Africa funds overlook prospects in smaller states
Wed Aug 31, 2011 By David Lewis

DAKAR (Reuters) - African investment funds are often skipping non-Anglophone countries due to perceptions of French post-colonial dominance there, but in the process, they are missing opportunities across a range of smaller, reforming nations, a regional fund said.

Agribusiness, financial services, light manufacturing and logistics are key target sectors for the Advanced Finance and Investment Group, which has a $72 million fund with investments ranging from Morocco to Angola, via a clutch of nations in West and Central Africa in-between.

Papa Madiaw Ndiaye, the group's chief executive, said while the dearth of competition allowed the current batch of Africa-focused funds to stretch themselves thin, competition would soon heat up, favouring those with focus and boots on the ground. "When private equity is in its infancy, you can afford to do that ... With more competitiveness, people will get sharper," Ndiaye told Reuters in an interview in Dakar.

Recent and upcoming investments are in nations including Mauritania, Chad and post-conflict Ivory Coast. "We wanted to show that we can succeed in a region people say is not ready for (an) Anglo-Saxon business such as private equity. This place can do well," Ndiaye said.

Ndiaye and Patrice Backer, the chief operating officer and fellow former JP Morgan trader, run the generalist growth and expansion Atlantic Coast Regional Fund, with investments ranging from $3-$15 million. Backer said funds had so far focused on Anglophone nations like South Africa, Nigeria and Kenya due to perceived French dominance elsewhere, not just the size of their economies. "People condition themselves not to do business (in former French colonies)," he added.

Earlier this month, the fund invested $14 million in a $50 million deal alongside Standard Bank to support a partnership between agribusiness firms in Ghana and Ivory Coast. The sector is as the fund's "most exciting" as it exposed it to food processing, Africa's swelling and consuming middle classes and, potentially, firms buying land to grow produce food, especially for local markets, the pair said.

Although focusing one of Africa's most turbulent regions, Ndiaye said there were very few countries that he would steer clear of and said governments were generally cutting back on red tape and responding better to the needs of business. "Many are learning to step back in certain areas like loosening the regulatory environment ... To me it is getting out of the way," he added.

Stopping short of predicting an Arab Spring south of the Sahara, Ndiaye said African governments had been jolted into recognising that they had to deliver more for their people. "The advantage of the region is that people are ahead of their governments so when (the governments) catch up, there is going to be an unlocking, catapult effect," he said.