AfricInvest - Part 1

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25 Years AfricInvest
Creating a Private Equity Ecosystem in Africa

AfricInvest is celebrating its 25th anniversary. Having raised over over EUR 1.2 billion for its funds, the company boasts more than 150 investments across 25 African countries, making it one of largest private equity firms of Africa.

Twenty-five years ago, the private equity industry was virtually non-existent in any African country, except for South-Africa where private equity emerged as an asset class mid-1980s. The banking sector on the continent mainly served multinationals and large locally-based companies. Access to finance for Small and Medium sized Enterprises (SMEs) was minimal and interest from private equity investors very limited.

In 1993, three young Tunisian entrepreneurs had a dream to start their own business. They saw a future for private equity funded locally in Tunisia. Coming from engineering and auditing backgrounds, the men were new to private equity. They were eager to learn and to make a contribution to their country’s development, and figured that private equity investments, in combination with a hands-on support approach, could be a means to that end.

It was at this moment in time that they came across FMO Investment Officer Tunisia Mr. Ben Zwinkels. He was impressed by the drive the three gentlemen possessed and assessed that their local knowledge and pragmatism was exactly what FMO needed to accelerate investments and development in the region. In 1994, the three entrepreneurs started Tuninvest, a private equity fund for Tunisian businesses. Later, FMO stimulated the partners to go ‘pan-African’ and expand to the Sub-Saharan Africa markets, Tuninvest became AfricInvest. Since the start, 18 funds have been established. FMO partnered with the founding partners in most of them.

 

AfricInvest Founding Partners Aziz Mebarek, Ziad Oueslati and Chairman Ben Zwinkels

2019, AfricInvest’s silver anniversary, presents the perfect moment for a deep dive into our shared history and, what turned out to also be the story of the creation of the African private equity ecosystem.

FMO interviewed two of the founding partners Aziz Mebarek and Ziad Oueslati, and Ben Zwinkels, former FMO Investment Officer and current Chairman of AfricInvest.

For more information, visit: www.africinvest.com

Exchanging local knowledge and networks

“Our introduction to Ben is where it really all began,” says AfricInvest founding partner Aziz Mebarek. “He challenged us. Tested our entrepreneurial spirit. He said: ‘FMO is stuck with some badly performing investments in Tunisia - a brick plant, poultry company and ceramic business - and maybe you can help me find out why these are nearly bankrupt.’”

After investigating for a couple of weeks, the young entrepreneurs told Zwinkels: “FMO might be the best in class when it comes to financing in emerging markets, but you are missing cultural proximity and local knowledge. You need people on the ground, who really know your clients, who are willing to learn your ways, and adopt your values.”

In a nutshell, FMO supported us to get into a position where we could leverage off the knowledge and track record of others, to get us started.

And so, the journey began. Ben Zwinkels: “We were the first European Development Finance Institution (EDFI) to get involved in the Tuninvest private equity adventure, because I trusted these eager entrepreneurs. I believed that with FMO’s contribution, they could raise funds to support the growing economy of Tunisia.”

FMO offered to pay for the young entrepreneurs’ training at a private equity company in France called SIPAREX. For 40,000 Dutch guilders (equivalent to EUR 18,151) from FMO’s technical assistance program, which is funded by the Seed Capital Fund from the Dutch Government (current MASSIF), the Tunisian partners learned the essentials of working in private equity. Aziz Mebarek: “In a nutshell, FMO supported us to get into a position where we could leverage off the knowledge and track record of others, to get us started.”

The challenges of starting a business in a non-existent sector

While training in Europe, the founding partners quickly started to raise money for their first institutional fund called Tunisie Sicar (total amount: EUR 2.3 million). It was quite challenging to attract institutional investors in an undeveloped market, with no real track record. Mebarek: “We raised our first fund with an IPO (Initial Public Offering) with no investments at hand and by selling our ’CVs’ in the local stock market. FMO took a leap of faith and invested EUR 0.2 million in Tunisie Sicar, and so did the French DFI Proparco.

Ziad Oueslati, Founding Partner of AfricInvest: “It took quite some time for people here in Africa to realize that with private equity, investors can add value to a company. If you do it well, you create a win-win situation: helping businesses grow in a sustainable manner, while creating profitable exits for shareholders and long-term deep positive development impacts.” Mebarek: “We had to explain it again and again. Creating the market cost an enormous amount of work. After a presentation of two hours, prospective investee companies still wanted to know what would be our interest rate... They did not capture the concept that we weren’t another bank but equity investors with a hands-on approach.”

We’re still as efficient and pragmatic as we were in the beginning. We’re all still a bit Dutch in our entrepreneurial ways as well.

“Another challenge was the size of our own business when we started,” says Oueslati. “We had to do so much work with such a small team. In the end, this really shaped AfricInvest’s future: we’re still as efficient and pragmatic as we were in the beginning. We’re all still a bit Dutch in our entrepreneurial ways as well. We often don’t agree at the start, but have an open discussion and end up somewhere in the middle. We believe this approach (the Dutch call it ‘Poldering’) gives our company the quality we want to stand for.”

Environmental, social and governance standards: from burden to profitable asset

FMO has been instrumental in fostering emphasis on environmental, social and governance (ESG) standards with AfricInvest. Mebarek: “Before we talked to FMO’s ESG officers, we saw these requirements as something to comply with, a box we had to tick. But when Walter van Helvoirt came to visit ten years ago, he helped us to see the treasure we were sitting on. He helped us realize that we could further boost our profits through increasing our impact and reducing our footprint and that of our investee companies. By, for example, investing in businesses’ resource efficiency, we could not only help them become cleaner and healthier, but also help to reduce their costs in the long term.”

By investing in businesses’ resource efficiency, we could not only help them become cleaner and healthier, but also help to reduce their costs in the long term

“One of the first investments we worked on together was Vitalait, a dairy company from Tunisia, which was using much more water than its benchmarks in Europe to clean its processing machines. By adjusting the cleaning process – which improved the hygiene conditions of the production process and reduced the waste – the company’s products became healthier. At the same time, they were able to save cream waste and reduce water usage, which increased Vitalait’s profit.”

For more AfricInvest impact stories, you can read the firm’s Impact Report 2018.

Growing African businesses, adding value, creating jobs

“What we are most proud of is our 25 years of contributing to job creation in our region,” says Mebarek. “Helping to create sustainable jobs gives people dignity, hope and increases welfare. Also, we’re enabling businesses to make affordable products and services for our people in a sustainable way. Thus, we raise the level of our country’s knowledge and development – slowly moving away from poverty.” Oueslati adds: “We’ve created a company that we hope will exist far beyond us, for at least another 25 years. We’re proud to be an African company which is having a lot of impact on the development of the continent while generating healthy returns.”

Helping to create sustainable jobs gives people dignity, hope and increases welfare.

Mebarek: “An investment that I’m personally very proud of is a client called Elephant. This is a rice importing company in Nigeria. It nearly went bankrupt a couple of years ago because it faced five challenges at the same time: currency depreciation, the Nigerian government deciding to forbid the import of rice (Elephant’s core business), an enormous decrease of purchasing power, smuggling issues at the border, and challenges in its fertilizer business. So, we advised Elephant to start an agribusiness company from scratch, and to empower local farmers to grow rice (instead of importing the product) and thus created one of Nigeria’s first domestic rice production companies. We’re in the middle of the journey – but we’re already making a difference for many farmers and their families in Nigeria. We’ve fought for the business at a time when many other businesses left Nigeria. And we’ve built our own brand in that market.”