CAPEX 2018: Investment Trends from East Africa’s Rising Finance Professionals (Article 1 of 2)
This article is a summary of the event organized and hosted by I-DEV, EAVCA and Bowmans on August 30, 2018 at the Azure Hotel in Nairobi. CAPEX is the 1st conference focused on featuring the perspectives of young finance professionals in East Africa, and providing them with speaking, mentoring and startup coaching opportunities.
East Africa’s Rising Finance Professionals Take the Stage
CAPEX convened nearly 200 young finance professionals from across East Africa to share their perspectives on the hottest trends and expertise in investing in the region. CAPEX was generously sponsored and supported by key leaders in the SME and startup as well as investment ecosystem: The German Cooperation, GIZ, Africa Capital Digest, Village Capital, KFW/ DEG, MoveMeBack, responsAbility and KPMG. Many of these parties were also generous to offer career-building perks to the participants to help them on their career journey!
CAPEX was developed and coordinated by the Associates and Senior Associates at I-DEV Africa, with the help of partner organizations. Specifically, it focused on offering young rising finance professionals from East Africa- in their 20s and 30s- to gain valuable professional skills by leading and speaking on panels, mentoring startup founders, and receiving coaching from senior investment professionals. Below are some highlights! Also stay tuned for CAPEX 2018 video interviews and content!
Challenges & Opportunities in the East Africa Investment Landscape
This panel was moderated by David Maina, Investment Director of AlphaMundi. This panel brought together Winnie Karanja, Director of Lion’s Head Global Partners; Mark Karake, Managing Partner of Impact Africa Fund; Dan Kimani, Associate at responsAbility; and Kigen Chelimo, Manager of Arcadia Growth. Speakers discussed the broad opportunities for investment in retail, clean energy and more, saying the region is rife with opportunity, yet companies still require significant pre-investment growth and capital raise support to clarify their growth strategy and case for capital required.
The opportunities are high, yet some too early stage, requiring significant pre-investment growth and capital raise support.
Identifying High Potential Investments
This panel was moderated by Mutembei Kariuki, Regional Coordinator, Make-IT in Africa/GIZ, and included speakers Dennis Onyango, Senior Portfolio Associate, Acumen; Nakul Sharma, Senior Associate, I-DEV; Tina Nyamache, Partnerships Associate, Village Capital; and Faith Chege, Associate, Factor[e].
Yet, there are high potential investments to be found…as long as you understand the local market context, informal and formal industry opportunities. Building relationships with trusted and knowledgable advisors and partners can also save valuable time and energy to source deals.
Speakers further elaborated by saying that understanding high potential investments requires a keen and deep understanding of local formal and informal markets and trends; this is why you are seeing more investors and advisors close to the ground, closely attuned to the more subtle social, political and sector trends. The greatest high potential investments have often come through trusted advisors and the networks built in the local ecosystem.
Others discussed organizations that are taking a sector and portfolio approach to sourcing pipeline, for example, in the case of Village Capital, which hosts cohorts of companies in an accelerator program; or via the Kenya Green Mini Grid Facility, for which I-DEV is Co-Managing Entity. This facility opens up quarterly application rounds for green mini grid operators seeking growth funding.
Identifying Red Flags: Lessons Learned from Real Deals
This panel was moderated by Ivy Macharia, Associate, I-DEV and included Alex Mathini, Partner at Bowmans Law; Moses Kimani, Deal Associate at Phatisa; Victor Shubin, Director of EY Transaction Advisory Services (Tanzania); and Carol Sigei, Senior Investment Officer, Business Partners International (Kenya).
Early stage investments often require more work and due diligence- an energy-intensive task taken on by first and lead investors. And, while some common red flags can be anticipated, building trusted networks of advisors and local resourceful and trustworthy informants is critical.
Panelists emphasized the importance of building and leveraging professional relationships to create a culture of trust in order to be able to identify red flags / issues preventing a deal from closing. Usually key pain points are around areas that can be resolved with communication, e.g. founder’s employee contract, etc. Tax liability non-disclosure has been one of the key red flags investors see that prevent deals from closing. And, often it is the investors of small ticket sizes (e.g. BPI) that tend to be the first institutional investors in a deal and have to go through a steep learning curve with businesses during due diligence.
Value Creation for Portfolio Companies
This panel moderated by Darshan Shah, Senior Associate, I-DEV, included speakers Mike Mbari, Senior Analyst at Kibo Capital Partners; Peter Owaga, Investment Associate of Ascent Africa; and Kevin Kamemba, Private Equity Manager of Kenya for Incofin.
Corporate Governance is paramount to PE investor value add as many of the companies Ascent and others invest in are family owned, with no formal board structures and no clear delineation between owners and management. Ultimately, value creation is a joint effort between the founders and investors, so both parties need to be aligned upfront on what needs to be done and why it needs to be done to achieve a successful outcome.
Founder Panel: How to Think About Exits
And, finally, our closing panel featured senior East Africa investment professionals sharing their experiences and expectations on exits. The panel was moderated by Philip Coulson, Managing Partner of Bowmans and included speakers Fred Murimi, Managing Director of Centum Capital; Marieke Geurts, Investment Director of Ascent Capital; Charles Ogalo, Managing Director of GenAfrica; and Jason Spindler, Managing Director of I-DEV. A critical take-away was:
Many of the East African and Pan-African funds are at that critical point where LPs are expecting exits. The next few years are critical to demonstrating a strong and successful exit is possible.
Deep support and strong senior strategic advisors will be critical to supporting companies to exit.
And, proven and high profile exits will be critical to investors raising their 2nd and 3rd funds, as well as attracting additional LPs into the region.
For More on CAPEX or the Young Finance Professionals of Africa (YFPA) group:
CAPEX: Championing the African Professional Experience is a first-of-its-kind event that brings together voices of the investment ecosystem to foster collaboration, improve deal flow efficiency, and share best practices about finance in East Africa. CAPEX panelists included senior investment professionals, founders, and junior investment professionals that discussed relevant finance topics and received career coaching on how to have a successful career in Finance in East Africa.
If you’re interested in sponsorship or to be involved with the Young Professionals in African Finance (YFPA) group that launched to continue the efforts of CAPEX throughout the year, please contact us at info@idevinternational.com.
If you’re interested to sponsor or be involved with CAPEX 2019, please email us at CAPEX@idevinternational.com.
To read more on CAPEX 2018, visit the site!
