It is important that Africa is viewed through the right lens or it risks being consistently dismissed by international investors. Africa is a youthful frontier story that has a long runway for growth uncorrelated to the rest of the world. The real story is the fortune at the bottom of the pyramid. This market is there right now and it doesn’t depend on politicians, commodity prices or even a growing middle class. It depends on finding the right company that is sensitive to these consumers’ needs by delivering a product that is good quality, offers convenience and at the right price point. In this note, we unpack our thinking behind such companies as well as the current mega-trends driving growth.
In July, OP and Finnfund announced plans to establish Finland’s first impact fund - the OP Finnfund Global Impact Fund I - that will invest into emerging markets. AGF’s Anna Lyudvig speaks with Tuomas Virtala, CEO of OP Asset Management and Markus Pietikäinen (pictured), CIO of Finnfund to learn more.
The total wealth held in Africa rose by a modest 14% over the past 10 years (2008-2018) with three of the largest economies on the continent, South Africa, Egypt and Nigeria performing poorly on most economic indicators according to the AfrAsia Africa Wealth Report 2019, released by Mauritius based AfrAsia Bank. The total wealth refers to private wealth held by all the individuals living in each country and includes all assets (property, cash, equities, business interests) less any liabilities.
Mauritius has forged a reputation as a safe, trusted and competitive financial centre. At the private sector level, Mauritius has been at the forefront of driving quality investments into Africa. AGF’s Anna Lyudvig speaks with Yogesh Gokool, Senior Executive – Head Global Business at AfrAsia Bank to discuss the African strategy of Mauritius, investment opportunities in Sub-Saharan and AfrAsia’s activities on the continent.
After a strong growth in 2017 and early 2018, the global economy is losing momentum and expected to slow down from 3.6% in 2018 to 3.3% in 2019 before returning to 3.6% in 2020. This slowdown is attributable to a confluence of factors affecting major economies. The factors weighing down on growth prospects include, the elevated trade tensions between the United States and China, the natural disasters in Japan, the introduction of automobile fuel emissions standards in Germany, the tariff increases enacted in the United States and China earlier this year, the sovereign and financial risks in Italy, the weakening financial market sentiment as well as the deeper-than-envisaged contraction in Turkey.
Prior to the global financial crisis of 2008 – 2010 the so-called “big” banks, both internationally and within the local context, were stamped by investors and depositors alike with the “too big to fail” label. There was a sense of comfort that, due to their systemic importance, the government would never allow a big bank to fail. And to a large extent, they may have been right. But if we have learned anything since the global financial crisis it’s that banks can and do fail.
The green bond market continues to grow, with analysts predicting 20% growth this year. While Africa only accounts for 2% of the existing green bond market, we are seeing African governments laying the foundations needed to grow their share of green finance. Given the market growth and infrastructure challenges Africa faces, this couldn’t come at a better time for institutional investors.
The good news for private equity fund managers in recent years has been the marked shift in global institutional investment towards private markets investments. According to Blackrock, one of the world’s largest asset managers, the largest pension fund markets have increased their exposure to alternatives from 4% to 25% over the past 20 years. This has included private credit, infrastructure, unlisted real estate, and a host of more niche strategies, and has led to a dramatic increase in fund sizes and capital available for investment in unlisted investments globally. It has also shifted the balance of power from LPs to established GPs, who have had more than enough interest in their funds to pick and choose their LPs. In certain instances this has even led to enhanced economics for the GPs, as LPs have agreed to skewed terms just to gain access to top rated funds. In a few instances, we have heard of the emergence of 3 and 30 fees arrangements being agreed.
In May, AGF attended AFSIC in London, UK - the largest Africa investment event taking place annually outside Africa. On the sidelines of the conference, we’ve met with Sanjeev Gupta, Africa Finance Corporation's (AFC) Executive Director for Financial Services.
The “Belt and Road Initiative” is a future-oriented initiative that will bring many benefits to global economic development and people. Chinese Ambassador to Kenya Wu Peng recently said that the cooperation between China and Kenya has deepened political trust, expanded economic and trade cooperation, and promoted the continuous development of the cooperative partnership.
How the evolution of the African model for PE sector continues to attract innovative solutions?
Under the guidance of the “Belt and Road Initiative”, international cooperation has become a major trend. In order to build a cross-industry cooperation platform and help the mining industry “go global”, at the second overseas mining investment high-level forum, experts and scholars had a comprehensive and multifaceted discussion and made some suggestions. Mining investment opportunities in Africa caught many investors’ attention.
Britam Financial Holdings has recently approved an anchor investment in Tiserin Capital, Africa’s first south-south private equity fund. The investment is a breakthrough in the region’s financial markets highlighting the important role pension funds, insurance and other local investors can play in supporting long term investments in the region. We caught up with Kenneth Kaniu, Britam Asset Managers CEO, to learn more about the deal, the firm, and the needs and constraints of institutional investors in Kenya and East Africa.
According to Preqin, private capital dry powder has reached $2trn and is climbing. This means that a large amount of capital is committed by limited partners who are then called on, once an investment opportunity is identified, to provide capital for the purchasing of equity (sometimes mixed with debt). The trouble is that capital commitments continue to grow and are not being called on in what appears to be a sellers’ market.