Nedbank takes a hit as African investment fails to deliver

Nedbank has reached an agreement to sell its 21.2% stake in Ecobank Transnational Incorporated (ETI) with Bosquet Investments for R1.8 billion. 

Bosquet Investments is the private investment vehicle of Alain Nkontchou, the Managing Partner and co-founder of Enko Capital Management.

The proposed disposal is subject to the receipt of the requisite regulatory approvals in the relevant jurisdictions only. There are no other conditions precedent.

This marks the end of an era of pain for Nedbank, which initially pumped R6.3 billion into Ecobank and has not seen much in the way of rewards. 

In its most recent interim results presentation, CEO Jason Quinn admitted that the bank’s investment case did not materialise as expected. 

In particular, Quinn said that the performance of the Nigerian economy did not prove to be as strong as originally expected. 

Operating in Nigeria also proved to be more difficult than initially anticipated, with Nedbank facing elevated regulatory uncertainty. 

Quinn bemoaned ongoing regulatory recapitalisation requirements at the bank’s interim results in early August, which created a scenario where Nedbank would have to inject capital to prevent its shareholding being diluted. 

“We wish to express our gratitude for the professionalism and integrity with which the board of

directors of ETI have consistently conducted its affairs, and for the constructive engagement that has underpinned our relationship,” Quinn said. 

“The ETI board’s stewardship has played a pivotal role in navigating ETI through complex environments and in advancing its pan-African mandate.”

“The sale represents a reset of Nedbank’s strategy on the rest of the African continent with a clear focus on the SADC and East Africa regions in businesses Nedbank owns and controls, and areas where we can play to our strengths.”

Nedbank CFO Mike Davis went into more detail regarding the financial benefit of Nedbank’s stake in Ecobank during the interim results presentation. 

Davis showed that Nedbank initially invested R6.3 billion into Ecobank, with its market value now being a mere R1.9 billion. 

This sharp decline in the market value of Nedbank’s stake in Ecobank can be seen in the graph below.