What do you guys think about Africa and its business opportunities?
November 18, 2022
by a searcher in Johannesburg, South Africa
There is no doubt that Africa is one of the world's most vibrant and fastest-growing economies. Yet, too many people think it is archaic when it comes to business opportunities in/with it's entrepreneurs.
I would like to know what is your opinion or view on doing business in, or with other companies and or/businessmen in Africa.
Excited to hear these answers!
from Harvard University in Vancouver, BC, Canada
There is undoubtedly great potential for search on the Continent...
There are many Sellers with standard (even more acute) succession issues; very good target companies, operating in fast growing industries (and countries), often developing 'leap-frogging' tech and services that can scale locally and be exported. There are fewer buyers in the lower-middle-market (lower entry multiples), and markets can be more fragmented and less competitive post-acquisition (faster growth). But, deals can be harder to find, smaller; messier to complete reliable due diligence on; harder to structure and close (debt is harder to raise and/or more expensive); operating complexity can be harder; talent can be scarce (harder to find and retain). There are also educational headwinds, where Searchers lose lots of time educating investors, intermediaries, Sellers etc. In short, many pros, but considerable cons.
It takes a pioneering spirit to go after the opportunity, but we believe there is sufficient potential reward to justify the risk. We've backed some of these pioneers, investing in many of the first traditional Search Funds on the Continent, including those in Ivory Coast (^redacted), Egypt (^redacted ^redacted, and soon, South Africa (^redacted). In the past, there has been one in Kenya (^redacted and Morocco.
This article provides a more thorough summary of pros/cons of Search in frontier markets (https://www.linkedin.com/pulse/evaluating-emerging-market-search-fund-opportunities-rob-leblanc/) - though written about all EMs, experience in Africa informs many of the insights.
from Columbia University in Cairo, Cairo Governorate, Egypt
I've done business in few African markets besides currently running my search fund in Egypt. There are loads of opportunities in many markets specifically the bigger ones like Egypt, South Africa and Nigeria. Other markets are smaller but you need good market insights to filter out the quality ones.
Happy to take the chat offline