New York — A recap of the exciting discussions on the future of investing in African business.
"Private Equity in Africa: an Overview of the Players, Past returns in the Asset Class, Winning Strategies for the future"
The theme of this year's Initiative for Global Development (IGD) Frontier 100 Forum is "Africa: Innovative Investing in Emerging Markets," and the event kicked off in New York City with an exhilarating session on a number of winning strategies for investing in Africa.
The session delivered a high-level market analysis on returns on investment across regional sectors in Africa and provides participants with an overview of the private equity landscape and where to make impactful investments.
The session was moderated by the brilliant Susan Carter, CEO of Commonfund Capital, and discussion leaders included such luminaries as David Wilton, Former Chief Investment Officer & Manager of Global Private Equity at IFC and Thomas C. Barry, CEO & Founder of Zephyr Management LP.
This session, and it's participants, revealed many key insights into African private equity. There are many similarities between the private equity markets of various African countries; notably, that capital is concentrated in larger deals of around 5 million USD, minority stakes are more commonly taken, and since leverage is virtually non-existent, contracts can remain difficult to enforce.
The session covered the differences between the various markets as well, along with the fact that Africa has some of the lowest intra-continental trade in the world, resulting in limited regional stock market growth. Recently, large multinational corporations are starting to engage in the private equity market, an exciting new development that is very promising for the African business future.
"Opportunities exist to access the middle class," said Thomas C. Barry of Zephyr Management LP, "historically through consumer goods, but now through a variety of means, all of which provide new investment opportunities."
Private equity is a critical part of Africa's economic growth, and foreign investors can provide guidance as well as capital for developing businesses on the continent. Although there has been some history of government turnovers resulting in poor returns, most of these investment opportunities are sound and valuable means of benefitting foreign investors while having a positive impact on Africa's economy.
"Sovereign Equities Verses Debt: A Debate on How Best to Get Exposure to African Growth"
The second session of the Frontier 100 Forum delved into the controversial topic of how to engage in and benefit from African growth. Many leading experts had a lively debate about the best means of entering the region's markets, particularly the high-potential ones that are truly on the rise. Focusing on the strategies and risks associated with equity and debt when assessing African national economic positions, this session presented every angle on this hotly contested issue.
Moderating this lively discussion was Co-Founder & Senior Managing Director at Cartica Capital LLC Teresa Barger, and she was joined by Jamieson Odell, Partner & Deputy Global Portfolio Manager at Caravel, and Anupam Damani, Managing Director & PM for Global Sovereigns and Local Markets, Emerging Markets Fixed Income, at TIAA-CREF.
All three industry experts agreed that liquidity with mixed asset class funds is still an issue. Debt suffers less from this problem, but it is critical for businesses to carefully examine the composition of said debt before making any commitment. Capital expenditures still tend to be low, as little as 2% in some countries, but where nations like Nigeria have improved fiscal and monetary problems, that is becoming less of a challenge.
However, most economies in Africa are still not resilient to macro economic shocks. Although both means of entry are beneficial and can yield very positive results, the group acknowledged the importance of careful consideration prior to selecting either route. "It is important for companies and investors to contemplate their individual needs and expectations when considering these types of transactions" concluded Anupam Damani, of TIAA-CREF.
African countries are working to stabilize and grow their economies, and no matter the type of government, all are interested in improving their markets. Sovereign equities and debts are excellent ways for foreign groups and individuals to contribute to African development while benefitting themselves from the process. These two sessions yielded fascinating insights into the nature of Africa's economic growth and where it will go in the future.
Julia Embry is a Communications Assistant with the Initiative for Global Development (IGD). IGD's Frontier 100 Forum, "Africa: Innovative Investing in Emerging Markets," is taking place in New York City Oct. 21-22. The IGD Frontier 100 Forum brings together IGD Frontier Leaders—senior executives of leading U.S., African, European and South Asian companies who share a commitment to business-driven development in Africa - to share insights and advance initiatives in key sectors. Learn more here. Follow updates using #Frontier100, and make sure to follow IGD on Facebook and Twitter. For photos from the Forum and to get a glimpse of who's attending, visit the IGD Flickr page.
