Today, von Stiegel, who founded Ariya Caital in 2008, on the heels of a solid career in investment banking, where she spent years building structured finance businesses, is raising an Africa-focused fund that will invest in financial institutions, telecommunications and clean energy technology.
“I basically feel that Africa is now where Eastern Europe was about 20 years ago,” says von Stiegel in an interview with David Dankwa, editor of The Africonomist. “I really see Africa as a tremendous investment opportunity with the recognition that philanthropic dollars are just not going to do it. If we look at the demographics, it is 2 billion people by 2050, 30% of the world’s natural resources, and an enormous land mass.”
The following is an edited version of the interview.
The Africonomist: What has been the response so far from the global investment community?
I founded Ariya just before September of 2008, at a time when things had come to an absolute standstill, particularly for new fund managers. That was not just an issue for Africa; it was pretty much across the board. What we are seeing this year is that the needle is shifting slightly, but it still depends where you are. For example, U.S. investors have very little focus on Africa in general. However, if you go to a place like Hong Kong Africa it is a very hot topic, driven by the Chinese investment into Africa. I think the investor appetite is still regionally-conditioned, and from the Western perspective, the bulk of the inflow into Africa is still coming from the development banks. Having said that, we are seeing more investor appetite into Africa from the private sector.
The Africonomist : How would you assess interest in Sub-Saharan Africa versus North Africa?
There are clearly a number of countries that are the primary beneficiaries of more direct investment; Egypt, Nigeria, and to a less extent South Africa and Kenya. If you look at the larger economies they certainly are getting the bulk. The average private equity deal in Africa over the last 8 years has been around $74 million, which is huge, given where the various economies are. However much of the funding is going towards relatively large deals that are a function of infrastructure investments and the larger private equity plays, and the rest is kind of neglected, which is where we see opportunity.
The Africonomist: What would differentiate your fund from the others that are springing up?
Our partners at Summit Development Group have tremendous expertise buying majority stakes in banks, either alone or with another co-investor, and then transforming those banks to effectively service the missing middle. We are not aware of anybody else who is actually doing the transformation aspect the way we are prepared to do it. Other investors are taking minority stakes. That is a differentiating proposition with the financial fund. On the clean energy side, it is an early stage industry. We are looking to invest in independent power producers that could also qualify for carbon projects. It is a hugely underinvested space and so quite frankly we are not very worried about competition. So in the smaller space, the 50 to 250 mega watts space, there is tremendous room for growth.
The Africonomist: The universe of banks in Africa is still very limited. Is that a concern or an opportunity?
Africa remains terribly under-banked and if you compare, for example, people who have bank accounts and people who have mobile phones, the people with mobile phones is much higher. So you have a huge population that is financially excluded. The vast majority of SMEs do not have access to credit. You can take any country in Africa, even the middle-income countries like South Africa, Botswana, and Namibia, the unbanked population is still enormous. If you are looking at only the microfinance space, the number of acquisition targets is fairly limited, but the Tier 2 banking space, which is what we are looking at, we’ve developed quite a good pipeline. We’re looking right now at about 37 deals with assets in excess of $4 billion in 16 countries. So there are some good targets out there.
The Africonomist: What would it take to get U.S.-based investors more interested in Africa?
We are talking to U.S. investors. First I think Africans need to invest in themselves. It is not a compelling argument to go to a California pension fund and say invest in Africa if the continent’s own pension funds are not investing in their own economy, except putting deposits with their local banks. Particularly in the private equity space, it is a more difficult asset class for some people to get their hands around. I think it is absolutely paramount for Africans to invest in themselves. Secondly, there is still quite a bit of education that needs to take place. When I talk to U.S. investors I start by saying that Africa is not a country. People who know Africa laugh when you say that and others look at you like you have two heads.
The Africonomist: Based on your discussions, what do you think are investors’ major concern?
One of the questions that always come up is political stability. Whether we like it or not, the turmoil in Kenya a few years ago spooked a lot of people. Obviously, the CNN lenses are on the troubled spots, so you’ve got the pictures of Mugabe and political instability. The other concern they have is operational risk, which is to what extent can you get things done? One question we are always asked is how many people do you have on the ground? Liquidity is also another big concern.
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