Renaissance Capital Moves Into Mozambique in Deal With Dominio

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Renaissance Capital Ltd. is pushing into Mozambique to take advantage of what it says is increasing interest from foreign investors in the southern African country.

The Moscow-based investment bank, which trades across 43 emerging and frontier markets, signed a partnership deal last week with Lisbon-based Dominio Capital Group, which has an office in Maputo, Mozambique’s capital. The agreement will make it easier for RenCap to work on deals for clients wanting to invest in the country and to help Mozambican public- and private-sector entities raise capital abroad, according to James Friel, the bank’s head of investment banking.

“There’s an opportunity for M&A and capital-raisings — there is a tremendous need for capital,” Friel said in an interview at a conference hosted by RenCap in Lagos, Nigeria’s commercial capital, on May 11. Dominio Capital is “very plugged in to the corporate and political spheres. They do not have research, distribution or capital markets capabilities. So, our skill sets are complementary and will give clients a full offering of services.”

While Mozambique’s Eurobond yields have soared since the International Monetary Fund discovered more than $1 billion of undisclosed sovereign-linked debt last month, it has long been one of the most buoyant economies in Africa, with growth averaging around 7.5 percent this century.

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“The government recently announced its intention to privatize over 50 companies, partly to address budgetary issues, but also for strategic reasons,” Friel said. “It’s an interesting market for us.”

Family-owned Dominio, which focuses on Portuguese-speaking countries, also has an office in Angola. It has been an adviser on deals worth $4.2 billion and manages $150 million of assets, according to its website. It says its clients have included Exxon Mobil Corp., Bob Diamond’s pan-African bank Atlas Mara Ltd. and U.S. private-equity firm Carlyle Group LP.

“The partnership will principally focus on Mozambique,” said Friel. “But we will look opportunistically at Angola.”

Ethiopian Opportunities

RenCap also sees opportunities in Ethiopia, which with 90 million people has the biggest population in Africa after Nigeria. The east African country has largely kept its banking, telecommunications and retail industries closed to foreigners, but is allowing more investment in other sectors, said Friel.

Companies that produce fast-moving consumer goods are “knocking on Ethiopia’s door, figuring out what they can do there,” he said. “Ethiopia is starved of dollars and needs to invest massively in infrastructure and manufacturing. A lot of state banks are instructed to fund state-backed projects. So, there’s a dearth of capital to fund private enterprise. For that reason, I suspect we’ll see a loosening of capital controls in the next decade.”

RenCap, which has offices in Johannesburg, Cape Town, Nairobi and Lagos, has no plans to open new ones in Maputo or Addis Ababa, Ethiopia’s capital, according to Friel.

Source: Bloomberg