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New finance approach in Ghana deal opens door for UK companies in Africa - africanlawbusiness.com

Wednesday, 17 August 2016

UK equipment provider Dints International has agreed to provide supply chain services to a Ghanaian mining operation, thanks to a collaboration between private and public sector financiers and an international law firm.A UK mining equipment supplier has won a contract to provide vendor managed inventory (VMI) to the Ghanaian subsidiary of South African gold mining giant Gold Fields, following the agreement of a credit deal that secures finance for the contract.

London-headquartered Dints International will provide Gold Fields Ghana with inventory procurement and management from its network of original equipment manufacturers, allowing it to reduce its procurement costs, increase efficiency and reduce the likelihood of obsolete stock.

Dints was advised on the means to provide the finance for the deal by Boston-headquartered international law firm Sullivan & Worcester, Anglo-South African banking group Investec and UK consultancy GKB Ventures, as well as UK Export Finance (UKEF), the UK government’s export credit agency.

Gold Fields and UKEF’s legal work was handled by their in-house departments.

The financing provides operational expenditure procurement with deferred payment. In a statement, Dints said the financing provided a model for further investment in Africa by UK companies: “All this can be replicated for Dints’ other customers and comes with the support as UK government looks to encourage more UK businesses to trade with African countries.”

Chief executive of UKEF Louis Taylor said it was the sort of deal his agency was designed to support: “UKEF’s mission is to ensure that no viable UK export fails for want of finance or insurance, and our ambition is to help exporters win contracts, as well as fulfil contracts already won.”

ENCOURAGING INVESTMENT

UKEF is not the only UK government agency supporting the deal. UK Trade and Investment (UKTI) has also supported the contract as it creates opportunities for other companies in the country to supply products to Gold Fields through Dints, with more than 4,000 UK companies believed by UKTI to be in the market to provide such services.

Greg Hands MP, the government minister of the Department for International Trade, said: “This is a great example of how business and government can work together as a force for good, making sure that the economic benefits of trade are felt throughout the UK supply chain.”

Chief executive of Dints Geoff de Mowbray added: “The ability to tap UKEF support in an integrated manner was key to our success and demonstrates how a UK company can succeed in markets like Ghana. The VMI contract is a unique concept that provides economies of scale for mining houses across the globe and, importantly, complete transparency and flexibility in their procurement processes.”

The format of the deal was a “very novel one”, said Lindley Hassler Witbooi, chief financial officer of Gold Fields Ghana: “The Dints proposition whereby with UK Government backing they provided deferred payment terms embedded in their commercial contract was new to us. We had no loan agreement or promissory notes to sign – just an assignment to the commercial contract. A true suppliers’ credit which gave us an additional form of liquidity with full flexibility to increase as more is procured under the VMI contract.”

London-based finance partner Mark Norris led Sullivan & Worcester’s team advising Dints. He said of the deal: “SMEs (small and medium-sizes enterprises) are key to the UK’s export success. We have shown that with UKEF support, a forward-thinking client, innovative advisers and supportive bankers – all of whom are able to think ‘outside of the box’ – market-leading ideas can be creatively translated into export success.”

The managing director of GKB, and a non-executive director of Dints, Gabriel Buck added that the “transaction breaks new ground and demonstrates what can be achieved with careful prepositioning and pro-active support from UKEF and other key stakeholders”.

Dints serves clients in 18 countries across Africa in the mining, oil and gas, construction and energy sectors and the Gold Fields project forms part of planned expansion, throughout which it will continue to be supported by Investec.

Johannesburg-headquartered Gold Fields came under scrutiny from the US Securities and Exchange Commission (SEC) in 2013 over the sale of a 10% stake in one of its mines, which led to the company hiring New York firm Paul, Weiss, Rifkind, Wharton & Garrison to conduct an internal investigation that uncovered unspecified problems with the transaction. The revelations were followed by the January 2014 resignation of the company’s general counsel, however, the SEC closed its investigation without filing charges in June 2015.

GROWING COMPETITION

Other recent African deals include the investment by French distribution company CFAO in pan-African retail property company SGI Africa and June’s transaction for the development of a pipeline across the continent by renewable energy investment company GreenWish Partners and global private equity firm Denham Capital.

The race to complete deals in Africa’s growing economies and secure access to the natural resources in many of its countries, has seen private companies and government departments from around the world collaborate to varying degrees.

US investment has been primarily private-sector driven during the Obama presidency, while Japanese companies, which have made some of the largest investments in Africa in recent years, have worked with government agencies to build relationships. Both are in competition with their major rival China, whose state-driven approach has led to significant investment in infrastructure across the continent, while Russia is also a growing player.


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