A long-term Egyptian recovery in place since currency devaluation in 2016 can resume after the war between Russia and Ukraine ends, Mathias Althoff, ... partner at Swedish frontier markets investor Tundra Fonder, tells The Africa Report.
Colin Coleman, a South African who has spent more than 25 years in the banking sector, was the director of the sub-Saharan African subsidiary of the investment bank Goldman Sachs until January 2020. Laureen Kouassi-Olsson of Côte d’Ivoire, a former investment director of the Amethis fund, is currently at the head of Birimian, a long-term investment holding company dedicated to African brands.
The two African financiers intend to put their expertise in structuring financing and fundraising at the service of the board of directors of Arise Integrated Industrial Platforms (Arise IIP), having just joined its new advisory committee. Other members of this board include economist Carlos Lopes, the senior adviser to the CEO of Total Momar Nguer from Guinea-Bissau and Frenchman Bruno Delaye.
Recently restructured into three separate entities – Arise Ports & Logistics, Arise Infrastructure Services and Arise IIP – Arise is consolidating its organisation. Its IIP branch, dedicated to industrial parks, has taken over the management of the Zone Économique Spéciale de Nkok au Gabon and invested €200m in August 2020 in the Plateforme Industrielle d’Adétikopé in Togo. It has become the latter’s developer and manager. Arise IIP is also developing the GDIZ industrial park in Benin.
The creation of an advisory committee led by pan-African financial and infrastructure figures should help it find investors, structure its activities in the various industrial zones and optimise its sources of financing.
Convinced that “industrialisation is one of the engines of growth for the continent”, the two new advisers shared their views on investment in Africa.
You recently joined the Arise IIP advisory board. Why did you do so?
Laureen Kouassi-Olsson: I was drawn to the structuring role of Arise IIP, which is innovative in its approach and impact on the continent. In order to industrialise Africa, it is necessary to strengthen local capacities, create local industries, transfer technology and jobs.
Colin Coleman: The continent currently accounts for 17% of the world’s population, and by the end of the century two out of every five people in the world will be African. Yet today, only 3% of global GDP comes from Africa. This is unsustainable, it must develop economically. Furthermore, industrialisation will help Africa support its population growth.
Arise IIP, with its experience in industrial parks and promotion of value addition and exports in Togo and Gabon, is one of the entities that is at the forefront of industrialisation development and will contribute substantially to it.
How do you see the role of industrial parks such as those of Arise within the continental economic landscape? What can they bring in terms of integration?
Kouassi-Olsson: Until now, the economic growth of African countries has essentially been achieved through foreign investments. These have included development financial institutions (Proparco, IFC, AFD, World Bank, etc.) which intervened first in the public sectors and then very gradually in the private ones; private-equity players who arrived with hybrid financing in the private sector; and then a mixed dynamic, the public-private partnerships (PPP).
Arise IIP proposes something different, that the financial resources come from the continent as do the opportunities to be financed. We provide local financing to create industrial zones.
Coleman: I have just recently begun with Arise IIP, but I can already see that the group has the potential to help each country become more dynamic, to identify its strengths and weaknesses. How do we add value along the line? What infrastructure is required to extract the raw material efficiently, transport it and export it to markets in a competitive manner? Helping these countries identify opportunities to strengthen their economies and then implement them through this industrial process is very exciting.
What do you think is the best way to finance these industrial projects? Is the PPP model a necessity?
Kouassi-Olsson: Africa is in dire need of financial resources to ensure its long-term economic growth. Today, we are faced with fragile economies: some are dependent on commodity cycles (Gabon, Ghana, Nigeria, Kenya, Mozambique, etc.), and very few countries are fortunate enough to have a stable, long-term ecosystem.
As soon as there are difficulties with monetary stability, the financial resource becomes manna that has no value. So any actor who positions themselves as a long-term financier of initiatives that encourage development is welcome.
But the continent suffers deeply from a lack of infrastructure. How can private players establish themselves there sustainably and contribute to the development of its industry?
Coleman: The Shenzhen experience in China, or even Dubai, shows that there is a link between the success of industrial parks in special export zones and the incentives (tax, basic infrastructure, etc.) given by the government to attract operators.
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It is this kind of win-win environment that will help move Africa forward. I think it will take time, but within a decade there should be multiple industrial park-type activities and especially export zones.
In this context, what are the main challenges for investors in Africa?
Coleman: Opportunities for growth are greater in Africa than elsewhere. But investors’ portfolios will only be able to grow rapidly if the returns on their dollar commitments are significant. This is a fundamental part, along with risk reduction.
For example, groups like the pan-African MTN or Barrick in Tanzania have found themselves having to pay large regulatory fines and other taxes. They have had to share their success in these countries, so to speak. Rightly or wrongly, these situations represent a risk for investors.
It is therefore very important to put in place risk mitigation strategies in the countries where you operate. These include sharing local resources, opening up capital to national investors, procurement, etc.
Kouassi-Olsson: I would add an unavoidable challenge, that of long-term financial resources. It is very important that investors who are interested in the continent, which is constantly evolving, are not in the business of short-term deals. And that there is no distortion between the appreciation of risk and the return on investment.
And what about exchange-rate risks?
Kouassi-Olsson: Here again, there is no ideal solution for reducing them, but they can be mitigated. Firstly, by working on diversification. The more a player is present in areas with different macroeconomic drivers, the better chance they will have of smoothing the impact of currency fluctuations on their economic and financial activities.
Then, we must identify opportunities, resilient business segments that are not currently based in optimal locations. These include sectors whose activity will be the least impacted by currency fluctuations, such as those linked to exports, which bring in foreign currency and help to curb the fall in the balance of trade and currency exchange rates.
Finally, the last step is to take a long-term view. It is easier to smooth out macroeconomic risks when you have a long-term investment horizon than when you don’t.
Coleman: To use oil crises as an example, it is very difficult to obtain foreign currency to buy goods on local markets and maintain one’s value chain. So the availability of dollars is one thing, and foreign-exchange risk, such as the value of the local currency converted to dollars or other currencies over time, is another – but it is also a risk.
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