Private equity investor Mediterrania Capital Partners (MCP) is considering investments in supermarkets, health and education as the impact of COVID-19 whittles down the list of financially strong candidates, CEO Albert Alsina tells The Africa Report.
Coronavirus: Kasada Capital to invest $500m to reboot Africa’s tourism
Kasada Capital has attracted $500m in equity housed in the Kasada Hospitality Fund through which the company plans to deploy capital in 10 key cities, including Johannesburg and Cape Town, and around Sub-Saharan Africa.
“We believe, [having observed] what is happening with the COVID-19 crisis, … financing is needed for the sector to rebound in Africa,” explains Olivier Granet, the co-founder and the CEO of Johannesburg-based Kasada Capital Management, which is backed by French hotel group Accor and the Qatar sovereign wealth fund.
He should know, being a veteran in the sector, having served as the CEO of Accor Hotels Middle East and Africa. He oversaw a portfolio comprising more than 200 hotels spread across 30 countries.
However, the sector is fragile and fragmented.
In Sub-Saharan Africa alone, 78% of hotels are closed. For a number of the hotels, reopening will be a herculean undertaking. The road to recovery and the return to some semblance of normality will be aided by two factors, says Granet.
First, collective solidarity and support for relief efforts around the health crisis underpinned by the distribution of adequate personal protective equipment.
Second, macroeconomic measures and support packages that the region has negotiated with the International Monetary Fund (IMF).
“I believe the African Union and the four [special envoys] … will be successful in negotiating with the IMF for most countries,” Granet tells The Africa Report in an interview.
Once the macroeconomic fundamentals are in place, Kasada sees itself playing a meaningful role providing support in the form of capital.
Recovery will be gradual and start in the domestic and regional market.
It is a process that will have to be carefully managed and facilitated adequately. Should the hospitality and tourism value chain and supply chain get it right, this will help build confidence among travellers.
That will require some capital expenditure on air-conditioning, labels and testing to ensure establishments meet health standards and are safe for guest occupancy.
Crisis could open the way to solve old problems
The global health crisis could also pave the way for a fresh perspective on an old problem and conversation: the thorny issue of visas in Africa and beyond once the dust has settled.
Around the world, the sector supports an estimated one in ten jobs and contributes 10% to global GDP, making it the backbone of the international economy. In the past five years, hospitality and tourism were projected to have created one in every four jobs globally.
But along came the coronavirus.
Now, talk has turned to job preservation in the immediate term for one of the hardest-hit sectors by the global pandemic. The health crisis has put the brakes on worldwide travel and resulted in most hospitality establishments closing their doors to observe national lockdowns.
“We are optimists, [and] we are realists,” says Granet. He views this as the ideal time to discuss visas, which enables travel.
“Everyone realises the importance of the hospitality and tourism sector. If you have a look at the … job losses in the US, almost 40% [were] in the hospitality and tourism sector,” adds Granet, whose company is watching developments pertaining to COVID-19 around the continent, is eager to contribute to a rebound.
Investment case for Kasada
Kasada is eager to spend in Abidjan, Accra, Cape Town, Dakar and Johannesburg, where it has spotted a number of high-potential opportunities. Nairobi and Addis Ababa are also on the company’s radar, says co-founder and chief investment officer David Damiba.
Damiba is a veteran deal-maker with 25 years of experience. His specialities include Africa fund management, as well as mezzanine and structured credit. He was previously a partner at Helios Investment Partners, a private equity firm headquartered in London.
“We are starting potential greenfields in South Africa. It’s early stages. As you can imagine, the economic impact and the shock of COVID-19 is going to have an impact on our strategy. In some ways, we are flexible in nature,” says Damiba.
“We can do a lot in terms of investing … in existing hotels,” he adds.
The major cities in Southern and West Africa provide compelling cases for investment.
“If you look at Abidjan in terms of the country’s economy, Côte d’Ivoire is one of the fastest-growing economies in Sub-Saharan Africa. It … will still have some contraction because of COVID-19, but won’t go into a recession in 2020,” he says.
The country is still playing catch-up in terms of infrastructure and supply of hotels. Furthermore, it is the growth capital of the CFD zone.
Since 2007, Accra has experienced tremendous growth. Most importantly, Ghana’s economy has diversified from its reliance on cocoa and gold. Oil has now come into the mix, making Ghana an attractive prospect for international investors from a risk appetite point of view.
Conditions on the ground
While investors such as Kasada Capital are weighing where to deploy their capital, South African unions in hospitality and tourism are grappling with job losses and uncertainty.
“Our members have been laid off,” Mayoyo Mngomezulu, the Food and Allied Workers Union (Fawu) general secretary, told The Africa Report last week.
“Even if COVID-19 can stop now, this is one of the sectors that might not come back as normal anytime soon until six months or even a year [to] two years,” says Mngomezulu.
In Limpopo, where some of South Africa’s most exclusive game lodges are situated, companies have closed their doors.
In Mpumalanga, home of the Kruger National Park, a popular tourist attraction, Fawu negotiated packages for its members.
“We didn’t have a choice,” admits Mngomezulu, “but [the packages had] a clause saying if … [a] company comes back, the same employees will be taken.”
“It’s … [the] impact of COVID-19 on the economy and contribution to unemployment,” he adds.
The South African Commercial Catering and Allied Workers Union (Saccawu) is pinning its hopes on the resumption of domestic flights, which started operating this week, says union official Mike Bonile Sikani.
“We also want the sector to be careful, so that we do not risk more lives as a result of a rush into reopening,” Sikani told The Africa Report last week.
This perspective is in line with Granet and Damiba’s view that recovery in hospitality and tourism will start in the domestic and regional market. Albeit, cautiously so.