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Once the preserve of banks and large multinationals, Africa is being opened up to private clients through a range of new platforms.
Africa has always been a place of opportunity. While the continent has historically been on the radar of multi-nationals, banks, large private equity funds and government development institutions, we are seeing a new wave of private businesses, local private equity funds and other international investors such as philanthropists, becoming deeply involved in the 'Africa Rising' story.
The continent has become more accessible due to a good track record of historical investors, the return of the African diaspora to the continent and also, the extraordinary economic growth of countries such as Côte d'Ivoire, Tanzania and Nigeria, all of which increase the number of investment opportunities.
It is unhelpful to think about Africa as one homogenous place; this is a common problem for many people doing business there for the first time. It is made up of 54 countries, homes approximately 15 per cent of the world's population, and has over 1,000 spoken languages - so broad generalisations can be misleading.
However, we are seeing a shift towards modern urbanisation in the fastest growing economies in Africa, for example Lagos (Nigeria), Dar es Salaam (Tanzania), Luanda (Angola) and Abidjan (Côte d'Ivoire). This has allowed us to focus on the needs of our clients, who have increasingly common challenges in light of the growing middle class across Africa, as a result of the fast growing economies.
There are a number of platforms, vehicles and investment managers giving investors the ability to get exposure to Africa from a more passive standpoint, through pooled investment products or funds of fund structures. For investors wanting to make a direct investment into an African business or project, the considerations are different because of the proximity to the actual deal.
On one level, the same rules apply in Nigeria or Rwanda in terms of investment appraisal, risk mitigation and deal execution, as would apply in the Netherlands or the UK. However, greater care should be taken on some of the things that may generally be taken for granted. Issues such as validity of title to assets, enforceability of contracts and judgments and protecting rights of ownership need to be considered carefully.
While working in the region with private individuals, development institutions, listed companies, banks and private equity funds over the last two decades, we have identified the following key considerations:
This article was originally published in Private Client Adviser, March 2016
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