Saturday, October 25, 2008

Diverse Investment Opportunities Springing Up Across Africa

Investment banker says ongoing reforms in Africa invite investment
By Charles W. Corey - Bureau of International Information Programs, U.S. Department of State

Washington - Significant, diverse investment opportunities are springing up across Africa, where change is occurring at a faster pace than many realize, says a prominent U.S. investment banker.

Thomas Gibian, chief investment officer of Emerging Capital Partners, emphasized that point at the 2008 U.S.-Africa Infrastructure Conference, "Connecting the Continent." The October 6-8 conference, the third of its kind, was held in Washington and was organized by the Corporate Council on Africa.

The investment situation has expanded in many places across the continent, Gibian said. "We have just really touched the surface."

"The challenge for all of us is to understand that Africa is changing much faster than our perceptions of Africa," he told a conference workshop on private equity opportunities in Africa.

"It is really necessary - particularly for Americans - to get out of the echo chamber of what we hear, think and are exposed to through the media about Africa and get some altitude and look at Africa as it is - a place that is very, very quickly reforming."

Gibian said the reform process in Africa is not a recent development. "Africa has been reforming through the whole decade, but we are approaching a tipping point as to what that really means on the ground for ... investment opportunities in African businesses," he said.

"Sustainable businesses, world-class businesses that are governed the way you would expect ... that practice transparency and that really emulate the kind of values and expectations that we have regarding [leadership] succession, independence of directors, independent audit committees," increasingly can be found operating across Africa.

To illustrate his point about the importance of reforms, Gibian recalled his days in Hong Kong in the mid-1990s, when he was serving as a managing director of the EMP Global Asia Fund, which managed almost $3 billion in investments in China, India, South Korea, Malaysia, Indonesia, the Philippines, Taiwan and Thailand.

"There was essentially, at that stage, zero private equity happening in China because there was no private property. It was a communist country so you did not have title to assets," he explained. "That was 1994-95. Last year, $30 billion was raised for private equity space in China, so reform matters. Reform actually occurs and has a potent effect."

A similar situation was found in India, he said, where the new century ushered in reforms that now are common in emerging markets: telecommunications reform, banking reform, insurance reform, pension reform. Such reforms, he said, may not have been perfect and may not always have gone far enough. "But enough that you could get real traction in the India private equities base," he said.

The same types of reform now are occurring in Africa. "You can track the trajectory of those reforms and the impact that it is having on the ground in all of those same businesses, plus natural resources," and other business areas that up to now have not been considered likely investment candidates, like health care and pharmaceuticals, he said.

Factors benefiting Africa are its close proximity to Europe, affordable land, abundant rainfall and labor, he said.

Speaking about his current venture, Gibian said ECP has been in business since 2000 and has raised more than $1.5 billion with 33 investments across Africa in more than 40 countries. Gibian said his company prefers to invest in pan-African and regional companies. ECP operates six offices in Africa, a headquarters in Washington and an office in Paris.

ECP now believes that Africa is "far enough along in its reform process," Gibian said, "in its key countries such as Nigeria, Ghana and Tanzania, to provide meaningful and working examples to other nations."