Investec Asset Management targets mid-sized African companies
Towards the end of last year Investec Asset Management, a business within the global financial group, announced it has made a private equity investment into Daraju Industries, a Nigerian-based manufacturer and distributor of toothpaste, soaps and detergents aimed at the emerging consumer.
Mark Jennings, an investment principal in Investec Asset Management’s private equity unit, told How we made it in Africa the Investec Africa Frontier Private Equity team is mainly looking to invest in established, mid-sized companies seeking a partner to grow their businesses. By focusing on growth capital and buyout investments, the objective is to support the creation of local or regional champions in their respective industries.
The Daraju deal follows Investec’s other investments in mid-market companies in Africa, including OK Zimbabwe, a food retailer; IHS, a multi-country telecom infrastructure business; and Big Media, an outdoor advertising company in Angola.
Competing with multinationals
But how can a relatively smaller player like Daraju compete with large multinationals such as Unilever and Procter & Gamble that sell similar products in Nigeria?
According to Jennings, Daraju is focused specifically on price-sensitive consumers. “We see space for a player focused on consumers who, up to now, may not have had access or been able to afford these types of products. Although Daraju is small relative to some of the large players in the market, we do think there is space to grow,” says Jennings.
“To be competitive in the market and to be able to provide products at affordable prices, it is essential for the company to have continual focus on managing its costs. It is also important to be innovative and nimble when it comes to how products are packaged and distributed,” he adds.
Daraju was founded by Indian-born entrepreneur Peeyush Garg. When he was young, Garg’s family relocated to East Africa and later to Nigeria. Daraju started life as a trading business importing products into Nigeria, but in 2005 the company started manufacturing locally in the West African country.
With its infrastructure gaps, especially when it comes to electricity, many companies are finding it challenging to manufacture competitively in Nigeria.
While Jennings admits that it can be tough, he notes that Daraju has been doing it for almost a decade and has experience in manufacturing. He says that importing products also comes with its own unique challenges, and that this is not necessarily an easier way to operate.
“Yes, there are challenges to manufacturing in Nigeria but it is possible, as Daraju has demonstrated, and for those that can get it right, it can be a source of competitive advantage.”