- By Region
Rod Evison is home in the UK, fresh off a flight from Accra, Ghana’s capital, where he has been attending a conference held by the African Venture Capital Association, an annual event started in 2003 and now attracting more than 300 delegates from 30 countries.
As managing director for Africa at CDC Group, the UK government-owned development finance institution, he is responsible for CDC’s fund investments across Africa and Latin America.
“The two-day conference was well attended and vibrant – a wide range of people from all over Africa were there, as were interested investors, and those who have invested before in Africa,” he says.
Africa as a whole makes up 45 per cent of CDC’s investment portfolio and includes 67 funds, of which 37 were first-time fund managers when CDC backed them. “We have been in Africa for a long time, but in the last few years our portfolio has grown in size and the number of companies that make it up has jumped,” says Mr Evison.
CDC’s African portfolio today includes investments in 438 businesses in sub-Saharan Africa with a total value of $1bn, and 108 of these are in the financial sector, with a value of $300m.
“Now we include direct equity investment as well as debt and guarantee products so we can sharpen the focus of our portfolio in the poorest regions and those areas where private equity finds it difficult because of the need for businesses of scale and top quality management,” he says.
Relaying the conference atmosphere, he says “those investors who have been operating in Africa for many years say you can get good financial returns as well as growth opportunities but there is an ‘execution challenge’ – infrastructure remains weak and human capital needs to be bolstered”.
Because there is a sense that “things can come at you” very fast, there is a need for “resilience in the business model” as well as “nimble and experienced management”.
Today, CDC is seeking to connect growing businesses in Africa with talented managers in developed countries, including those who are part of the diaspora, using its network and an informal approach.
Mr Evison has 20 years of experience with CDC, and has made many trips to the African continent during that time. The Cambridge-educated economist says: “My personal philosophy is that development is not about trying to change the world overnight, but about making things happen faster than they otherwise would do.”
Looking at opportunities in Africa for expatriates generally, Mr Evison points out that whether it is the financial sector or mining and oil and gas, companies operating in a global market “adopt a remuneration framework that works for them globally”.
In agribusiness, which has not had the same sort of commercial approach seen in other parts of the world – in south-east Asia for example – he says he has seen opportunities in countries such as Zambia and Tanzania that seek to take advantage of rising commodity prices.
Ethiopia, he says “has been very ‘statist’ in the past – but it is now beginning to recognise the contribution the private sector can make to the economy, and is making it more private-sector friendly”.
While there is much business focus on the “middle class opportunity” in Africa – around the market for consumer goods – he points out that there is a real opportunity among poor people as well, citing the mobile phone as proof.
“There is a fantastic need in Africa and the key is to turn that need into an opportunity – which is what great managers can do. There is growth in demand at the bottom as well as in the middle for those companies able to spot that demand,” he says.
Mr Evison gives two examples of CDC-backed successes in the mobile phone market: Celtel, the telecommunications company founded by Sudanese-born entrepreneur Mo Ibrahim, backed by Actis, then part of CDC; and MTN, a South Africa-based mobile telecommunications company, which saw an opportunity to expand in Nigeria and now has almost 40m subscribers in a country which has about 80m mobile phones. “When they get broadband, it will be through their mobile phones, not landlines,” he adds.
Mr Evison’s career before CDC included stints at Lloyds Bank, Bank of America and IFC – the International Finance Corporation, which is a member of the World Bank Group and helps the private sector bring better infrastructure to the developing world.
CDC recently advertised in the Financial Times for “PE, Debt and Fund Investment Professionals” for London-based investing in sub-Saharan Africa, but Mr Evison says: “We have many more people working for us through the portfolio companies and can see both the challenges and the virtues of working in the continent.” The businesses supported by CDC Capital provide 177,000 jobs.
Last month, CDC announced a $50m investment in 8 Miles LLP, a pan-African fund that will take equity stakes in promising businesses in a range of sectors. The fund is broadly “sector agnostic” but it has identified a wide range of target sectors.
These include agribusiness, financial services, consumer goods, energy and infrastructure, TMT and logistics and transport. In the last sector alone, the World Bank has estimated the African continent needs to spend $9.5bn between 2005 and 2015
Bob Geldof, the pop singer-turned campaigner and Kofi Annan, former UN secretary general, are backers and the name 8 Miles is inspired by the fact that Africa is just eight miles from the southern tip of Europe.
At the fund’s launch, Mr Geldof said: “Africa is now a continent of extraordinary business and investment opportunity. Private equity is one way to support the enterprise and dynamism of the people of the continent and help provide the jobs and skills that are needed. I’m happy that 8 Miles helps signal that Africa is seriously open for business.”