Corporate governance promotes value creation in African private equity-backed companies

Albert Alsina


The African Private Equity and Venture Capital Association (AVCA), the pan-African industry association, released the third edition of its Africa Sustainability Study at the 15th Annual AVCA Conference, which was held on 23 and 24 April in Marrakech. The 2018 Africa Sustainability Study: Creating Value through Corporate Governance explores how investors in Africa have promoted the adoption of corporate governance frameworks within their portfolio companies to drive value creation.

Corporate governance has been a vital component of environmental, social and governance (ESG) standards in Africa, regularly implemented to drive job creation and job quality improvements. The study follows AVCA’s recent special report, An Untold Story: The Evolution of Responsible Investing in Africa, which explores the history of the development finance institutions (DFIs) and their crucial role in popularising ESG policies in African investment, along with the emergence of responsible investment strategies.

The survey within the study presents empirical evidence from 277 private equity-backed companies operating across the continent, using data from 2012-2017, and explores the components of value-accretive corporate governance systems. In the survey, 85% of private equity-backed portfolio companies and fund managers report that improvements made by the implementation of corporate governance initiatives have led to value creation within the portfolio company. This is critical in the context of the African PE ecosystem, where financial returns and developmental impact signify successful investment.

The report also presents case studies from fund managers such as 8 Miles, Amethis Finance, and Mediterrania Capital Partners. They provide insight into the role of their firms in implementing various corporate governance measures, from overseeing company audits, conducting risk assessments and boosting compliance, to improving financial management and reporting and revitalising corporate strategy. These case studies illustrate GPs’ successes, as well as the lessons learned from dealing with corporate governance issues in their portfolio companies.

Commenting on the sustainability study, Enitan Obasanjo-Adeleye, director, head of research, AVCA, noted: “This is yet another important piece of research to add to the growing story around sustainable and responsible investing in Africa. This is a significant theme that we covered at the 15th Annual AVCA Conference, and a discourse that we are looking to champion for many more years to come.”

Albert Alsina, chair of the AVCA corporate governance sub-committee added: “As an industry, we recognise how critical corporate governance frameworks are to investing in Africa. AVCA has the ability to reinforce these views by sharing fund manager insights and channelling knowledge exchange into action.”

For more information, and to download the report, please click here.
More information on the conference is available here.