Africa’s has the potential to become the next Private Equity hotspot. Merely looking at the energy infrastructure sector, “600 million Africans are not connected to the electricity and public investment will not be sufficient,” says Graham Sheward, SGG Mauritius Managing Director.
In addition, Africa has only just begun exploring and developing its vast oil and gas potential. The investment that the extraction, refining, distribution – through pipeline and ports – and regional and global sale of these resources will require is vast, “even before the supplier and secondary industries required to support this build are considered,” adds Sheward. Then there is the telecommunications, consumer, services and urban infrastructure build attendant on the continent’s rapid urbanisation as millions of Africans move to town. Underpinning all this potential is Africa’s traditional mainstay – agriculture. Already employing 80% of the continent’s population, properly capitalised, Africa’s agricultural sector holds the potential to feed the world as global population figures test eight billion in coming decades.
Looking at Africa from the inside, or from the individual perspectives of separate countries, the scale of the opportunity is often clouded by shorter term – and much more immediate – challenges. At minimum, for example, investors considering Africa have to take underdeveloped or constraining legislation, political uncertainty, liquidity and exchange control challenges, or skills and infrastructure deficits into account.
These, however, do not negate the bigger picture of opportunity and growth that the continent presents. This view was the rationale behind Luxembourg headquartered SGG’s recent acquisition of Cim Global business, headquartered in Mauritius. The combination brings together Cim’s presence in Africa and South East Asia’s most dynamic economies with a world-leading Luxembourg-based provider of administrative and accounting solutions for investment funds and multinational corporations. The transaction links Europe, the United Kingdom, the USA, Caribbean, Mauritius, South Africa, Singapore and Hong Kong in a powerful combination set to transform the world’s access to African investment and growth.
Specifically, the acquisition, “provides global corporates the ideal support vehicle through which to roll-out international strategies – especially in Africa’s rapidly developing private equity environment,” explains Sheward. From an African perspective, SGG’s acquisition of Cim Global Business means that world-leading business support services are now available locally in Africa, “providing African corporates, for the first time, a distinct competitive advantage – especially when it comes accessing global investment, capital, markets and opportunity,” adds Graham
Cim Global Business already manages many of the largest United Kingdom private equity firms’ engagement with Africa – from Mauritius. Cim’s acquisition by SGG, now, exponentially broadens the private equity landscape able to consider Africa. “Adding 22 countries from the United States, the Caribbean and Europe, including Luxembourg, France and the Netherlands, to Cim’s well-established African, Middle Eastern, Indian and Asian stable of private equity clients, significantly widens the pool of established global clients seeking African opportunities.’’ says Graham Sheward. This acquisition is particularly significant for Africa from a United States’ private equity perspective.
The United States has invested heavily in Asia over the last decades whereas the United States–Africa investment corridor, especially private equity investment, is extremely underdeveloped. SGG’s acquisition of Cim Global Business now provides United States’ largest private equity firms with risk-managed, globally compliant access to African equity through Mauritius. “This is set to transform the United States’ access to African paper – and Africa’s access to global capital for growth,” predicts Graham
Currently, Africa offers exciting private equity opportunities, especially in renewable energy. To date South Africa, through its renewable energy programme based on public private partnership models has attracted the bulk of this investment. Going forward, however, as more countries, like Morocco and Uganda, for example, use or adapt this model the scope for global private equity activity supporting public-private partnerships in the renewable energy sector in Africa is set to increase exponentially.
Established long-term private equity investment is a particularly well-suited funding method for these types of energy investment opportunities given, “the size and long tenor of the deals, the highly capital-intensive nature of the infrastructure builds, and the fact that properly structured off-take agreements guarantee investor returns,” says Sheward.
Channelling SGG’s vast global client network through the system of bi-lateral investment protection agreements that Mauritius has with most of Africa’s high growth markets provides the surety required by global private equity investor mandates. Despite South Africa being a much more developed investment management hub than Mauritius, “Mauritius’ bi-lateral investment protection framework was one of the key reasons for SGG choosing to acquire a Mauritian domiciled asset and investment management business,” added Graham.
Graham Sheward mentioned that he is often approached by South African asset and private equity managers about accessing African equity or other investment opportunities for their clients via Mauritius. This was, in fact, part of the motivation for Cim Global Business opening an office in Johannesburg in 2016 as, “increasingly South African investment mandates consider African pension funds, local African treasury instruments and also, of course, African private equity,” explained Sheward. As such, being present in Africa’s largest domestic investment hub, “is a critical part of our strategy and – now that we have been acquired by a global investment services major like SGG – only enhances our relevance as a serious asset and investment management partner within South Africa’s highly developed and innovative investment sector,” said Sheward.
This is especially so since beyond private equity, SGG’s mandates covers all types of illiquid asset strategies including infrastructure, real estate, including commercial, residential, office, student accommodation and social housing, debt, venture capital, early stage, mezzanine, buy-out (equity and debt instruments) as well as fund of funds. “South African investors and investment managers will now have the opportunity to safely access these investment classes across the continent via the institutional safety of Mauritius – without the burden of exchange control,” added Sheward.
Despite the many challenges that define doing business in Africa, SGG’s acquisition of Cim Global Business points to a new pragmatism in the world’s most developed markets as they begin to recognise Africa’s undoubted long term potential. Central to this, “is an appreciation of the role that private capital will need to play in realising this potential – and the growth that this will generate,” says Graham. If one considers the huge influence of international private capital flows in Asia over the last six decades, channelling these flows to Africa presents a huge development opportunity for the continent. At the same time Africa also presents, “the next big growth opportunity for the world,” concludes Sheward.