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Billion dollar investment boost for Africa

Cape Town – Afro pessimists step aside, because the big leagues are bringing their green bucks to Africa and they want to boost your business.

That’s the message from TPG Growth and Satya Capital, who announced a billion dollar investment partnership in Africa on Thursday.

The partnership is TPG’s first African-focused investment vehicle and will invest in growth stage companies and the next generation of entrepreneurs across the continent.

Satya managing partner Moez Daya told Fin24 that the partnerships were looking for entrepreneurial partnerships “north of the Limpopo River” and which could benefit South African businesses.

“The growth of the consumer face middle class is greater in sub-Saharan Africa,” he said. “South African growth is a lot more constrained. Growth beyond South Africa is faster, but more risky.

“The business we do is partnering great companies, those who are breaking through the [Limpopo] border,” he said. “We will be the ideal partners for South African companies wanting to do that. We bring capital, tools, know-how and the relationships that we’ve built across Africa.”

Billion dollar investment

Satya Capital was started by Sudanese/British billionaire Mo Ibrahim, who sold his African-based mobile communication company Celtel for $3.4bn in 2005.

TPG has $74bn of assets under its management, while TPG Growth has $7bn. The latter’s current and past investments represent a mix of disruptive and innovative companies across tech, retail and entertainment including Uber, Airbnb, Box, Domo, Beautycounter, Ride, Angie's Artisan Treats, Fender, SurveyMonkey, Evolution Media and STX Entertainment, among others.

The partnership is TPG’s first African-focused investment vehicle. It will invest in growth stage companies and the next generation of entrepreneurs across the continent.

The partnership with Satya Capital brings deep regional expertise, relationships and on-the-ground experience, said Daya.

Focus on growth

The money will be provided by TPG Growth, who will look for companies and entrepreneurs in all sectors that are in need of capital to help them grow, including in healthcare, TMT [technology, media and telecommunications], consumer and financial services.

While Satya normally targets investments of between $20m and $150m, this partnership will allow it to broaden the scope to between $1m and $200m, said Daya.

“It is exciting for African entrepreneurs looking for investors,” he said. “TPG is willing to invest up to $1bn in Africa provided it’s the right company. They are not bound by geography, but go where the opportunity is. However, this partnership allows them to focus more on the growth in Africa.”

Daya, the former CEO of Celtel International, said that business was a “landmark opportunity and company” for Satya Capital. “We’ve [Satya] been operating for seven years in Africa and built a portfolio of companies.”

Ever green investment

He said Satya Capital, which has capitalised $300m in Africa, focuses on an ever green model. “That means we keep recycling the money within a company instead of withdrawing our investment,” he said.

“We invest in companies without a strict limit on when to leave, which gives businesses the ability to realise its full potential and brings stability,” he said, adding that the partnership with TPG was not part of their ever green strategy.

Risk of investing in Africa

Daya said the risk of doing business in Africa had micro and macro elements.

“There is a risk who you do business with and who you partner with, which is something we factor in,” he said.

“South Africans are used to working in private equity, but that is not the case in sub-Saharan Africa,” he said. “A lot of businesses are used to the old way of doing business, but they need to start looking to the new way. It’s a challenge for them and that’s the execution risk.

“Then there is the risk of economy and infrastructure and political risk that goes with doing business in sub-Saharan Africa,” he said.

”You  also have depreciation issues, but the underlying growth exceeds most of those risks.”  

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