I, and adds an additional 20 km of road on the Lekki Peninsular Phase II.

Some of the improvements made with the project was to widen the first 23km and upgraded the last 26.5km of the expressway from Lekki to Epe on the main corridor from the peninsula into Victoria Island. In addition a new ramp was installed at the Falomo junction connecting to the Falomo Bridge. The project also installed walkways for pedestrians. The project also consisted of a coastal road and upgrading 10 additional connecting roads between the Lekki expressway and the coastal road. According to the African Development Bank (AfDB) the project is projected to create over 1000 jobs.

Financing

In addition to the 85 million USD in financing provided by the AfDB, total project cost was roughly 382 million USD, or about 44.91 billion Naira required additional financing. The AfDB provided about 35% of total financing. The project was also funded in part by Standard Bank London. The project is supposed to last for 30 years, with the repayment of the private partner coming from the collection of tolls over the time period. The tolls run from between 0.30 USD to 2.00 USD depending on the vehicle used. When the road opened late in 2011 it was the first major public private partnership in the transport sector for Nigeria. The involvement of the AfDB helped to validate the due-diligence process for international partners and provide a stamp of approval for international investors to participate. To date there have been substantial private investment in the telecommunication sector this is the first significant partnership in the transportation sector.

Controversy

Since the initiation of the toll road project there has been opposition, in part linked to opposition to Governor Fashola of Lagos State. There is considerable controversy over the legality of a toll road and the practice has been challenged in court. In addition there has been opposition to the user fees attached to using the bridge.  Many of the services including clinics and hospitals are located on the other side, thus residents have to pay an added cost just to access basic facilities that are presently not available on the peninsula.

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The Success of PPP’s and Political Risk Management

The legal challenges and protests that has surrounded the Lekki Toll Road is an example of political risks that could shroud PPP’s. The nature of PPP’s particularly in infrastructure generates a high priority on risk assessment and risk climate in the host country. Most infrastructure projects involve hundreds of millions if not billions of dollars to construct and develop and maintain. They take years to build and construct as oppose to months and weeks with other types of investment. Once an investment has occurred there is almost no way to turn back, as an investment in infrastructure is relatively immobile and must function in the host society in order to generate revenue. Thus in an infrastructure investment, investors are stuck with what they have got in terms of investment climate and there is not much that can be done once an investment occurs. For this very reason, infrastructure investment in frontier economies has been slow, particularly in Africa where there are a myriad of opportunities but a high-level of fear that the risk outweigh the potential benefits of revenues. Thus in the previous decades since independence in Africa infrastructure development has been lead by the state. The state has conceived planned and built much of the existing infrastructure in Africa utilizing its own resources in the process.

Of all the parties that could potentially invest in infrastructure, the state has the least level of risk. The most significant risk being, if there is civil conflict an key infrastructure falls into the hands of forces that are opposed to the state. This has occurred in several countries in the region including Sudan and Cote D’Ivoire, but most recently in Libya. With the limited level of risk, the state has the highest potential of seeing a return on investment (ROI) or at the very least increasing political support with particular constituencies as a result of the investment in infrastructure. With this dynamic the vast majority of infrastructure development in Africa is limited largely to what the state prioritizes and has the resources to execute. This paradigm has resulted in low-levels of investment in infrastructure given the limited resources available to the state.

This dynamic of the government being the primary driver of infrastructure development is changing with the success of the private sector in the telecommunications sector on the continent. Major internet and mobile phone service providers have reaped big profits in Africa over the last decade and are projecting strong growth for the next several years. This success of this infrastructure development has led to the possibilities of public private partnerships in other areas beyond the telecommunications industry to include transportation, air, rail, sea, and roads. There are numerous political and economic risks involved in investing in African infrastructure.

Private investment in infrastructure requires some type of concessionary agreements with the government. Ideally these agreements should last long enough for the private investor to get a high enough ROI to justify the investment and could be for the life of the infrastructure put in place. These concessions are often for several decades or longer. Needless to say, it is unlikely that the political administration that negotiates an infrastructure concession will be around throughout the life of the agreement. Political turnover is the first major risk when investing in infrastructure and other long-term PPP’s.

In this it is possible that future political administrations will not honor the agreements made by predecessors especially if they are under political pressure to disavow them. These risks are not unique to Africa, expropriation of vital infrastructure from private investors is a possibility that investors should consider when investing in infrastructure. These risks can be managed from the onset by tailoring concessionary agreements with expropriation clauses and mandatory minimum levels of compensation if they occur before the expiration of the concession. The risk of expropriation of the telecommunication services is not likely to occur in Africa. Telecommunications are viewed as a luxury, thus the providers are providing something that is not considered an entitlement. Thus it is not likely that there will be political pressure on future administrations to expropriate or nationalize telecommunications infrastructure investments.

Infrastructure such as roads, bridges, and highways, are typically provided to citizens free of cost by the state. Public private partnerships in these areas where a private company will be allowed to charge user fees to the public for access may be a bit more controversial. There has already been considerable controversy in Lagos, Nigeria surrounding the Lekki toll road. The concession made by the Lagos State government has already faced substantial opposition and legal battles. In addition there were a number of “Occupy” protests where residents attempted to block the road. They were supported by opposition politicians who were arrested along with protesters. It is not at all clear that a future administration in Lagos will honor this agreement. Any investment in infrastructure such as roads and bridges, if structured with user fees as the primary means of repayment, should come with considerable risk management from the onset with expropriation clauses and mandatory compensation and payment schedules if that were to occur. While it remains unlikely that Lekki toll road will be expropriated, the risk of this occurring is higher than with the telecommunications investments. As governments open-up to investment areas that have been previously regulated and controlled by the state, there are a vast array of opportunities in Africa for firms to form lucrative partnerships with the state. The key to succeed in these ventures is assessing and managing the political risks.

Kuranga and Associates Global Consultancy is a political and economic risk management firm with a principle practice area of Africa. To learn more about Kuranga and Associates go to www.kaglobal.net. © Copyright 2012 David Kuranga. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

David O. Kuranga, Ph.D.
Managing Director

Kuranga & Associates Global Consultancy
Office: 212.363.0936
New York, NY
david.kuranga@kaglobal.net
https://kurangaandassociates.wordpress.com/
http://us.macmillan.com/thepowerofinterdependence/DavidOladipupoKuranga

#OccupyNigeria: What Now?

30 May

David O. Kuranga, Ph.D.

The author is the Managing Director and Principal of Kuranga and Associates Global Consultancy, a political and economic risk management firm that specializes in Africa. He is also the author of The Power of Interdependence with Palgrave Macmillan Press.

Attempts to fully deregulate the subsidized petroleum industry failed in January as a result of mass nationwide protests, with demonstrations, marchers, and strikes under the hash tag #OccupyNigeria, which begun over the hike in the price of fuel and the removal of the state subsidy at the beginning of January 2012. Protesters took issue with the subsidy removal that more than doubled the price of petroleum and caused the cost of basic goods to skyrocket, yet was promoted as a necessary austerity measure for the country. The government produced estimates that 8 billion USD would be saved in the budget by removing the subsidy. All the while high ranking state officials continued their exorbitant expenditures, including the presidency, members of the national assembly, and cabinet. The expenditures were for salaries, allowances, and other budgeted items that were clearly not in the spirit of saving given that the state indicated in needed to save and cut costs. The prevailing view was that the president was out of touch and did not care about the plight of average Nigerians.

To defend the programme the administration released statements that the 8 billion would be used to invest in health care, infrastructure, education, improving the downstream refining capacity to reduce oil imports that would all help ordinary Nigerians. Members of the cabinet came forward to defend the administration and support the programme. The minister of Finance also reiterated the administrations claims that the 8 billion would be used to improve the standard of living for average Nigerians in various programmes but offered no specifics or itemized figures or estimates as to where the money would go. No official provided any detailed account as to precisely where the money saved from ending the subsidy would go. Protesters were not convinced by these vague statements, neither were they moved by the administrations attempts to pacify criticism by announcing a slight reduction in salaries of those in the executive. Strikes and protests continued until the government agreed to restore the subsidy at a higher level of NGN 97 per litre. The standoff undermined the administration and caused many in the cabinet to lose credibility including the President, the information minister, the petroleum minister, and the minister of finance.

Decades of corruption in government and a lack of transparency was a major concern of protestors who used the Occupy name to identify with other protests movements throughout the world. The administration did not understand the distrust that people understandably have for government in Nigeria. The fact that they tried to sell the programme without providing any specific account, even from the ministry of finance, as to where the money was going was a tactic that was rejected by the masses. Going forward the lack of transparency surrounding the subsidy removal is not likely to work in the future. Nigeria is no stranger to nationwide strikes and protests. Long before the Occupy movements all over the world and the mass protests that occurred in Tunisia and Egypt, Nigerians have held nationwide strikes that have brought the country to a standstill and forced the government to back down on removing the oil subsidy. The administration has stated that it intends to phase-out the subsidy and has not given up completely on deregulating petroleum prices. If the administration moves again to completely remove the subsidy on petroleum it is likely that more civil action will take place. Labour remains adamantly against any increases in fuel and the masses, which started the protest without ever being prompted by labour unions appear to be in full support.

Since the protests, an investigation by the legislature has unveiled a 7 billion USD fraud in the subsidy program between 2009-2011, calling the program “fraught with endemic corruption and entrenched inefficiency.” Implicated are bureaucrats in the Nigerian National Petroleum Corporation (NNPC) and ministry of petroleum resources. The still ongoing problems of mismanagement in the NNPC regarding the subsidy program has led to a long awaited probe by the Economic and Financial Crimes Commission (EFCC) into the NNPC. A number of groups behind the #OccupyNigeria protests have indicated that if those responsible are not brought to book they will once again resume protests. The issue with the subsidy program is the single greatest issue that has undermined the administration of President Goodluck Jonathan and many of his key reformers in his cabinet. If it cannot be resolved in the coming months in a way that pacifies the growing outrage over the outright theft by business and government officials associated with the subsidy program, the administration will not be able to regain the credibility it lost in the January #OccupyNigeria protests. What is clear is that if not for the protests, the legislature and the Federal Executive Council (FEC) would not have taken the rampant corruption seriously and would not have taken steps to redress it. The threat and perhaps execution of further civic action may indeed be necessary to ensure a higher standard of governance including greater accountability and transparency.

Kuranga and Associates Global Consultancy is a political and economic risk management firm with a principle practice area of Africa. To learn more about Kuranga and Associates go to www.kaglobal.net. © Copyright 2012 David Kuranga. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

David O. Kuranga; Ph.D.
Managing Director
Kuranga & Associates Global Consultancy
Phone: 212.363.0936
david.kuranga@kaglobal.net
https://kurangaandassociates.wordpress.com/          http://us.macmillan.com/thepowerofinterdependence/DavidOladipupoKuranga