Actis, the emerging markets private equity investor, has concluded a number of exciting deals and exits over the past few years. Its most recent exit was of South African-based shoe retailer Tekkie Town. In its latest newsletter, SAVCA spoke to Actis partner and head of southern Africa David Cooke on the fund manager’s recent activities.
What has been the highlights of Actis’s deal activity in the past year?
We’ve exited Emerging Markets Payments (EMP), our pan-African payments platform; we’ve partially exited Edita Food Industries, our North African snack food business; and recently signed an agreement to exit Tekkie Town in South Africa.
What is your investment strategy?
Our investment strategy is based on two fundamental trends of what we experience across emerging markets – the rise of the emerging consumer and the growth of infrastructure spend, both in hard and soft infrastructure across our markets.
And we target specific sectors that play into those two macro trends, which include financial services, consumer, healthcare and industrial sectors. And we seek out the energy and real estate opportunity through distinct, specialised funds.
What were the circumstances that prompted the Tekkie Town exit after two years?
Our typical approach is a five-year journey of building and adding value to companies with which we partner. Tekkie Town was no different; we embarked with the founder on a five-year plan to help transition and continue to grow the retail business in South Africa and further in sub-Saharan Africa.
The company performed exceptionally well and that performance was not lost on Steinhoff, who had watched the business over a number of years and felt that it was a good strategic fit into their value retail proposition.
Steinhoff approached the Tekkie Town shareholders to consider an exit. We assessed that with the founder and concluded that in Steinhoff the business and its employees have found an ideal host for its future.
What opportunities do you see for Actis in emerging markets, given economic and financial uncertainty globally? In which emerging market regions are you most active, and why?
We remain convinced of investment opportunity in emerging markets, specifically in the markets on which we focus – China, India, Africa and Latin America. Nothing has changed in that respect; it’s what we have been doing for many years and it will continue to be the focus area of the firm going forward.
We take a long-term perspective. We invest in trends which are not driven by commodity prices or currencies in the main. Instead we focus on opportunities where growth is driven by the rise of the middle class and their need for infrastructure, goods and services. Examples would include the secular growth we see in the financial services sector, with the shift from cash to electronic means of payment that has nothing to do with commodity prices or GDP growth.
If you stick to this type of opportunity, macro-economic shocks can be absorbed and in fact give rise to an ability to take advantage of dislocations in markets. When Egypt was going through political turmoil, for example, we continued investing there and our investment in CIB bank proved highly successful as we managed to continue growing the business even through times of civil unrest before selling in 2014.
Clearly it has been challenging times in terms of the global macro environment, but we’ve been doing this long enough to have experienced the ups and downs of these markets. This gives us a more nuanced view of the opportunities in those markets and we continue to identify growth opportunities in those markets notwithstanding what may be happening in the macro headlines. It certainly is not easy, but the fact that we have done this for many years helps tremendously.
This article was first published on the Southern African Venture Capital and Private Equity Association (SAVCA) newsletter.