By opening up the telecommunications and internet sectors to private investors, African governments have given them the upper hand in the lucrative ... data market. If the continent is to regain control of its digital economy, countries need to rethink tax and regulatory policies, analysts argue.
Before the pandemic, the firm was considering 50 possible investments. That has been reduced to 15 companies which have maintained strong balance sheets. COVID-19 has been “a natural filter for resilient businesses,” says Alsina. “It’s Darwinism at work.”
Supermarkets, he says, are a sound bet because “everyone needs essential goods”, especially as they are staying at home to eat. Meanwhile, “no-one is dropping out of school”, and companies which can deliver digital teaching are in a strong position. The most likely geographical areas for the new investments, he says, are Morocco, sub-Saharan Africa and Egypt.
In April, MCP closed its third African fund, Mediterrania Capital III. The fund attracted total funding of €286m, which exceeded the target of €250m. Investors include the French development financier Proparco, and the European Bank for Reconstruction and Development (EBRD).
- The eight-year fund targets small and medium-sized enterprises in north, west and central Africa.
- Investments so far include Moroccan construction company TGCC, Egyptian clinical lab services provider Cairo Scan and Tunisian food retailer Aziza.
- So far, 70% of the fund has been deployed in six companies, leaving room for two more investments, Alsina says. Investments will take account of the need to diversify the portfolio, he adds.
- Those two investments, each likely to be between EU20m and EU30m, should be made in the first half of 2021, or the end of 2021 at the latest, Alsina says.
- That would be in line with the fund’s original four-year timeframe to complete its investments.
This is no time to be looking for a bargain, says Alsina. “Good companies remain expensive,” he adds. “There’s no concept of buying cheap. We don’t want companies which need a capital increase to survive.”
The danger is that everyone will be chasing the same types of investments and push prices even higher: technology conglomerate Naspers, Africa’s biggest company, says it has a war-chest of $8bn to invest, and will be considering educational start-ups.
Local presence will be key for smaller funds. The pandemic has been an opportunity to get closer to portfolio companies, says Alsina, who is based in the Maltese capital Valletta. The firm has offices in Casablanca, Algiers, Cairo and Abidjan.
- Being local has meant that the firm has been able to keep directly monitoring its investments through masked, face-to-face meetings, says Alsina.
- The pandemic has led to a much stronger focus on reviewing balance sheets, liquidity and overdraft facilities.
- MCP has broadened the use of the “cash-burn ratio”, a measure of how quickly a company is consuming cash, and for how long it can keep doing so.
The article continues below
Get your free PDF: COVID-19. How Africa can navigate the pandemic
Leaders of all stripes are scrambling to contain the fallout.
Complete the form and download, for free, The Africa Report’s COVID-19 How Africa can navigate the pandemic. Get your free PDF by completing the following form
MCP’s construction companies have dealt with the crash in hospitality by demanding an advance from clients in the sector in order to keep building.
If the customer can’t make the payment, then construction isn’t being allowed to continue, says Alsina.
Private-equity funds that can monitor the financial strength of companies on the ground will be the best placed to emerge from the crisis.
Understand Africa's tomorrow... today
We believe that Africa is poorly represented, and badly under-estimated. Beyond the vast opportunity manifest in African markets, we highlight people who make a difference; leaders turning the tide, youth driving change, and an indefatigable business community. That is what we believe will change the continent, and that is what we report on. With hard-hitting investigations, innovative analysis and deep dives into countries and sectors, The Africa Report delivers the insight you need.View subscription options