How we made it in Africa asked a handful of private equity investors to identify untapped business and investment opportunities on the continent. Here are some of their responses.
1. Facilitating cross-border trade in Namibia. Ekkehard Friedrich, a partner at private equity firm Eos Capital, believes Namibia is well positioned to serve the Southern African region as a logistics hub and act as a gateway to nearby landlocked countries such as Zambia, Zimbabwe, the Democratic Republic of Congo and Botswana. “The Walvis Bay port has been massively upgraded and Namibia has some of the best roads in Africa. There is already a shift to using the port of Walvis Bay for copper exports from Zambia rather than the ports of Durban or Dar es Salaam. There are a lot of opportunities here to facilitate cross-border trade,” he explains. Click for more information on Namibia’s business and investment opportunities.
2. Industrial warehousing for Africa’s burgeoning e-commerce industry. “We invest in industrial warehousing and I think the growth of e-commerce interplays well with these investments,” notes Charlie Tryon, CEO and co-founder of investment holding company Maris. “I anticipate there will be fairly substantial growth in online retailing, with a progression from routine retail towards either big-box retail or e-commerce and distribution platforms (like Amazon) on the continent in the years ahead. It’s only a matter of time.” From agriculture to real estate: Charlie Tryon shares insights on opportunities in Africa.
3. Private education in Nigeria and Ghana. “We think the education space is extremely interesting,” says Danladi Verheijen, managing partner and co-founder of Verod Capital Management, a Lagos-based private equity fund manager. “Families prioritise educating their kids to the best extent possible and will send their children to as good a school as they can afford. Historically, the best schools were government-run although, over the years, the quality of public-sector education has declined. There have always been private schools in Nigeria but most were linked to religious institutions; now there’s a growing number of for-profit schools. Nonetheless, there is still a deficit of quality educational facilities in Nigeria and Ghana, with demand for good schools far exceeding supply … We’re also interested in investing in vocational training schools but have not yet found any investible players operating in this space in Nigeria or Ghana. Learn more about Verod’s education investments.
4. Manufacturing in East Africa. David Owino, founding partner of Ascent Capital Africa, is bullish about the manufacturing sector in East Africa. The firm has invested in Kisumu Concrete, which manufactures building products such as ready-mix concrete and concrete blocks. It is the largest player in western Kenya and enjoys little competition given the difficulty and cost of shipping building blocks from Nairobi or other locations. Ascent has also backed Metro Plastics in Kenya, which produces PVC and PPR pipes as well as gutters and wastewater removal products. “These are not products that are going to make the front-page news but they are essential if you’re going to construct a building or collect rainwater, which is very important in this part of the world. These types of businesses that serve consistent local demand and are considered somewhat ‘safe’ from potential threats of imports are generally attractive to us. For example, it’s not cost-effective to ship pipes from China to Nairobi – they are light but take up a lot of space,” he says. David Owino discusses investment opportunities in East Africa and highlights the sectors he would stay away from.
5. Regional digital banking platforms. “I’m completely sold on the idea of regional digital banking,” says Zain Latif, CEO of TLG Capital. “There is a phenomenal opportunity to create a mobile-based digital bank that offers customers an account where they can access savings, loans, other financial services such as insurance, as well as the ability to transact in various currencies. However, it needs to be a regional platform as most of Africa’s countries are too small. To make it work, one would need scale. A lot of people are trying to do this but it is a very difficult proposition because you need to operate across jurisdictions. It’s a lot of work but is a huge opportunity if someone gets it right.” Read our full interview with Zain Latif.
6. Cultivation of high-quality crops to encourage food processing in Ethiopia. “The most untapped opportunity for me is to use the available resources and grow high-quality agricultural produce that will drive the manufacturing sector,” notes Saad Aouad, co-founder and chief investment officer of 54 Capital. “The quality of Ethiopia’s agricultural produce is oftentimes not good enough for food processing, which is why so many products are still imported. I will give you the example of tomatoes. Ethiopia exports fresh tomatoes but then imports ketchup. That doesn’t make sense because ketchup is a relatively easy product to produce. So why then? It is because the quality of tomatoes grown in Ethiopia is not good enough to run a profitable ketchup plant.” Saad Aouad shares lessons learnt about investing in Ethiopia.
7. Taking popular local restaurant up a notch. There are unexploited opportunities to take “the casual dining experience in Africa to the next level”. So said Carolyn Campbell, founding partner and COO of private equity firm Emerging Capital Partners (ECP), in an earlier interview with How we made it in Africa. Campbell notes that an entrepreneur who has developed a popular casual dining or café outlet should consider growing the business by transforming it into a chain. ECP first invested in the continent’s restaurant industry when it took a stake in East African chain Java House. Towards the end of 2018, it followed that with an investment in Kenyan restaurant group Artcaffé. The firm recently also made headlines when it acquired the Burger King South Africa franchise. “These businesses cater to middle-class people looking for a way to spend their disposable income during their leisure time. They also offer alternatives to the office for business meetings and provide a space for students to gather and study,” Campbell explains. “We have seen how this concept has taken off in regions such as China and we see a similar opportunity in Africa. There have been a few entrants coming in from outside – such as Burger King and KFC – but developing local entrepreneurs is particularly exciting for us,” she adds.
8. Packaged food and snacks for the Nigerian market. It is estimated that roughly 50% of Nigeria’s population is urban and with one of the highest urbanisation rates in the world, consumption patterns are rapidly changing. “People now look for more convenience and seek out packaged foods, which are different from what they would eat in rural areas,” says Mezuo Nwuneli, managing partner and co-founder of Sahel Capital. “When it comes to this opportunity in packaged foods, I mean everything from staple foods to breakfast cereals and snacks. Think of your average consumer – someone sitting in traffic on the way home – what are they snacking on during the car or bus journey? If you have kids going to school, what kinds of food are convenient, packaged and ready-to-eat that the kids can take to school? Or middle-class families – where both the husband and the wife work and come home at the end of a long day – which food is more convenient to prepare versus trying to make that food from scratch? Packaged foods can cover the whole gambit but it is important to get the right price point for that consumer. Also, the more nutritious a food product is, the more you appeal to a broader family-oriented consumer base.” Read our full interview with Nwuneli to learn more about agribusiness trends and opportunities in Nigeria and the broader West African region.