Initiative teaches buoyancy ahead of investment tsunami

According to David Marchick, managing director and global head of external affairs at The Carlyle Group, the continent is facing a major moment in its economic history as investor interest is on the rise - but if it is not ready, the wave of investment may destroy and not build African business.

Marchick was speaking at the inaugural "In the Boardroom" event - a speaker series that has been set up to prepare African people and business for a steep increase in investment interest. Africa, he said, has incredible potential and investors are scoping out possible partners across the continent.

"To help everyone in the space understand the environment better, we thought it best to start by sharing with them the insights and experiences of those who have been in the environment a long time," he said.

A joint initiative

In the boardroom is a joint initiative between the African Development Bank and The Carlyle Group and is aimed at sharing the wisdom of respected global leaders from business, government and the social sector with business school students across the continent. The first event was hosted at the UCT Graduate School of Business in Cape Town, South Africa.

The initiative will not only educate business about the international investment environment, but it also serves the dual purpose of giving The Carlyle Group the foothold they need to expand its investment on the continent.

Tim Turner, director of private sector operations at the African Development Bank, said that the bank is mandated to develop business on the continent in sustainable ways, and that partnering with The Carlyle Group offered a way to signal to other investors in other countries that there are huge opportunities for them in Africa.

"We want investors to come to the continent, to help develop business here and The Carlyle Group is perfect because it sends out a very interesting signal to the rest of the world," he said.

Small to medium businesses

The Carlyle Group is a global alternative asset manager with $170 billion of assets under management across 113 funds and 67 fund of fund vehicles. With 1,400 people in 33 offices across six continents, the firm has invested in more than 200 portfolio companies employing more than 670,000 people, the focus being on developing fast growing companies.

"We believe our strengths lie in working with small to medium businesses that have a proven business model," said Marchick. "It is here that we can give the most value."

The firm has been an early-mover into emerging markets like China, Brazil and the Middle East with The Carlyle Sub-Saharan Africa Fund having established two offices in Africa, one in Lagos and the other in Johannesburg.

"So far our experience here has been similar to other emerging market regions, but we have a very strong interest in Africa and we're confident we can help companies grow, expand and create other opportunities by improving the value-add abilities, governance and transparency of these companies," said Marchick.

Turner said that it is important to note that investment does not only take the form of capital but also expertise and approach to business.

"And we are very mindful of catalysing responsible investment through new business with foreign investors," he said.

Researching responsible investing

Responsible investing is a key area of research at the UCT Graduate School of Business, being a business school situated in an emerging market, driven by a commitment to changing business to have a more positive impact.

At the In the Boardroom event, Dr Stephanie Giamporcaro from the GSB faculty presented the Investing for Impact Barometer, an annual barometer that shares insights into the sustainable and responsible investment environment in South Africa.

She said the business school would like to see a more concerted effort by investors to look for investments that intend to have positive social impacts, and that the partnership between the ADB and The Carlyle Group could help spark interest in proactive responsible and impact investing strategies in the private equity sector.

"The school is about positive impact, so it is good to host such an event," she said. "As a business school in Africa, we feel it is our duty to measure and understand how this 'tsunami' of growth is going to happen, whether it will be sustainable, and how it can be directed to be more sustainable."

Marchink said that The Carlyle Group has invested in businesses that have social impacts, mainly in education and health, but that its overall goal is to grow businesses that add value to Carlyle shareholders. He said that often, as businesses grow there are positive spin-offs.

Marlon Chigwende, managing director and co-head of The Carlyle Sub-Saharan Africa Fund, said that the firm's very first investment in Africa, in a Tanzania-based export company, has had very positive ramifications.

According to him, Carlyle gave the company, which trades in agricultural commodities, $210 million as well as expertise to improve its route to market-based business. He said there were tangible social impacts.

"The export company has been running for more than 30 years and they have an exceptional network. The interesting thing is that 85% of the produce they trade is sourced from small-scale producers," he said. "That already is quite sustainable. But we also want to grow the company by helping them add value to the produce, so rather than just trade in primary products they can trade in final-stage products. Everyone benefits more."

Investors will be looking for opportunities through which to increase profits for their shareholders, and that has always fueled the fear that, under the guise of development and foreign investment, capital flows out of Africa and does not, in the end, benefit the continent. But a full understanding of the investment environment could help to not only attract investors but extract full value out of the investments.

The In the Boardroom event is planned to visit other universities across the continent later this year.