OPIC partner profile: Emerging Capital Partners on tapping the African opportunity
One of the key ways OPIC invests in global development is through emerging market private equity funds, such as Washington, DC-based Emerging Capital Partners (ECP), which invests in businesses in Africa that show strong growth potential. ECP invests across the continent in a wide ranging group of businesses from a chain of coffee shops in Kenya to telecommunications towers in Guinea. Here, Carolyn Campbell, ECP’s Founding Partner and Managing Director, explains the significant opportunity of investing in Africa, and the ways OPIC has supported its work.
First, for some perspective, where does ECP invest?
ECP invests exclusively in Africa and has invested in 44 of Africa’s 54 countries. This pan-African approach has enabled us to access Africa’s broad-based, growing middle class.
Describe the investment opportunity in Africa and why some of the world’s poorest places can present strong investment opportunities.
Between 2005 and 2015, Africa’s GDP enjoyed a compound annual growth rate of 6.3 percent, and the International Monetary Fund projects that Africa will be the world’s fastest-growing region by 2020. Many countries in Africa are enjoying even faster growth. McKinsey Global Institute projects household consumption in Africa will grow at 3.8 percent a year through 2025 and there are several other strong economic fundamentals such as a large youth population and a rapid rate of urbanization. Over the next decade, an additional 187 million Africans will live in cities, and this urbanization has a strong correlation with higher GDP and consumption.
More specifically, how can American businesses benefit from private equity investments in Africa?
Many of the local African businesses we’ve invested in have purchased American-made goods from companies such as John Deere, Cisco, General Electric and Pepsi. These same companies often use American legal and consulting services. And numerous portfolio companies have hired American senior management for top positions.
Can you share the story of any specific investment that’s brought strong benefits to the U.S?
There are many examples. One of the ECP investments that OPIC supported is the Java House chain of restaurants and coffee shops in Kenya and Uganda (pictured). Java House was started by an American aid worker turned entrepreneur who discovered, while working in Kenya, that Kenyan coffee was hard to find. ECP invested in the growing business, which now operates 41 restaurants in Kenya and Uganda. All the stores were designed by an American architectural firm and they import food products like ketchup and tabasco sauce from the U.S.
Describe some of the investment challenges you encounter investing in Africa and the way OPIC has helped you work in these often challenging places.
African countries generally have younger democracies and are often subject to political upheaval. In addition, since our funds are U.S. dollar-based, we need to manage local foreign exchange risk. And fundraising for an emerging market can be challenging. Having OPIC in our investor base helps to incentivize institutional investors globally. And this often allows these investors to access high-growth markets in Africa as part of a balanced portfolio.
How did ECP come to work with OPIC and how does OPIC support your work or help mitigate some of the risks?
In 2005 OPIC approved a proposal ECP submitted for an OPIC debt facility in response to OPIC’s general call for proposals. Since then ECP has applied for three further debt facilities and partnered with OPIC in 22 investments. During our partnership with OPIC, OPIC has provided inestimable benefits, through successful direct intervention and diplomatic support, helping with capital repatriation from Tunisia, capital recovery from Nigeria, and respect for investment terms in Mauritania. OPIC attends and participates actively at all of our Advisory Board meetings with our global investors.