As Trump tariffs around the world begin to bite, many have suggested that local businesses must seek to diversify.
For many businesses, securing investment from private equity funds to cover the costs of diversifying supply lines and establishing a footprint in target markets may represent an attractive proposition.
Ashford Nyatsumba (partner) and Clinton Mphahlele (senior associate) at Webber Wentzel advise that securing capital for private investment across Africa’s varied markets requires strategic vision and a firm grasp of the nuances of the African investment landscape as well as what drives capital allocators around the globe, given the continent’s unique regional considerations.
Ultimately, when raising capital, your objectives as asset managers and capital allocators must align.
They say the first step to ensuring alignment is choosing the best jurisdiction, based on the investor pool and objectives of the proposed investment vehicle, including the target region and nature of assets to be acquired or traded.
While holidaymakers may choose Mauritius for its beaches and warm weather, Africa-focused asset managers prefer it for other reasons, such as its tax efficiency, including its extensive double taxation treaty network extending across numerous African jurisdictions and recognition as a mature international finance centre, in particular following its removal from the Financial Action Task Force grey list in October 2021.
The two experts say limited partnership structures are generally preferred due to investor familiarity and their ability to provide limited liability protection to investors.
Other critical success factors include considering what protections investors expect and contrasting this with the rights the fund promoter requires to achieve success.
Also, remember that different countries have different local law requirements, which may enhance the investment proposition.
For instance, in South Africa, it may be beneficial to structure an investment vehicle as a BEE-compliant fund to secure more deals.
Governance is another huge point to consider, according to the duo, so know what licences are required to operate in your chosen jurisdiction because there will be attendant costs.
The primary goal of private equity funds is to increase the value of the underlying assets for the investors and sell for a capital gain.
Nyatsumba and Mphahlele say institutional investors expect the tried and tested, so always remember, “the wheel already exists; there’s no need to reinvent it”.
