beyondbrics

When they are not ignoring Africa altogether, big-hitting institutional investors regularly bemoan the continent’s illiquid small markets, political insecurity and shaky regulations, or fret that despite pretty decent returns little or nothing would make them touch the continent right now.

But as Africa’s economies grow and its nascent middle class starts spending into the trillions of dollars, with all the accompanying developing of banking, insurance, construction, retail and more, it is time for catch-up. Nevertheless, some simply can’t fathom the best route in, be it through stock markets, private equity or even property.

“I don’t think much is missing other than time,” Janusz Heath, managing director of Capital Dynamics, a Swiss private equity group with more than $20bn under management, told a room of Africa private equity specialists gathered in Nairobi on Tuesday.

On that reading, many in the room have long since time-travelled: some started investing in everything from Africa’s fledgling stock markets to pumping millions into its family-owned businesses years ago.

Richard Honey, investment principal at Investec Asset Management, which has $40bn invested in Africa, is a fan of the 1,500 or so companies listed across the continent’s 20 or so stock exchanges as the best route in. The company has put $1.2bn into African stocks outside South Africa. “There is an investable universe out there,” he told the SuperReturn Africa 2011 conference.

Not shy of a risk, he leads the company’s new Zimbabwean Recapitalisation Strategy, which launched this year. Thanks to a private family office, he told beyondbrics, the company has $20m to play with and is set on raising a total of $80m to $100m to put into Zimbabwe, including up to 40 per cent for its stock market. “We think we’ve got some potential in the underlying market, we see it as a special situation,” he said.

For Okey Enelamah, CEO of African Capital Alliance, private equity is the clear-cut winner. “The Africa story is a good story; most of that growth is not listed, a lot of opportunities are outside the stock exchange,” he said, adding that his fund long since exited all of its initial 11 investments save one, which was still a good earner.

David Morley, head of real estate at Actis, pointed to the dearth of shopping malls across a continent increasingly caught up in retail of local and global brands. Actis, which has put close to $300m into African real estate outside South Africa, is investing in Ghana’s first “Grade-A” office block, all sleek lines thanks to an Italian architect.

In Kenya, shopping malls are the name of the game. Actis has already sold out of its $20m Junction shopping mall, which houses everything from whisky bars to sushi restaurants in one spot in Nairobi, for more than three times its initial investment. Now it is planning another Kenyan real estate project, its third: another shopping mall on the Nairobi road out to Thika. “The opportunity is clear,” he said.

While India has 60 real estate investment funds, sub-Saharan Africa excluding South Africa has only three. It might not have much in the way of liquidity, but sub-Saharan investors see plenty of long-term growth on the go.

Related reading:
Kenya to India: exporting the mobile money model, beyondbrics
Guest post: Banking for the poor, beyondbrics
Tullow Oil set to get Uganda stake sale nod, FT
Audio slideshow: Kenya’s middle class squeeze, FT