The bulk of East Africa’s investment opportunities are in private equity, says Centum CEO

James Mworia is the CEO of Centum, a Nairobi-based investment company with a portfolio valued in excess of US$170m. Centum’s three business units are: private equity, listed equity and real estate. How we made it in Africa’s Dinfin Mulupi chats with Mworia about the firm’s strategy, challenges and future plans.

James Mworia

At 34 you are one of Africa’s younger CEOs of a listed company.
I never sit back and think I am young. I am glad to have this opportunity to make an impact. It is important to invest in yourself because as a young person you have a lot of potential and you can impact not just your life, but the lives of many people. Every day ensure you learn new things and explore new horizons. I got here because I asked for opportunities to do different things. When people are employed the perception is that “I will work hard when I’m on my own”. The truth is you are working for yourself because you are investing in yourself, building your capacity and track record.

Can you give us some more insight into what Centum does?
Centum is a listed investment company that is 45 years old. It essentially provides its shareholders with listed access to a portfolio of high quality but otherwise inaccessible opportunities. We are listed on the Nairobi Securities Exchange (NSE) and the Uganda Securities Exchange. The inaccessible investment opportunities we invest in include private companies, which are essentially not listed on any stock exchange, and real estate. We also have about 12% of the portfolio invested in fixed income securities across the continent.

Within the private equity portfolio our investment philosophy is to invest in companies in Kenya and the region that fulfil demand for basic goods and services and where there is little scope for import substitution. We invest between $2m and $20m. Our principle investments are in beverages and financial services.

In real estate we have two principle investments. These are the Two Rivers project in Nairobi, and Pearl Marina Estates Limited, set on the shores of Lake Victoria in Uganda.

We are seeing the entry of more private equity firms in the region.
I think the attraction of private equity is that there are very few companies that are listed in the region. This means that the bulk of companies and opportunities are actually in private equity. For instance, in 2003 we invested in UAP Insurance and this year we got other investors to put in money and they came in at ten times the value we did in 2003. In 2009, we acquired 22% of Carbacid, a manufacturer and distributor of natural liquefied carbon dioxide in the region. We sold those shares last year and made two times what we had invested 24 months earlier. As an investor in private equity you actually play a role in value creation, it is not passive like listed equity.

Describe some of the challenges you face in running this business.
This is a complex company run by a very lean team of 15 professionals spread across the three businesses. There are practical challenges on how we execute the business. It is getting even more complex as we spread across different countries.

There is general volatility in the market. 2011, for instance, was a very challenging year because within four months the cost of borrowing more than doubled. We had to move very swiftly to preserve shareholder value. The other challenge we face is communication in terms of explaining our business and to be understood by the investing community.

Where do you see Centum in five years?
I see us having a very strong private equity business, probably an additional two or three funds that we will have raised. My vision is for Centum to be one of the largest private equity funds in the region and the most successful. We have begun strides towards that. In three years I also see each of our three business lines become larger than what Centum combined is worth today.