African finance


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African finance

  1. 1. African Finance – New businessopportunity prospect. Overall objective and evaluation measurement is to make a sustainable leasing company, that can make an impact with offering finance to business in African countries, where access to smaller and short time finance are limitedLeasing in Africa is a new opportunity ofmaking a new big profitable finance institution,and supporting the development in Africa withleasing finance.It is a group of leasing, agriculture and carspecialists, that is behind the company
  2. 2. Leasing in Africa The leasing market in Africa is growing along with the great growth in general in Africa and it is driven much of natural resource extraction, other investments like agriculture and in some countries a growing local middle class and business. This creates a demand for financiel solutions together with equipment and cars An example is leasing of a new car, that typically would be leased out for 1 to 4 years and are then amortized, but if the cars are in good condition at the end of the lease period, they can be sold at a profit. There is different markets to start up in but the group behind has connections to dealers and mining companies in Sierra Leone and connections to Uganda. Depending on suppliers and investors, we are open minded to business in other countries too. The business for African Leasing is to deliver these leasing cars in cooperation with car dealers and service shop companies, including everything, to make it easy for customers. That model is open to all countries, where access to finance solutions are limited.22-03-2013
  3. 3. Calculation on a carCalculation for one car can be seen to Calculation one car, in dollarthe right and yield would be 15% plusopportunity to sell used cars and the Price for one car 37.500 Document fee 300company in 3 to 5 years time. Downpayment 7.800 Finance in total 30.000 Service per year 4.000 Insurance per year 2.000 Running admin cost per year 500,00 Residual value 1.000 Leasing period 24 Interest yearly 20,00% Financial cost ex vat 1.492,64 Leasing price per month ex vat 1.992,64 22-03-2013
  4. 4. Business intro Sierra Leone Sierra Leone in one of the West African countries with a great economic growth rate and Peter Adamsen has been working with the Healthcare project Masanga in Sierra Leone the last 5 years. It is from business and network in Sierra Leone the African leasing company is founded. The business for African Leasing is to deliver these leasing cars in cooperation with car dealers, insurance and service shop companies, including everything, to make it easy for customers. One of the cooperation companies in Sierra Leone is Motorcare, who is a Ford car dealer with 3 sales and service shops in Sierra Leone. The business model for a new Ford Ranger 4x4 car which is offered for sales at 43.000 $ and will be sold to the leasing company for 37.500 $, is offered out to customers for around 2000 dollars per month including service but plus a down payment. From a market and field research in November 2012, there is a big and growing market for this services. The revenue from a leasing fleet of a 100 cars is estimated to be 18% yearly and with a possible upside from selling the company in 5 years’ time. All leasing customers will have a credit check and many leasing customers will already have a payment history at the dealer, which can show creditability and the leasing contracts has a 20% down payment. All cars has a GPS tracker with mileage information for service intervals and the service is on a contract with a car dealer at 4000 $ yearly between the leasing company and the dealer. Insurance is also a part of the leasing contract, and residual values is typically 1000$ after 4 years. The value will be higher on many cars when they are sold, but to make sure, there will be a revenue from used car sales, the value is set low, and is a potential upside.22-03-2013
  5. 5. Business intro Uganda In Uganda the business has a potential with a network of some funds, that has a particular interest in agriculture but Uganda also has a population of 35 million people with a growing middleclass. There is a strong demand for used vehicles to local business and new vehicles and equipment to internationally companies. Leasing is also a new business in Uganda, and the approach is to cooperate with one of the bigger banks in making a new leasing company, that effectively can offer leasing to agriculture, industry and mining, with a CSR profile. Abitrust and Swisscontact would like to support with manpower and financial support, together with other funders. For the new leasing company in Uganda, we are also looking for project research funding to make a sustainable setup. Indicators for success is a 95% repayment on time for leasing fees. Overall objective and evaluation measurement is to make a sustainable leasing company, that can make an impact with offering finance to business in African countries, where access to smaller and short time finance are limited.22-03-2013
  6. 6. Background introOn the finance market in many African countries there is little or no existing leasing companies, but private moneypeople, banks and leasing companies. All types of loans have a price exceeding 15% ​interest and rent are with driver.From local knowledge and cooperation with dealers, we know that there is a demand for leasing of cars tointernational projects from 6 months to 4 years. This segment will be the starting point for African Leasing as four-wheel drive cars in this segment can be leased at low risk. The low risk is based on experience from Sierra Leone as itis existing customers at the car dealers and a known depreciation of the car. Once acquired experience in vehicleleasing in a country the company can start leasing business with other types of equipment on the leases, inconsultation with the owners.Earnings for the leasing company comes from the lease payments that are higher than the cost of purchase of car andinterest expense. With dealers there is made an agreement on the purchase of cars to a favorable price andagreement on service as part of the lease agreement. Also included is insurance and GPS tracking in the leases.Ownership structure is a limited company in the countries, where all assets is owned and managed in a holdingcompany controlled by Peter Adamsen as director with partners and a board. The Board consists of individuals withlong experience in the leasing industry in Europe.There is expected to lease 50 new cars out in the first year and double that figure in year 2 and also in year 3. Thegrowth is based on expectations, from a fieldtrip research in 2012.Legal foundation to operate the company as a leasing company in Africa is confirmed by a lawyer in Freetown. Creditpolicy must be agreed with the Board.The leasing company in is looking for potential investors from 1 to 5 mill. $ with a potential payback of 15 to 20%.22-03-2013
  7. 7. Background intro A Leasing Companys strongest point is to offer a product in demand, in a market where competition is not directly, but only in form of lease agreements. A key strength of the companys cooperation with the countrys largest car dealership chain and workshop operator, which is also growing rapidly and moving into truck industry. This creates the possibility of a fixed small platform for Leasing business, which then can grow out to other African countries. Risks and losses as a result of car accidents and customers will not pay, is expected and most be avoided through a good credit policy. Although the cars and the people in the cars are fully insured, there may be cases where the lessee has to pay for damages and it can cost liquidity and losses. Corporate tax is 15% in many countries and payment out of the countries will be charged this tax. Managing credit risk is essential for leasing business risks and credit policy is finally determined together with the board. The aim for investors is a credit line of 1 to 5 million dollar over a 4 year period with an agreement on the investment return.22-03-2013
  8. 8. Software for easy administrationFeature calculation is based on input from an integrated web with a customer profile flowfrom the administration, so tasks are defined and ends in agreement and billing to thecustomer, the most effective way. The picture below shows such a software. 22-03-2013
  9. 9. Contact African FinancePlease contact us for a moredetailed discussion and furtherInformation. Looking forwardfor the opportunity.Peter AdamsenFinance ProfessionalPhone +45 42627750Mail peter@africanfinance.eu22-03-2013 9