Emerging Capital Partners’ Andrew Brown’s Tips on Investing in African Businesses

On Friday June 6, Andrew Brown, CIO at Emerging Capital Partners, was interviewed at CNBC and talked about investment opportunities with great potential in the African continent. Mr. Brown highlights that his private equity firm is a Pan-African investor, which implies that it endows businesses in the entire continent, not only in South Africa, as many assume. In fact, he states, opportunities in South Africa are less interesting that those present in the rest of the continent.

In terms of where the opportunities are in the continent, most people talk about Nigeria, “because of the young demographic and rapidly growing population” (CNBC interviewer). Mr. Brown further explains that everybody tends to focus on Nigeria because “it’s a single country with a lot of people.” However, Emerging Capital Partners looks beyond this, and seeks to reach the same population size, delivering products and services, by endowing companies with presence in several smaller countries. He continues, “The dynamic you’re seeing in Nigeria is a dynamic that’s playing out across Africa. The challenge is how you actually build businesses that can operate and address that market need.”

When considering investing in Africa, one must take into account that, as a continent, it is growing at 5% per year, and this growth rate is accelerating. Actually, this recently resulted in the Work Bank upgrading its forecast to 6% for the continent.

 

But what about the risk?

Well, Mr. Brown’s job as a fund manager is to manage that risk in order to get stable returns. “I can’t tell you there is no country or political risk across Africa, but there are certainly lots of businesses that aren’t really impacted by political risk per se. And then, when we invest, we like to build platform companies that are operating across a number of countries (…) and that provides a diversification not only at the portfolio company level, but then when you aggregate that to the fund level, we have a very diversified portfolio,” Brown assures. Emerging Capital Partners’ portfolio comprises investments in 45 out of 54 countries across Africa, and includes telecoms, commodities, and food and drink stocks, amongst others. Its assets under management surpass the $2 billion threshold.

Finally, he talks about Africa’s shift towards a consumer-driven economy: “I think what you’re seeing come through –Brown assures- is an emerging consumer class and we’re looking to make investments that will provide good quality, well priced, goods and services into that emerging consumer class.” So, maybe, it could be time to consider investing in Africa, and helping this continent, its economy, and its people, often left behind, develop.

Watch the full interview:

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