Investment Climate
African Markets
Record growth rates posted across industries attest to the value of African markets. The emergence of a consumer class in Africa promises to bolster demand for both basic and advanced goods and services, and a young demographic profile promises to bring new spenders to the market in the near term. This growing consumer market in Africa has attracted significant new attention from global and domestic companies and will re-cast Africa as an important investment destination.
Enabling Environment
The right enabling environment has been put in place for successful business in Africa. In addition to macro-economic and governance improvements, appropriate regulatory structures are providing clear rules and a level playing field. Legal, accounting and tax standards are at par with global standards worldwide enabling companies to do business as they would anywhere.
Democratic transition has been more the rule than the exception. Today only a few of the countries in our investment region are experiencing challenges transitioning to full democracy. Stable democracy has laid a foundation for the creation of policies that are favorable to the development of private sector activity.
Returnees
There is a growing stream of African professionals, with experience and training abroad, returning home to contribute to economic development on the continent. Travant has benefited immensely from this phenomenon - several of our professionals are returnees. We are also leveraging it for our investee companies. We see this influx of human capital as critical to Africa's resurgence.
Success Stories
Success stories have been seen across several industries and geographies. The best known example is the telecommunications boom, where African subscriber growth is the highest in the world and where market capitalization for African operators is in the tens of billions of dollars. More recently, financial services has begun to take off in several parts of Africa with the total banking assets in Nigeria growing four-fold since 2002 to over US$66 billion. In addition the Energy Services, Transportation & Logistics, and Information Technology sectors have witnessed significant growth.
Non-correlation
It has been long understood that African financial markets have low correlations with developed markets around the world. Limited portfolio investment and trade flows between the West and Africa actually serves to insulate Africa from global economic troubles. While this will change as Africa becomes more integrated into the global economy, this non-correlation has clear portfolio benefits for investors.
Exit
Exit options have begun to multiply. In the public markets Nigeria, Ghana, and Cote d'Ivoire host active bourses with deepening liquidity. Cumulative market capitalization for these exchanges surpasses US$100 billion. In Nigeria, which has grown from a frontier market to an emerging market, the stock exchange has grown at an astounding CAGR of 52.6% since 2000, from US$4.3 billion to US$94.0 billion. This translates into greater exit opportunity for Private Equity.
Trade sales are also becoming a more frequent exit route as global firms seek to access African growth markets. Successful M&A into Africa have occurred in Telecoms, as witnessed by Zain's purchase of Celtel; Financial Services, such as Standard Bank's acquisition of Nigeria's IBTC; and Agribusiness with Orsascom Construction Industries' purchase of Egyptian Fertilizer Company. M&A is not just international; Nigeria witnessed a flurry of merger activity during the banking re-capitalization while BMCE, a Moroccan bank's acquisition of a stake in Bank of Africa is another example of intra-continental deal making.