1. KR – 201109 - 1
- Research Paper –
Francophone Africa: the untrue Private Equity investment black hole
2. About Kusuntu
Kusuntu-le-Club is an Africa Diaspora executives and sympathizers partnership set up
with the ambition to act connecting worldwide capital to frontier market economies,
especially Africa.
Kusuntu-le-Club aims at providing leadership thought and act to promoting change and
development in Africa through private equity investment. Kusuntu-le-Club behaves as a
Think Tank and advocacy group to promote Private Equity investment in Africa. It action
take various forms such as public position taking, research publication, social networking
or edition of an African Private Equity Directory.
Contact : info@kusuntu.com
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3. Francophone Africa: the untrue Private Equity investment black hole …
The African private equity asset class gets to a light in recent years with series of deals, being exits as
the Celtel US$ 3.4 bn deal in 2005 or even breaking
fund raisings such as the recent closing of
th
Washington based Emerging Capital Partners 7
funds with US$ 618 million in 2010 or the more
recent London based Helios US$ 900 million. Next
to this, Africa has spotted into the worldwide
investment radar screen. Arguments for this have SIERA
LEONE
been notably, the China and others emerging
markets interests on the black continent and the
successful achievement of the 2010 world cup in
South Africa, which has brought back Africa to the Private Equity Activity
worldwide economic scene. However, from the High
Medium
perspective shown within articles, surveys from Low
International consulting firms or professional
commentators, the investment activity has SWAZILAND
concentrated to the Anglophone Africa, leaving the LESOTHO
SOUTH AFRICA
perception that the francophone states were out of
the nascent game. As many perception situations
Source : Kusuntu-le-Club Research Jan. 2011
when it comes to Africa, is this the reality or another
face of the global African business misperception?
Table 1 - The four Francophone Africa First, reviewing countries that make up the
a) The North African French speaking countries (the Francophone Africa, it is of good study to
Maghreb),
b) The West African French speaking countries, all identify those specific ones that create
sharing, but Guinea, the same currency and many economic traction and why, especially looking
common points on their business code – the West Africa at how they compare to private equity well
Economic and Monetary Union Countries or WAEMU, known countries like Egypt, Kenya, Nigeria and
c) The Central African francophone countries, that also
share same currency and business code while linked into South Africa. Secondly, the African private
an economic union, the Central Africa Economic and equity deals story might be a good indicator to
Monetary Community - CEMAC and, confirm or not such a perception. Finally, some
d) The other francophone countries, that is very diverse perspectives will has to be drawn on
and taking together states like The Democratic Republic of
Congo, Rwanda1, Burundi, Djibouti, Madagascar, the expectations for more private equity activity
Comoros, to some extend Mauritius and the Seychelles, within the Francophone Africa.
as well as and the French territories of Mayotte and La
Reunion. As many Africa exists as countries on the
continent, the francophone Africa could be described as four diverse groups (see Table 1). Each of
these four francophone Africa has common and specific business dynamics and none of these
countries have been absent from the overall economic progress witnessed in the recent years, nor the
private equity activity, but at a very different magnitude.
Economic indices explain country attractiveness to private capital
Elements for strong country attractiveness have been identified in a recent university research as a
combined index of 1) Economic Activity, 2) Depth of Capital Market, 3) Taxation, 4) Investor protection
and corporate governance, 5) Human and Social Environment, and 6) Entrepreneurial culture and
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deal opportunities . Taking some proxies such as GDP, GDP growth, Doing Business Index,
Diversification and Competitiveness indices, Basic Education and Demographic Indicators developed
by the World Bank, the OECD and the African Development Bank, there are clear advantages for
Anglophone countries on the others (see table 2).
1
Rwanda has turned from French as official language to English. For the purpose of this article and given the number of people that speaks
French, we have counted this state as FR-Africa
2
Alexander Groh, Heinrich Liechenstein and Karsten Lieser in « The Global Venture Capital and Private Equity Country Attractiveness” –
2011 edition
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4. Regardless of recent political troubles or unrests, data shows on the north Morocco and Tunisia, on
the south of the desert, Cameroon, Côte d’Ivoire, Madagascar, Mali, Rwanda, Senegal as places for
major private equity potential, although at a lesser extend to what does already exist in neighbouring
states Ghana, and Kenya, not to mention giants Egypt, Nigeria and South Africa. And this reflects in
where are seen the main private equity transactions within the Francophone Africa (see table 4).
Table 2 – Comparing key leading countries – FR-Africa / EN-Africa / Other
Region Country Population GDP Growth Rate Doing Business Mo Ibrahim4
(Inflation rate) Rank3 Rate (Rank)
North Africa Morocco 31.285.174 145.60 4.9 (1.2) 114 56.57 (13)
Tunisia 1.0486.339 86.35 3.0 (3.7) 55 62.12 (8)
West Africa Cote d’Ivoire 20.617.068 35.86 3.8 (1.0) 169 36.83 (44)
Mali 13.443.225 15.70 4.4 (2.5) 153 52.94 (19)
Senegal 13.711.597 22.38 1.7 (-1.0) 152 56.32 (14)
Central Africa Cameroon 18.879.301 42.85 0.9 (2.01) 168 44.23 (34)
East Africa Madagascar 20.653.556 20.15 -1.0 (9.0) 140 48.74 (28)
Rwanda 10.74.311 11 4.5 (10.4) 58 47.17 (31)
Benchmark Egypt 78.866.635 470 4.7 (11.8) 94 60.46 (9)
Countries
Ethiopia 85.237.338 77.40 8.7 (8.5) 104 43.52 (35)
Ghana 23.887.812 35.83 3.5 (19.3) 67 64.61 (7)
Kenya 39.002.772 62.56 2.6 (9.3) 98 50.53 (26)
Nigeria 149.229.090 339 6.1 (12.4) 137 43.25 (37)
South Africa 49.052.489 505.30 -1.8 (7.1) 34 71.45 (5)
Data Source: African Economic Outlook – OECD AfDB end 2010
Deals pipeline and it potential are actually more robust than thought
st
Data from the Emerging Market Private Equity association reveals from year 2008 up to 1 half of year
2011, 30 private equity investments in the francophone Africa (FR-Africa), where the English speaking
countries (EN-Africa) report 147 deals, with
67 deals allocated South Africa only, 31 to
Nigeria and 23 to Kenya. Detail review for
EMPEA data on Francophone Africa
indicates 4 deals each for Cote d’Ivoire,
Madagascar, Morocco, Togo and Tunisia,
with one Togo deal going into a bank holding
platform to fund 3 new subsidiaries across
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Africa .
There are some factors that explain the
limited strength of private equity activity
within a region vis-à-vis the others. As do the
English speaking countries in Africa with the
Great-Britain, Francophone Africa shares a
lot with the former ruler France, notably business practices and, the delay in private equity
development. More into the details, corporate development funding overreliance on bank loans that
equity capital as well as a business culture of secrecy where financial and management information
provision is very conservative. For long time, business development has been the privilege of the
government with a so-called “state capitalism”, with commerce and distribution being handled by local
branches of non African multinational companies such as Unilever or CFAO. Former British colonies at
the contrary have historically been geared to more entrepreneurialism and use of equity financing,
3
State ranking provided by World Bank review of ease of doing business across it 183 member states
4
Mo Ibrahim index is an average rate on 100 which allows ranking of African 53 states on overall governance
5
It has to be noted that number of transactions overall is greater as there are limited transactions data disclosed on African private equity –.
For the consistency of the diagram and presentation, this statistics reflects data provided by EMPEA Research. For the same period of time,
supplementary data collected from press articles and Private Equity Fund managers’ website, deal flow for the Francophone zone only is 70,
as listed in Table 4. And this probably underestimates the real figure.
4
5. even with local entrepreneurs competing against multinational companies or being hired by them to
develop the activities. From these different inception or situation, naturally highest number of private
initiatives in the Anglophone Africa has called for higher search for entrepreneurial and equity
financing, which in return yields today to a higher number of private equity teams establishing
themselves to support the renewed economic vitality.
However, this situation does not mean Private Equity business is neither weak in Francophone Africa
nor limited. Many changes since accession to free sovereignty have been a catalyst for more business
culture. In recent years, first have been the economic reforms that are taking place with a greater
recognition of private business – but for many professionals, more need to be done. Second, - and this
is encouraging - generation of graduates are looking to create their businesses as mean to be part of
the development game and create value, jobs and wealth. Third, easy access to information
worldwide, accelerates generation for ideas that are quickly been turned into action. In summary, the
culture of entrepreneur that is propagating worldwide reaches as well Africa and especially the former
colonies of France.
More Fund Managers in activity than thought
The English speaking countries business culture largely explains the highest number of locally
domiciled Private Equity firms, so do the size of markets such as Nigeria, Kenya, and more specifically
South Africa. It is nevertheless interesting to compare both speaking zone activities in Africa. Situation
contrasts in Anglophone Africa from many locally based teams, executing many small to big size and
cross regional deals, to few, not necessarily locally based teams, executing few much localized large
deals in Francophone Africa.
Private Equity Funds Managers active in the region include both domestic firms, raising money to
invest locally (single country or region) and, international firms allocating funds to Africa. A good
number of the locally domiciled firms are similarly to the others region, first time fund managers. They
are the Senegal based Advanced Finance Investment Group (AFIG), Malimbe Capital, recently
established in Mali and in the UK, currently raising it first funds, and, SINERGI SA, based in Niger.
Established local firms also exist across the region, with more than a decade impressive track record
for some of them. The extent to which they are known is variable. Among them are the Morocco based
Capital Invest, the Tunisia based Tuninvest-AfricInvest Group, the Togo based Cauris Management,
the Cameroon based CenaInvest and on the eastern side, Madagascar Development Partners that
recently leads formation of a domestic private Equity Association. Equally, some initiatives have failed
International names present on the continent do not overlook the Francophone Africa. If it is thought
be the case, probably this roots it cause with the prism used to read African stories, giving more
attention to either one region or the other, depending each other of it own origin. Transaction records
indeed demonstrate quite a strong presence of the Washington based ECP, London based Actis or
Aureos (table 4).
Finally, reviewing General Partners that are on the continent, it is worth to mention cross-zone
initiatives whereby actors established in Egypt, South Africa or outside the continent enter the
Francophone zone. Among them, the US based Thousand Hill Fund which focuses on Rwanda, the
France based companies such as I&P Management or Horus Development Finance, the Switzerland
based Vital Capital, or firms based in Africa such as Fanisi Capital, Citadel Capital, etc.
Table 3 – Firm raising fund to be invested in Francophone Africa
Manager GP domicile Country Countries of Investment Fund Target Status
Fund Size
mn$
Advans SA (Horus France/Luxembourg Advans Sicar II 60
Development (45m€)
Finance)
AFIG Senegal WAEMU + CEMAC + Atlantic Coast 150 First closing
Guinea Regional Fund at 72m$
Cauris Management Togo WAEMU + Guinea Cauris Croissance II 90 First closing
(60m€) at 45 m€
I&P Management France WAEMU + CEMAC +
Guinea
Malimbe Capital UK / Mali Mali Mali SME Fund I 20 Raising
Fund
Salt Capital Partners UK/France Raising
5
6. Fund
XSML/CenaInvest Netherlands Cameroon, Chad Central Africa SME 25 First closing
Fund
Data Source: Kusuntu Research
Two different business dynamics leading to two different private equity models
Development routes taken by Francophone Africa could be described as a “Capacity and
Infrastructure building based”, led and organised at the level of the states, while the Anglophone Africa
approach is more private business driven, with private initiatives leading the state to adjust the
required infrastructures or capacities.
As such, Private Equity firms in Francophone Africa are active in those sectors that could form
infrastructure platform for economic development such as mining, energy, financial services and
telecom. Other sectors that are looked at are: the food and agriculture transformation industries,
healthcare, pharmaceutical and drugs distribution. Transaction history often shows that those
investments to a large extent are acquisition deals from foreign direct investors (buy out or expansion)
and to a very little part, companies taken back from the states (privatization). This situation generally
leads to transactions that size above US$ 1 million to often multiple of US$ 10 million. And, increasing
number of actors have also started looking at Francophone Africa, not necessarily on the expansion or
buy-out segment but as SME venture capital provider, this is the case for example of I&P Management
which usually funds SME creation initiatives by Diaspora returning home.
A future full of potential for Private Equity
The Francophone Africa has good prospects for more private equity. Attention is coming either from
more informed entrepreneurs no more shy to open their capital and welcome GP’s as strategic and
technical partners, or from the very specific deal sourcing style where GP’s approach firms to reveal
them their potential to grow into regional champion. To date, private equity transactions compared to
the size of country GDP or overall impact on jobs creation and GDP growth has left Anglophone
countries at the forefront of this industry in Africa. As private initiatives develop in Francophone Africa,
one could expect that the delayed zone will converge quite rapidly. Catalysts to this process are
greater liberalization, ease of doing business reforms but also brain gain. Because of an increasing
attractiveness, funding initiatives will certainly increase from the noticed economic vitality, and this is
seen from those many diaspora financiers or former DFI’s executives visiting LP’s to market dedicated
funds creation for the Francophone Africa. Money exist worldwide looking for great return, it is a
question for the Francophone African market to attract it.
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7. Table 4 – Sample list of key transactions in Francophone Africa between year 2008 and year 2011
Country Fund Manager, Co-investors Company Name Sub-Sector Investment Date
Algeria Emerging Capital Partners (ECP) Shoresal Real Estate June 2009
Swicorp Petroser Oil & Gas October 2008
Tuninvest-Africinvest Group General Emballage Wood & Paper Products June 2009
Benin Emerging Capital Partners (ECP) Financial Bank Banking January 2010
I&P Management France Bhelix Construction Year 2009
Carotech Benin Construction Year 2009
FINADEV Benin Financial Service- MicroFinance Year 2010
Nomad Distribution Year 2009
Benin/Chad/Guinea Emerging Capital Partners (ECP) Finadev Banking - MicroFinance January 2010
Burkina I&P Management France ACEP Burkina Financial Service- MicroFinance Year 2009
Cameroon Horus Development Finance France Advans Bank Cameroon Financial Service- MicroFinance Year 2009
I&P Management France GENEMARK Pharmaceuticals Year 2008
LOOP SA Optical Year 2008
Sagex Agroindustry Year 2009
Tuninvest-Africinvest Group Reef Hout Timber August 2009
Chad I&P Management France FINANDEV Tchad Financial Service- MicroFinance Year 2010
Congo Horus Development Finance France Advans Bank Congo Financial Service- MicroFinance Year 2008
Congo Dem.Rep. Actis Copperbelt Minerals Extractive Industries (Mining) July 2008
Trans-Century Limited Cableries du Congo SPRL Industrials & Manufacturing March 2010
Cote d’Ivoire / Guinea Cauris Management SwindevCo Telecom Year 2009
Cote d'Ivoire Cauris Management Planor Capital – MTN Telecom Year 2009
Emerging Capital Partners (ECP) Finagestion Infrastructure July 2008
La Nouvelle Societe Interafricaine d'Assurance
Insurance December 2008
Participations SA (NSIA)
Thunnus Overseas Group Food & Beverage October 2008
I&P Management France Afrique Emergence Initiative Financial Service- MicroFinance Year 2008
Cofipeche Food Year 2009
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8. Country Fund Manager, Co-investors Company Name Sub-Sector Investment Date
Vue et Vision Optical Year 2009
Horus Development Finance France Advans Bank Cote d’Ivoire Financial Service- MicroFinance July 2011
Kingdom Zephyr Africa Management Thunnus Overseas Group Food & Beverage December 2008
Tuninvest-Africinvest Group Alios Finance Financial Services TBC
CDCI Distribution & Retailing TBC
Petro Ivoire Energy TBC
Planor Capital – MTN Telecom TBC
Djibouti Emerging Capital Partners (ECP) Salt Investment Mining July 2008
Madagascar Wisco Guangxin Kam Wah Resources SA
Madagascar Hony Capital Extractive Industries (Mining) July 2011
(MWG)
I&P Management France Phileol Agroindustry Year 2009
Madagascar Development Partners BICM (Banque Industrielle et Commerciale de
Banking November 2009
LLC Madagascar)
CAM Aviation / Sky Services Services January 2010
Madarail Development SA Infrastructure July 2008
Tuninvest-Africinvest Group Microcreed Madagascar Financial Service - MicroCredit TBC
Mali I&P Management France Trainis Eductation Year 2010
Mauritania Emerging Capital Partners (ECP) Bacim Bank Banking April 2008
ALMAMED (Almal Meditterrannée
Morocco Alma Bat (ex Car & Automotive furnitures March 2010
Invest)
Alma Pack (ex Nordenia Morocco) Packaging March 2010
Alma Plast Packaging October 2010
Amundi Alkantara Emteyco SA Telecom furniture March 2009
Oksa Maroc Metrology TBC
Atlamed SA Intex Compagnie Industrial construction February 2010
M2T Electronic banking November 2009
Emerging Capital Partners (ECP) Almes Engineering & Construction July 2009
Compagnie Miniere de Touissit Extractive Industries (Mining) January 2008
Finaccess Group Information Technology April 2009
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9. Country Fund Manager, Co-investors Company Name Sub-Sector Investment Date
Kingdom Zephyr Africa Management Mixta Africa Engineering & Construction March 2009
Niger I&P Management France CAT Logistics Logistics Year 2010
Rwanda Altira Group Banque Rwandaise de Developpement S.A. Banking & Financial Services July 2008
Societe Monetique at de Tele-Compensation au Rwanda
Technology July 2008
(SIMTEL)
Senegal Aureos Capital Les Ciments du Sahel Industrials & Manufacturing February 2009
Emerging Capital Partners (ECP) Teranga Gold Mining April 2011
I&P Management France Duo Pharm Pharmaceutical Year 2010
Equip Plus Construction Year 2009
AFIG – Advanced Finance Investment
Togo 6 Ecobank Transnational Incorporated Banking July 2010
Group
Cauris Management Banque Populaire pour l’Epargne et le Crédit Banking Year 2010
Socopharm Pharmaceutic distribution Year 2010
Sodigaz Energy Year 2009
Emerging Capital Partners (ECP) Financial Bank Group (now Oragroup) Banking August 2008
IFC Asset Management Company
Contour Global Energy June 2010
(AMC)
Ecobank Transnational Incorporated Banking July 2010
Tunisia Actis Poulina Group Chemicals & Industrial Materials August 2008
Amundi Alkantara Opalia Pharma Pharmaceuticals October 2009
Emerging Capital Partners (ECP) Societe des Articles Hygieniques (SAH) Industrials & Manufacturing May 2008
Islamic Investment Bank Artes Automotive May 2008
Data Source : Kusuntu Research & EMPEA data
6 Transaction into ETI the holding structure of Ecobank for funding subsidiaries in Chad, Liberia and Rwanda, therefore could be allocated back to those countries
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