Increasing Capital Flows to Africa Conference

Increasing Capital Flows to Africa Conference

“Strategic Partnerships and Alliances in Private Equity

in Africa”Mark JenningsManaging Principal Zephyr

Management Africa, and Chairman African Venture Capital Association

30 September 2004

Increasing Capital Flows to Africa: September 30, 2004

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TABLE OF CONTENTS

I. Overview:

Zephyr Management

African Venture Capital Association

II. Strategic Partnerships and Alliances: Framework

Fund Management LevelInvestee Company LevelObservations

III.Contact Details


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I. Zephyr Management

• Zephyr Management founded 1994 By Thomas C. Barry

• Focus on emerging markets and niche investment opportunities – private equity/investment funds

• “Invest where Reality is better than Perception”

• Involvement to date in 13 private equity/investment funds; around US$800 million; nearly 50% of business in Africa


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African Venture Capital Association (AVCA)

• Representative body of the private equity and venture capital profession in Africa.

• Current membership of around 50 institutions.• Fourth Annual Conference, held in April 2004 in

Morocco, attracted 250 delegates. Next conference in Nairobi in 2005.

• Initiatives include: quarterly newsletter, training, guidelines on valuation and reporting, annual directory of members, research publications, lobbying to “create an enabling environment”, enhancement of website.


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II. Framework for Partnerships/Alliances in Private Equity

• Investors• Advisory Committee

• Partnership/alliances with - other fund managers - institutions - specialists

• Strategic partners (growth & development)• Strategic acquisitions (exit)• Coinvestment

Private Equity

Fund

Private Equity

Fund

Investee

Companies

Investee

Companies

Fund ManagerFund Manager


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Fund Manager Level : Examples of Partnerships/Alliances

Zephyr examples:– South African Capital Growth Fund (Brait)– Capital Alliance Private Equity (Capital Alliance Nigeria)– Pan African Investment Partners & Pan Commonwealth

African Partners (Kingdom Holding)

Other fund-manager examples:– AfricInvest Fund (Tuninvest – Tunisia, Morocco, Algeria;

IBTC-Nigeria; Fidelity Partners – Ghana; Cauris – Togo; Cenainvest – Cameroon)

– South Africa Infrastructure Fund (Old Mutual Asset Managers – South Africa, Macquarie Bank - Australia)

Other examples:– Relationships with specific institutions e.g. accounting

firms, financial institutions– Relationships with specialists e.g. sector specialists

(energy, banking, mining)


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Benefits of partnerships/alliances

• Complementary skills and resources • Extended network; deal sourcing• Local presence and local knowledge• Product specialisation• Combined track record• Innovation


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New Pan-African Private Equity Fund

• Pan African Investment Partners (PAIP) and Pan Commonwealth African Partners (PCAP) - US$100 million in commitments- Expansion funding to create multi-country African

businesses• Strategic Partnerships - Variety of roles: funding, co-investment, network - IFC, FMO, DBSA, Kingdom Holding - Joint management company : Kingdom Zephyr Management Company - Exploring co-investment, and other,

opportunities to work with other fund managers across Africa.


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Kingdom Holding Company

• Kingdom Holding Company (KHC) is an investment vehicle headed by HRH Prince Alwaleed Bin Talal Bin Abdulaziz Al Saud, member of the Saudi Royal family, private entrepreneur and international investor

• Kingdom Holding is estimated to have assets of US $24.6 billion and a capital base of US $19.7 billion

• Kingdom Holding has a wide range of investments in banking, telecommunications, broadcasting & media, entertainment, hospitality, computers and electronics, agriculture, restaurants, upscale fashion, retailing, supermarkets, tourism, travel, and automotive manufacturing.

• Selected current holdings include:– CitiCorp 4.9%– Time Warner, approximately 1%– Apple Computers Inc., 5% – Canary Wharf, London, approximately 2%– Cal Merchant Bank, Ghana, 14% – Disneyland Resort and Theme Park, Paris, 17.3% – EcoBank, 10%– George V Hotel, Paris, 100%– Hewlett-Packard (HP), approximately 1%– Kodak Corporation, 1% – Senegalese Telecom. Co. (SONATEL), 10%


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Improvements in Telecommunications

&

Transportation Infrastructure

Improvements in Telecommunications

&

Transportation Infrastructure

Globalization

&

Market Liberalization

Globalization

&

Market Liberalization

Privatizations in Critical Industry

Sectors

(Financial Services, Telecom,

Transportation, Energy, Media, etc)

Privatizations in Critical Industry

Sectors

(Financial Services, Telecom,

Transportation, Energy, Media, etc)

Political & Economic Africa Integration

Initiatives (NEPAD, etc.)

Political & Economic Africa Integration

Initiatives (NEPAD, etc.)

Improved Economic & Business Environment for Capital Investments

Improved Economic & Business Environment for Capital Investments

Convergence of Favorable Macro Factors in Africa are Facilitating Private Equity Investment


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Industry Company Domicile Expanding To(No. of African countries)

Telecom Celtel (MSI)GS TelecomVodafone, VodacomFrance TelecomMTN, MTN Nigeria

NetherlandsNigeriaUK, South AfricaFranceSouth Africa

Pan-Africa (13)Pan-Africa (7)Pan-Africa (3)Pan-Africa (10)Pan-Africa (6)

Financial Services African Banking Corporation Holdings EcobankBank of AfricaABSAStanbic

Botswana / ZimbabweTogoMaliSouth AfricaSouth Africa

SADC (6)West Africa (12)West Africa (6)Pan-Africa (4)Pan-Africa (22)

Pharmaceutical T3ARanbaxy

EgyptIndia

Pan-Africa (sales in 17)Sub-Saharan Africa (3)

Aided by Improved Investment Climate, Many Firms are Expanding into Regional/Pan-African Businesses


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Investee Company Level

Examples of:

- Strategic partnering:• Freeplay with Coleman (Branding and Distribution)• MTN Nigeria/ MTN (Operating and Equity partner)

- Strategic exits:• Grey Security Services to Securicor

- Coinvestment:• Celtel (Zephyr/ZMAIF, CDC, EMP/AAIF, IFC, FMO,

DEG, Citigroup, Bessemer, Capital International)


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Benefits of Partnerships/Alliances at Investee Company level

• Strategic and operational skills that partner brings to investee company

• Market access (for both partner and investee company)• Financial capacity of partner• Local presence and local knowledge of investee company• Exit options for investee company shareholders – e.g.

private equity fund (but perhaps also constraints)• Coinvestors can bring - financing capacity - complimentary skills - geographic spread: local knowledge and expertise - network – to recruit managers, raise additional funding,

etc


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Conclusion

Making partnerships/alliances work can be challenging:• Need to establish clear goals and objectives• Communication a priority• Culture fit and chemistry is critical• Flexibility required – needs can change and needs can

differ

However• Real benefits achievable through partnerships/alliances

with others• Need to look not only internationally but also within

Africa for such partners


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Contacts

Kingdom Zephyr Africa Management Company

Mark Jennings; Johannesburg, South Africa• Phone: +27 (11) 268-9402• Fax: +27 (11) 268-6917• Email: [email protected]

Runa Alam; Washington, DC, USA• Phone: +1 (202) 342-7095• Fax: +1 (202) 342-7098• Email: [email protected]

Kofi Bucknor; Accra, Ghana• Phone: +233 (21) 769-725• Fax: +233 (21) 769-727• Email: [email protected]

African Venture Capital Association Mark Jennings (Chairman – as above)

Sanda Oumarou (Secretary General, Cameroon)• Phone: +237 223 1898• Fax: +237 223 1911• Email: [email protected]• Website: www.avcanet.com

Economy & Finance

Increasing Capital Flows to Africa Conference