Private equity firm to invest in ‘extraordinary’ African companies
K&A Private Equity has identified opportunities to invest in Africa’s mining, construction and agribusiness sectors. How we made it in Africa talks to Ephra Kazadi, CEO of K&A, about the firm’s plans for Africa, and why it is moving its headquarters from Paris to New York.
Why are you specifically focusing on Africa, and not other emerging markets such as Asia or South America?
Because we don’t have any competitive advantage in those markets. We don’t have the same socio-cultural, economic and political knowledge that we have in Africa.
Do you have experience of doing business in Africa?
I graduated in finance in France and launched my first company in the city of Mbuji-Mayi in the Democratic Republic of Congo almost ten years ago. It was a diamond trading company. I traded diamonds between Africa, Europe and the US for three years, then I started a mining and metals consulting firm based in Paris. With the profits my partners and I launched K&A because we wanted to have a solid investment vehicle to compete with Middle Eastern or Chinese investors in Africa.
How would you describe the current interest from investors in the US and Europe to put money into Africa?
There is growing interest in Europe, especially in London, for investment opportunities in Africa. Europeans have for a long time had a business relationship with Africa and with Asia’s growing demand for commodities, they don’t want to lose their advantage in the continent.
For US investors the situation is a bit different. Their interest in African companies is just starting. They are willing to talk with companies like us, but they are not ready to commit yet. The reason why we’re opening an office in New York is because we want to build a trust relationship and be in a good position when they are ready to commit money to Africa.
K&A has launched its first fund, called Muchanga Capital. Tell us more about this.
We just finished the formation of our first fund that we call Muchanga Capital. We are currently raising money for our first US$100 million closing in March 2013. So far we have $30 million already committed from an African sovereign fund and a French bank.
Have you made any investments so far?
Not yet, but we have identified potential targets. We are waiting for the closing to start acquisitions.
Describe your investment criteria? How do you decide on companies to invest in?
We invest in companies operating in mining, agribusiness and construction. We are looking for companies with a competitive advantage, a minimum of three years of positive results, and a minimum of $5 million in annual sales. We are looking for companies that produce ordinary things in an extraordinary way.
Are there many companies around that fall within these criteria?
Yes there are a few in the continent. Lately I have identified two interesting companies in South Africa.
K&A is especially enthusiastic about the opportunities in Africa’s agriculture sector. Why is this?
Agriculture is a sector that directly affects people’s lives. The African population is growing faster than that of any other continent. These people need to be fed and we cannot continue to import food from the EU or Asia. Investing in agribusiness is key for the development of the continent. At K&A our philosophy is to develop corporations, to develop countries and to ultimately develop a continent.
How competitive is the private equity industry in Africa? Is there a lot of competition for deals?
Yes there are more and more private equity funds for the continent. This is a good thing because it increases the liquidity and the exit possibilities. There is still a problem finding high quality managers in the continent. Intelligent, dynamic and honest management with high expertise in their sector is rare, and that is where our competitive advantage lies.