BBBEE group, Kagiso, ventures into the oil rich Ghana

Kagiso Tiso Holdings (KTH), which pioneered the broad based black economic empowered (BBBEE) investment space in the early 1990’s, is now heralding a new phase in the life of the BBBEE movement. It is moving considerable amounts of money, $35 million (R350 million), into West Africa via an investment into Fidelity Bank Ghana.

KTH announced today that it has signed an agreement to make a minority equity investment in Fidelity Bank Ghana. In making this investment KTH is joining the scramble of South African capital into the rest of the sub Saharan region as propelled by the Africa rising narrative. Ghana is particularly interesting in being a hot investment spot after discovering oil fields which has excited its economy.

KTH’s venture will be seen as representing a critical development in the BBBEE movement. It happens when most of the capital launched from South Africa into the rest of the African continent has a white face. KTH’s brings into this northward scramble a more palatable political character.

KTH has roots in an investment entity titled Kagiso Trust Investment (KTI) which was established through donor money in 1993 for the benefit of development NGO Kagiso Trust. It was driven to prominence by BBBEE doyen Eric Molobi with a blessing of prominent human rights activists like Bayers Naude and Desmond Tutu. KTH merged with Tiso, another empowerment investment entity in 2011, to form kagiso Tiso Holdings (KTH). This merger infused into the Kagiso fold super black merchants in form of Tiso founders David Adomakoh and Nkululeko Sowazi.  KTH boasts an asset bane of about R10bn. It still features significant BBBEE shareholding (46%) held by Kagiso Trust and Tiso Foundation. Other major shareholders are Tiso Investment Holdings and Remgro.

KTH said the Fidelity Bank Ghana investment confirms its long term investment horizon as well as its confidence in Fidelity’s sound fundamentals. “This transaction signals an important milestone for KTH and in particular the development of our pan-African strategy.” said KTH’s CEO Vuyisa Nkonyeni.

KTH spoke of the transaction as heralding something new, an ambition to diversify its portfolio into fast growing markets, particularly in West and East Africa. The company said it has set aside substantial funds to pursue this strategy. “The Fidelity transaction represents a significant milestone for KTH and is its first direct investment outside of South Africa.”

KTH Chief Investment Officer, Jacob Hinson, said “This transaction is in line with our strategy and is testament to our focus on building our portfolio through investing in fast growing regions and sectors. Fidelity Bank Ghana has an excellent management team, significant growth potential and a clear strategy to become a world-class local bank. We are very pleased to be partnering with Fidelity Bank on our first investment outside South Africa, and are eagerly exploring others.”

Hinson added that “We expect KTH’s investment in Fidelity to create opportunities for our South African portfolio companies, through greater access to the fast growing Ghanaian market. Similarly, for Fidelity this opens channels for access to South African firms as customers and South African financial institutions as partners.”

Fidelity was created in 1998 as a discount house to provide investment products and services to both private and institutional customers. Fidelity Bank was issued with a universal banking license in 2006, with the ambition to create a world class commercial bank. The Bank has grown at three times the industry average and is now seen as one of the strongest indigenous banks in the industry, with a network of 50 branches across Ghana. Fidelity is the 6th largest bank in the country by customer deposits.

KTH pointed out that in addition to the equity investment, KTH has also subscribed for convertible preference shares, which upon conversion will increase its stake over time. KTH’s total investment in Fidelity is approximately $35 million, through the combined instruments. KTH is investing alongside Amethis Finance and Edmond de Rothschild Europportunities II. The investment is subject to the approval of the Bank of Ghana and completion of conditions precedent.

Edward Effah, Managing Director of Fidelity Bank Ghana said “KTH’s investment is a vote of confidence in the Board and Management of the Bank. Our strategy is to prudently grow our asset base and become a leading bank in Ghana. We welcome KTH’s investment which will allow us to continue to drive our strategy, and in addition to have access to South African markets.”

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