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Making a Mark in Africa: Global Brands Dominate

8 October 2019 Comments (0) Africa, Business

With Africa being one of the fastest growing markets for consumer goods worldwide, global brands have increasingly focused their efforts on the continent’s vibrant economies. Two major factors are worth noting here; Household consumption in Africa has outpaced GDP growth, and GDP growth across Africa is consistently outperforming global averages.

Consumer expenditure in Africa has been growing at a compound rate of 3.9% since 2010, reaching a total of $1.4 trillion in 2015, with that figure expected to reach $2.5 trillion by 2030. (1)

The planned Continental Free Trade Area (CFTA) is also due to be implemented by 2030, and if successful, will offer a single continental market for consumer goods and services as well as free movement of investments and businesspeople. This opens the doors to a potential 1.7 billion customers (based on projected population by 2030). 

African consumers tend to be loyal

With such ambitious plans and rapid growth, cementing a place as a major brand across the continent is a priority, not only for global corporations but also for African brands. 

Research has shown (2) that African consumers tend to be loyal to their chosen brands but also discerning in their choice of brand. While currently most consumer activity in Africa tends to still happen in informal market settings, there is, and will continue to be, a shift towards more modern shopping settings, including shopping malls and e-commerce, two sectors which will offer good growth potential at several levels. 

African brands have been declining year on year

However, the latest Brand Africa 100 ratings in May – published every year by African Business Magazine – show a continuing worrying trend, at least as far as African businesses are concerned. From a high of 25% of the list in 2013/14, African brands have been declining year on year and are now at a low of 14% from 17% in 2017/18. Asian brands have also suffered, falling 10% from the previous year. US brands saw the largest growth, up 17% to 28%, while the dominant European brands rose 2.5% to 41%. 

As you would perhaps expect, the leading brands are global household names, with Nike, Adidas, Samsung, and Coca Cola all retaining positions in the top 4 from 2017/18. The highest ranked African business is South Africa’s MTN Telecoms at 8th (down 2 positions from last year). The company operate in 21 African countries so far with more expansion planned, so their top 10 position should not only be safe but may improve again in future lists. 

Anbessa Shoe Share Company: the most impressive African performer

Ethiopia’s Anbessa Shoe Share Company, originally founded in the 1930s by an Italian expat, was the most impressive African performer. In the 2019 chart, it moved up 11 places to #12. As well as having around 65-70% of the Ethiopian shoe market, the company also exports to USA, EU, Middle East, Asia, and Africa.

There were only two new African names on this year’s list, South African retailer, Pick n Pay, who re-entered at #84, and Africa’s largest e-commerce firm. Jumia, who debuted at 74 after a successful launch on the New York Stock Market in April. 

With continued economic growth forecast as far ahead as 2030, African companies must now look at how they can compete with the global giants. 

(1) https://www.brookings.edu/wp-content/uploads/2018/12/Africas-consumer-market-potential.pdf

(2) Spivey L. et al. (2013) “Ten Things to Know About African Consumers: Capturing the Emerging Consumer Class,” Bcg.perspectives.

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Adamant, the new african digital adventure

11 September 2019 Comments (0) Africa, Business, Entertainment and Lifestyle, Featured

Adamant is a new digital medium aimed at connected African youth. The media promotes continental ambitions through a network of creative and offbeat influencers. Meeting with its founder Denis Cantin and its program manager Angélique Amougou.

  • Denis Cantin, you are the founder of Adamant Media, before talking about your new digital media, let’s talk about you and what led you to create Adamant?

Denis: I was heading the content sales over Europe-Middle East- Africa for A+E Networks (Disney / Hearst) for 5 years in London and I thought there was still a place in Africa for high level Entertainment media , gathering Africans and Diaspora, offering the best of comedy Series, sketches, Beauty, Sports and news. And that media should be digital, free and on mobile to reach everyone. I left my job last summer and we have launched Adamant on the 1st of April 2019.

  • Can you explain how Adamant works? 

Denis: We are settled like a proper Media group and we control the whole chain from Creation and Production to Broadcast and Advertising: 

First, adamant is the media of Continental Entertainment. Millions of people watch us and enjoy fresh high quality African content on a daily basis. 

adamant is also a studio, aggregating and supporting the best producers and talents from every corner of West and central Africa. 

Last but not least, adamant is an unique expertise in digital communication and marketing over the the whole Continent. Africa is experiencing massive growth you could compare it to a startup for that matter. Africa is as digital as you can get. We are in our element. Our logline is indeed “ Digital, Continental, adamant”. 

  • Daty Niang – adamant
  • Angélique Amougou you are in charge of influencer relations at adamant, what drives the talents and influencers to join Adamant, according to you? 

Angélique: Quite honestly, there’s no better home than adamant for talented influencers. Our business model has been set up to allow comedy influencers, our A-Producers,  to grow without losing their soul and their business. We encourage creation, we finance the best talents. Not only, we are also sharing our experience in terms of storytelling , post editing, promotion and access to sponsors. 

Some influencers are already big in their own country like the super popular duo the Pakgne (Murielle Blanche and Marcelle Kuetche) in Cameroon with already 1 million followers.  With us, they have become continental stars. Some are less known, and when the adamant team feels they’re good, we offer them an A class treatment and after a few weeks, it looks like they have always been famous.

“babatché à tout prix” was watched by a few thousands people before we got involved, it was promising but still limited. Now with adamant, each of their episodes is followed by between 300 000 and 2 million people! They are some genuinely International stars now. We did the same for the couple Thakai and many others. We have now the biggest team of influcencers in this part of the World. And we can tell you: each and every of them count. 

African talents are amazing and we are glad to share this with the rest of the world.

Les gos Babatche – adamant
  • What kind of audience Adamant is targeting ? 

Denis: Our audience is mostly between 18 and 44 years old. They are adults and parents. Social networks in Africa are usually male skewing but we are very balanced between male and female at 50/50. Our audience is connected and engaged. Our engagement rate is just tremendous: 34%!  Our audience is urban and strongly connected. Our first cities are Abidjan, Dakar, Douala and Paris but we do not only reach the big cities; adamant is followed in every corner of Francophone Africa and the world. You can’t imagine how global we are.

  • What new programs are you trying to put in place? 

Denis: adamant will remain pure entertainment and close to our audience’s everyday life. So we won’t explore genres like crime, sci-fi …Unless there is a twist, a good idea and lots of fun! 

 I will tell you that the quality will only go in one direction: up. And more and more content will be original and never seen on line. Stay tuned!

Angelique: Talent wise, we have wonderful talents in the key territories Senegal, Côte d’Ivoire, Cameroon now. We are about to contract with influencers in Burkina Faso, we are digging in Mali, Madagascar, Guinée. Be sure we won’t forget any territory.

  • So you are producing branded content, what do you bring to advertisers that is unique to adamant?

Denis: The affinity. adamant is close to our audience thanks to a very dedicated team and our influencers. We make people laugh on a daily basis. There is no better communication than a smile.

And with this smile, we provide the top notch values services of a digital agency with reflection, strategy, tactics, ads and even more important, high value video production. We invent formats and new series on demand. We clearly do our best to spoil our clients ad we are committed on our targets and KPIs.

  • What are your ambitions, your future plans or projects for Adamant?

Denis: adamant is fast and furious (smile). We are launching this week our free VOD site with all our videos. We will announce soon a business partnership with a leading Film production and talent agency in the heart of Nollywood. This allows us to produce both in French and English original with top influencers. We are post producing our first animation for pre-school children with our talent’s voices. We will of course expand out of the Francophone area soon, but first thing first, we have to make sure our clients are spoiled and that we remain the leaders.

Ah yes, maybe a last one;  the Studio veteran is now talking, my sincere dream would be to produce the Pan African comedy feature Film starring all our great influencers. And this will come true sooner than later!

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Russia’s Return to Africa

11 June 2019 Comments (0) Africa, Business, Featured

Once an important player on the African continent, Russia has renewed its aspirations for economic, military, and trade ties with several African nations. From Algeria to Zimbabwe, Russia is investing in energy and resource projects, lending military and diplomatic support to embattled African leaders, and once again positioning itself as an influential presence in the region.

Historical ties with Africa and shifting interests

During the height of the Soviet Union, newly independent African countries such as Mozambique, Egypt, the Democratic Republic of Congo, Somalia, Ethiopia, Angola, Benin and Uganda all received valuable materials and ideological support from the Russian superpower, including training and education to many of these country’s leaders. The Soviet Union’s influence across African states was widespread until the fall of the Berlin Wall and the dissolution of the regime in 1991.

Fast-forward to 2018, and Russia appears set to return to its influential position over the continent – yet with a very different approach and goal in mind. As African nations are opening up to being courted by new strategic partners, the time is ripe for new foreign entrants to make their mark on the continent. Russia is thus in a good place to re-establish itself across the region – and indeed appears to be doing so – via strategic investments in energy and raw materials.

Investment in Energy and Minerals – new opportunities arise

According to ISS Africa, trade and investment between Russia and Africa grew by 185% from 2005 to 2015. Whilst in 2017 alone, Russia’s trade with Africa rose by 26% to $17.4 billion. Senior fellow at the Carnegie Endowment for International Peace, Paul Stronski says there are many advantages for Russia engaging with resource laden countries on the African continent. With a shortage of minerals such as chromium, bauxite, and manganese, all of which are important to industry, Russia is looking for rights to extract minerals, oil, and gas in less complicated or costly places than Siberia and the Arctic, Stronski says. With a strong presence on the national soil and a proven expertise in raw material extraction, no doubt that CEOs such as UMMC’s Iskander Makhmudov will be setting their eye on the continent sooner or later.

Economically, the focus of Russian investment is on energy. Russian power companies, such as Lukoil (oil), Gazprom (gas), and Rosatom (nuclear energy) are already active across the continent, with most activity being in Uganda, Nigeria, Egypt, Angola and Algeria. Others, such as Kuzbassrazrezugol (a coal mining organization, and also a company Iskander Makhmudov has stakes in), are already global exporters and could very well aim to penetrate the African market in the future. Others, such as Transmashholding (also a company Iskander Makhmudov has interests in), already trade with Egypt and South Africa – admittedly some of the most developed markets on the continent.

According to energy news site Power Technology, a deal between Rosatom and Egypt’s Ministry of Electricity to create the country’s first nuclear power plant has already been finalized. As most large Russian corporations are fully or partially state-owned, Russian interest takes the form of public/private partnerships.

Indeed, although Russia’s main arms exports are to Asia, according to the BBC, sales to Africa continue to rise, strengthening Russia’s position on the continent.

A growing geopolitical influence…

Another reason Russia may wish to gain a foothold on the continent is that diplomatically, Africa is a geopolitical strategic landmark. African states comprise of the largest voting bloc across diplomatic, security and economic institutions, such as the UN Security Council. Therefore, holding influence over Africa could have a global reach. Other emerging economies, such as China and India, have also expanded trade significantly across the African region. According to US research group the Brookings Institute, China provided some $60 billion in financial support to Africa in 2018.  

Although Russia lacks the financial muscle of China, through strategic investments, military might and soft power, the country will see a gradual increase in influence across the African continent, according to ISS Africa research analyst Stephanie Wolters. She believes that, amid a new ‘scramble for Africa,’ it will be up to African leaders to exploit the renewed attention from Russia by brokering favorable deals on good terms, rather than fall victim to previous exploitation by Europe and the West.

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Kilamba, a chance for the Angolans

23 January 2019 Comments (0) Africa

Kilamba

During the post-war reconstruction process in Angola, China and some European businesses have been actively working to bring about a number of important building projects. Of these, the star project is the city of Kilamba, where efforts have transformed a rural zone into a undeniably modern city. Kilamba is the fruit of a collaboration between two companies: The Chinese company CITIC Construction, led by Chen Xiaojia, and the investment fund Pierson Capital, led by Pierre Falcone.

Improvement of the Quality of Life

The new residents are particularly satisfied by their new life in Kilamba. They confide to Meng Qingshang, journalist for a Chinese television channel: “The conditions in we were living before were not good. It was a house which did not belong to us, and it was far from the city. With the improvement of our revenues, we were able to move into this new city. We live much better.” Indeed, their apartment is more than 120 square meters, and is a spacious residence for a family of five.

The Santos family makes up some of the thousands whose prospects have improved thanks to the huge building project by CITIC Construction and Pierson Capital. For the children of this family, it is also the chance to meet new people, and to interact with their neighbors. The cadet, Eduane Santos, confided to the journalist that “My life here is very different. Here, it is modern. I have made many new friends here. Before this, I often played alone.”

Kilamba is ideally situated a few kilometers from Luanda. A portion of the city’s buildings have been reserved as social housing. Thanks to this project these Angolans live a better life, and indeed for many residents, it is the first time that they live in their own apartment. The group of apartments consist of residencies which represent a large split from their old homes. The apartments have running water and electricity 24 hours a day, which was formerly difficult to find due to the ravages of the war in Angola.

A four-year-old Construction Site

The buildings of Kilamba comprise one of the largest residential sectors in the world. The city consists of over 100,000 residents. But the construction has not been without its issues, when the project started in 2008, the artisans had  difficulty in finding quality building material on the local markets. They were then compelled to send more than 2 million tons of material directly from China. In total, it has took four years to complete the project.

A City-Sized Development

Today, the post-war construction continues to go forward, leaving in place new ambitions more important still. The Angolans continue to believe that the development of the city will continue, and will continue to bring them new professional and commercial opportunities.

Chen Xiaojia, president of CITIC Construction, has declared that “the project has improved local employment opportunities as well as the quality of life. […] The residencies are well equipped, and the city offers a large range of public infrastructure. We have built schools, sewer systems, as well as electric and water systems. I have learned that the residents of Luanda are proud to live in Kilamba New City. It’s because of this that we are proud.”

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Digital Finance needs to be a top priority for African Growth in 2018

20 July 2018 Comments (0) Africa

digital finance

In an annual report released by the Africa Growth Initiative, there is a call for African nations to embrace digital technology as one of the major priorities for 2018. The report, entitled “Foresight Africa: Top priorities for the continent in 2018”, identified six priorities for the continent to capitalize on new technologies that would have the potential to bring more economic prosperity at every level of civil society. Technology-based solutions to long-entrenched problems are believed to be the catalyst the continent needs in order to strengthen its institutions and improve its standing on the global stage.

The Africa Growth Initiative was created in 2011 by the American think-tank The Brookings Institution. The Foresight Africa project is a series of reports, commentaries and events that aim to help policymakers and Africa watchers stay ahead of the trends and developments impacting the continent. Since 2011, the Brookings Africa Growth Initiative has used the occasion of the new year to assess Africa’s top priorities for the year.

Education and agriculture could develop more innovative solutions

This year, a particular focus was placed on “harnessing Africa’s digital potential.” By focusing on technology and digitization, countries are better able to shift their economic structures and transform both the labor market and public services. Entrepreneurs with sustainable business models would benefit from opportunities for financial inclusion, easier retail payments, and improvements in administrative services. Other sectors such as education and agriculture could develop more innovative solutions as a result of improved access to key information such as market feasibility.

One of the biggest areas of opportunity is in mobile payment technology. Given that an estimated 50% of the world’s population is considered “underbanked” or “unbanked”, the development of such technology in the early 2000s gave thousands of people access to a formal banking system in societies that were to-date highly cash-based. On the African continent, the success of the mobile phone-based money transfer system M-Pesa has helped African economies save billions of dollars. M-Pesa made it easy for its users to deposit, withdraw, and transfer money without needing to visit a bank or carry a large amount of cash. For low-income people, especially women, it became easier to borrow and save money.

Public and private investors attracted

Mobile payment technology in development has attracted both public and private investors who see its potential to improve the efficiency of government institutions and private operations, saving money while increasing the volume of business. It has allowed for innovation in other areas: M-Akiba allows for people to invest in bonds issued by the Kenyan government; M-KOPA makes it easy for people to acquire solar power; M-TIBA helps people set money aside for health expenses; and the One Acre Fund invests in small farmers and facilitates the acquisition of seed and fertilizer, training, and loans.

By moving towards digitization, some of Africa’s most intractable problems could be addressed, including corruption, administrative break-downs, and the diversion of public money that has choked the public sector. Rather, the Africa Growth Initiative pushes the public to move towards democratizing access to public services (taxes, commerce, transportation) by shifting the operations online.

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Tunisia Becomes the 21st Member Country of Arabsat

4 July 2018 Comments (0) Africa

It was announced April 12, 2018 that Tunisia has been formally elected as a new member country of Arabsat (Arab Satellite Communications Organization) by the Tunisian Minister of Communication Technologies and Digital Economy, Anouar Maarouf. Now with 21 member countries, Tunisia enters with a 0.7% stake in the organization and acted as the host of the 42nd Annual Conference of the Arab Satellite Communications Organization in Gammarth.

While there have been issues in the past with member countries acting in a coordinated fashion, Arabsat’s unique coalition and organization structure is a boon to the technology field throughout the Arab world. The addition of Tunisia to Arabsat seems to be a massive win for the quality of services in the region.

Under the new agreement, Tunisian television and radio will now be broadcasting directly through Arabsat due to the creation of a new satellite station with the National Broadcasting Corporation (ONT). Thanks to this change, picture and sound quality will greatly improve to higher levels capable of taking much better advantage of high definition televisions. Arabsat already offers over 500 standard definition, 95 high definition (HD), and 200 radio stations for its user base. With this added footprint, it is very likely that there will be more and more HD programming coming shortly. Better programming will hopefully means more technology sales and a greater incentive to create more diverse programming across the Arabsat networks.

To increase the planetary footprint of Arabsat

With Tunisia on board, Arabsat Executive Chairman, Khaled Ben Ahmed Balkheyour mentioned the satellite telecom coalition is currently seeking to invest over $600 million (1440 dinars) in two brand new industrial satellites. One of the control stations will be located in the Edkhila region of Manouba in Tunisia while the second will be featured in Saudi Arabia. The goal of will be to increase the planetary footprint of Arabsat, and strengthen coverage in the rest of Africa and Europe. Not only allowing for better television broadcasting, but also better internet services, and better maritime and military communications. As of now, the expectation is that each of the new stations will be operational by the first quarter of 2019.

Like with any satellite venture, much of the costs are up front. It requires a great deal of capital to build and launch a satellite into geosynchronous orbit around the planet. Such an early sizeable investment explains the need for over 20 countries at its inception. Making satellite technology viable and profitable takes a great deal of time and effort and backing money. This is a major explanation for the fact that while it was started in 1976 (with much unofficial history before that), Arabsat did not have its first satellite in orbit until 1985. However, in the 21st century, Arabsat has more support than ever as well as the ability to bring in revenue on its own thanks to its robust content and internet offerings. Arabsat has become a major player in the telecom industry and experts say that its very existence is a powerful beacon of collaboration throughout the Arab world.

A new member country: the continued expansion of the organization

As one of the most massive telecom conglomerates in the world, this year’s conference saw the chairman speak highly of the host country, playing up Tunisia’s role in promoting the direction and connection of Arabsat. He also announced Arabsat’s profits in 2017 reaching $120 million (288 million dinars) and a strong hope for future growth in the industry. With Tunisia on board, Arabsat seems to believe the future looks very bright. A greater footprint, more satellite stations, and a new member country signal the continued expansion of the organization and its reach to citizens living and working all over the world.

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Zimbabwe wants mining companies to list on local exchange

5 April 2018 Comments (0) Actualites, Africa, Economy, Mining

HARARE (Reuters) – Zimbabwe wants mining firms to list on the local bourse as part of efforts under new president Emmerson Mnangagwa to boost investment and local ownership of its vast mineral resources, a new bill before parliament showed.

Mnangagwa, who took power in November when the military ousted Robert Mugabe after nearly four decades, has vowed to revitalise the economy and unlock investment in the mining sector after years of reticence by foreign investors.

“No mining right or title shall be granted or issued to a public company unless the majority of its shares are listed on a securities exchange in Zimbabwe,” the bill says.

Companies seeking rights to mine in the platinum-rich country but already listed elsewhere must notify the mines minister and use the funds from such public offers to develop the mine in Zimbabwe, the bill said.

A failure to comply would mean a liability of a fine equivalent to 100 percent of the cash raised at the foreign listing or as much as 10 years in prison.

Industry lobby group, Chamber of Mines, said its members were not opposed to the proposal to list on the local bourse but warned that exchange may not be deep and liquid enough for companies to raise capital.

“Our members are not averse to listing on the local bourse but it has no capacity to meet the needs of the members,” Chief Executive Isaac Kwesu said.

“Mining is a capital intensive business and some of our larger mines are listed on foreign exchanges because they are able to raise large amounts for working capital and for investment.”

Four mining companies, including Canada’s Falcon Gold and local diversified miner RioZim, are listed on the Zimbabwe Stock Exchange, which has a market capitalisation of around $8 billion.

 

(Reporting by Alfonce Mbizwo, editing by David Evans)

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Trafigura signs three-year cobalt deal with Shalina Resources subsidiary

5 April 2018 Comments (0) Actualites, Africa, Mining

LONDON (Reuters) – Commodities trader Trafigura has signed an offtake agreement for cobalt hydroxide running to December 2020 with Shalina Resources and its subsidiary Chemaf, based in the Democratic Republic of Congo (DRC), Chemaf said in a statement on Wednesday.

Interest in cobalt reflects a shift in the automotive industry to electric cars (EV), powered by lithium-ion batteries which also require components made from the metal as well as other materials such as nickel.

Trafigura has already increased its foothold in nickel with an exclusive offtake agreement with Finland’s Terrafame, that also produces zinc and cobalt.

“If as expected EVs account for an increasingly significant proportion of a growing global vehicle fleet from 2025, it will drive sharp rises in demand for nickel and cobalt,” Trafigura Chief Executive Jeremy Weir said in the company’s 2017 annual report.

“That provides a very promising environment for our growing cobalt and nickel trading activity.”

Chemaf specialises in cobalt and copper exploration. It produced about 5,000 tonnes of cobalt last year from its Etoile mine and processing plant in Lubumbashi, with production set to rise to 7,000 tonnes this year.

More than 60 percent of global cobalt production comes from the DRC. Trading and mining group Glencore, the world’s biggest producer of cobalt, has already signed major offtake agreements with Chinese companies.

Trafigura traded 69.9 million tonnes of metals and minerals in 2017, up 18 percent from 2016.

 

(Reporting by Julia Payne; Editing by Susan Fenton and David Holmes)

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Time to cut? Nigeria central bank gathers for first 2018 meeting

4 April 2018 Comments (0) Actualites, Africa, Economy

LONDON (Reuters) – The Nigerian central bank’s monetary policy committee will finally meet on Wednesday to set interest rates for the first time this year.

Interest rates have been stuck at a record high of 14 percent since July 2016. However, the committee had to cancel its January meeting due to an inability to form a quorum following a number of departures that reduced it to just five out of 12 members.

A majority of analysts taking part in a Reuters poll said they expected rates to stay on hold for now, but that they would be cut later in the year.

Here are three graphics showing Nigeria’s changing economic dynamics.

 

1/ EASING PRESSURE

The pace of inflation has steadily slowed since the start of 2017, with the core reading hovering close to the 12 percent mark. And with exchange rates fairly stable and demand-related pressures absent, inflation rates could be sinking further, making Nigeria ripe for easier monetary policy.

“After a year of lethargic disinflation, the drop in headline inflation to 14.3 percent in February 2018 ignites hope that inflation is still on a steady course towards the target 9.0 percent ceiling and that conditions could continue improving to favour unwinding the present hawkish monetary stance,” StratLink wrote in a note to clients.

 

2/ WHERE’S THE GROWTH?

Nigeria returned to growth in 2017 with the economy expanding 0.83 percent after shrinking by 1.58 percent in 2016, which was its first annual contraction in 25 years. However, latest growth figures are still well below its potential, the recovery has been fragile, and private sector credit lending lacklustre.

Political stalemate has been a common occurrence in Nigeria and has hampered reforms, while lawmakers still have to pass the 2018 budget. But with elections coming up in 2019, the heat is on for policy makers to help stimulate growth.

“The main focus will be to try and do something positive to the economy, to try to kickstart bank lending to the economy against a very weak backdrop, where the budget has not been passed and money supply is weak,” said Razia Khan, chief economist for Africa at Standard Chartered.

 

3/ RISING BUFFERS

Meanwhile a recovery in oil prices, successful debt sales including rolling local into external debt, and a significant amount of portfolio investment have helped replenish the central bank’s coffers. In March, foreign exchange reserves stood at $46.2 billion – a near 9 percent jump month-on-month.

Nigeria’s foreign exchange buffer has climbed 53 percent since March 2017 when it stood at $30.30 billion – though reserves remain far from the peak of $64 billion in August 2008.

 

(Reporting and graphics by Karin Strohecker; Editing by Gareth Jones)

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South Africa’s Gold Fields ties up with Canada’s Asanko in Ghana

29 March 2018 Comments (0) Actualites, Africa, Business, Mining

JOHANNESBURG (Reuters) – South Africa’s Gold Fields will buy a near 50 percent share of Asanko Gold Inc’s Ghana subsidiary and take a stake in the Canadian miner in a $202.6 million deal announced on Thursday.

Investors were cautious, questioning whether the African joint venture would make a return any time soon and sending Gold Fields’ shares down nearly 6 percent, in an already weak bullion sector.

Gold Fields said in a statement that as well as acquiring half of Asanko Gold Ghana’s 90 percent interest in the Asanko Gold Mine, its Ghana subsidiary will also acquire associated properties and exploration rights in the African country.

Shares in Goldfields fell more than the broader bullion sector – which was down 2.8 percent – tumbling 5.9 percent to 46.01 rand by 0858 GMT.

“There’s always some execution risk, they are buying these things but can they actually make money out of it, is what the market is asking,” said Cratos Capital equities trader Greg Davies.

The deal includes an upfront payment of $165 million on closure of the transaction and a deferred payment of $20 million. Gold Fields’ subsidiary will also take a 9.9 percent stake in Toronto-listed Asanko for $17.6 million in a share placement.

The South African miner said the $203 million deal fitted in with its strategy to improve its portfolio by lowering all-in costs and extending mines’ lifespans to enhance cash generation.

Asanko, which is expected to produce 253,000 ounces of gold annually from 2019 to 2023 with a life-of-mine of at least 15 years, also has the potential to make further discoveries, Gold Fields said.

“The Asanko joint venture will give immediate access to low cost production ounces, increasing the quality of the Gold Fields’ portfolio,” the South African miner said.

(Reporting by Tanisha Heiberg and Nqobile Dludla; Editing by Susan Fenton)

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