PSG Africa targeting consumer-facing companies for private equity deals

Which other countries do you like?

I mentioned Zambia, Botswana, Mozambique before. We are open to any Southern African country, anything from Namibia, all the way up to Kenya. We are not looking very hard at West Africa at the moment, although we are very aware of the developments that are happening there.

Are you seeing a willingness from these African companies to sell a stake in their businesses to private equity players such as yourselves? Is it easy to convince them to partner with you?

A guy told me in Uganda once that he can get money from his friend who has mines in the DRC, but money was not what he was looking for; he was looking for skilled people to contribute to the operations of the business. I think there is an advantage for South African corporates who can make a real operational contribution to these businesses. But we as PSG Africa have our ways to engage companies, and to convince them that we are a suitable investment partner for them.

What are some of the things you have learned about doing business in the rest of Africa?

It can take quite a while for these deals to close. I think specifically private equity is quite underdeveloped on the rest of the continent.

There are a lot of foreigners that have been involved in our neighbouring countries long before South Africans have woken up to the fact that we even live in Africa. Not only the Indians and Chinese, but also the Lebanese and Portuguese, for example, have been operating in these markets for a very long time.

On-the-ground presence is very important. Flying in and flying out is very difficult. It helps to have a local partner, or your own person on the ground, to really get traction on these deals.

And lastly, can you describe the challenges you face in doing business in the rest of the continent?

I think on-the-ground presence is probably one of our biggest. It is not feasible for us to have an office in every country, but if you fly in and fly out the deal can easily lose traction. So that is definitely a challenge for us.

Bureaucratic red tape is always an issue. Some countries handle it a lot better than others, and it can definitely slow things down. A lot of countries are now starting up competition commissions. For some of them our deals have been their very first cases, and these guys are still learning. It takes longer than in South Africa or in a more developed economy.

And then the political and regulatory environment can change very quickly. In Malawi the currency has been a huge problem for corporates operating there. In Zambia the minimum wage was dramatically increased last year without any public consultation or anything like that. The government has also stopped anyone from invoicing in US dollars, which had a big impact on the way people do business there.