The internet is changing life for African entrepreneurs, says the chief executive of Silk Invest. But why is it still hard to raise assets for African funds? He meets George Mitton.
When Zin Bekkali, of Moroccan descent but raised in the Netherlands, was sent to his parents’ country of origin as a youth in the 1980s, he was struck by the vast divide that separated Europe from Africa.
At the time, Morocco was fighting a costly war against a rebel movement, the Polisario Front, which wanted an independent state in the western Sahara. The conflict weakened the economy and created popular discontent. It was a similar story in other African nations, which endured wars and hardships as they became battlegrounds in the Cold War.
Move forward some 20 years, and the gulf between Europe and Africa has narrowed. Today, visitors arriving at Morocco airport are greeted by a telecoms company that wants to sell them a SIM card. They can withdraw cash from an ATM and use an online mapping service to track the route to their hotel, where they are greeted in English and given access to wireless internet.
Struck by Morocco’s progress, Bekkali established his investment company, Silk Invest, in 2008 to raise assets in the Western world to invest in Africa, which he calls “the investment opportunity of my generation”. The specialist boutique asset manager employs investment staff in Kenya, Nigeria, Egypt, South Africa and Morocco and is a champion of frontier market investing.
I meet Bekkali in Dubai, where his company is based, to talk about Africa. Bekkali is a slight man who gives the impression of great nervous energy. He speaks quickly and shakes hands quickly, all the while wearing a clever smile that hints at his quick wit. His large, black-rimmed glasses give the impression of a technical wizard, someone with above-average skill at a computer keyboard.
The connection is not merely superficial. Bekkali has a lot in common with a Silicon Valley entrepreneur, being positively evangelistic about the transformative powers of the web. (Silk Invest itself is unusually tech savvy for an asset manager; its managing partner Baldwin Berges can often be found at fund conferences praising social media.) Bekkali says he likes the internet because it is opening up opportunities for African entrepreneurs.
“In 1950 we had a situation that Africa, Asia and the Middle East accounted for less than a quarter of world GDP. Why was that? Mainly because of low productivity and no access to information. The problem of information has vanished. Somebody in Ethiopia has the same phone, the same Google, as someone in the West. When you are doing business with him, he can check the numbers.”
The internet has opened up new possibilities for African entrepreneurs. Businessmen can use internet voice service Skype to make business calls. They can place orders and make payments online, a huge change given that mere decades ago the only way to strike deals was to carry cash. “The bottlenecks have been taken away. It’s more safe. The business environment is better,” he says.
As well as technology, African entrepreneurs have role models like they never had before. There is Nigerian cement magnate Aliko Dangote, worth $20 billion, for instance. A favourite of Bekkali’s is Ebele Enuwa, who founded a chain of quick-service restaurants in Nigeria. Silk Invest backed the firm through its private equity fund.
The investment case as Bekkali puts it is undoubtedly compelling. Bekkali can tell you a lot about the rise of consumer spending in Africa, about global rebalancing, and about demographic trends that mean frontier markets will account for half the world’s population by 2100.
What he can’t tell you – or rather, declines to say – is how many assets under management his company has. Readers can draw their own conclusions from this omission. It is perhaps relevant that Bekkali expresses frustration at the preference among some investors to entrust their money to big companies rather small.
“Without being too arrogant, we are unique. But unique doesn’t necessarily bring you money. It’s the interesting thing. Some people would rather give money to one person within a big firm, than a firm which has 27 people dedicated to the story, but within a smaller set-up.”
While Silk Invest solidifies its position in the market – “We cannot just knock on somebody’s door and say, give us $200 million. We are not at that level.” – Bekkali prefers to collaborate with other companies. A Scandinavian bank is the firm’s biggest distributor. Silk Invest manages a frontier market strategy for a French asset management firm. Before our meeting, Bekkali has been seeing a Middle Eastern asset manager about co-operating to raise assets for African investment.
Silk Invest is also open to new, unexpected opportunities. One trend that even Bekkali, an African enthusiast, has underestimated, is the growth of institutional assets in Africa itself.
Pension fund assets in Nigeria, for instance, have grown five times in five years to around $20 billion, according to Bekkali’s figures. Silk Invest has already received money from African institutional investors for its private equity fund and hopes to announce a joint fixed income venture with an African bank.
“Silk Invest was set up to raise money in the western world and invest it in frontier markets. But maybe we should have focused on investors within frontier markets. We underestimated the development of the asset management industry locally.”
With the rise in investment appetite from African institutional investors, could it be that at some stage, the status quo will be flipped on its head, and Silk Invest will raise more money from Africa than from the Western world? Bekkali is unequivocal.
“Definitely. This could happen within three to five years.”
Bekkali, who began his career managing institutional money for ING Investment Management, Fortis and others, remains passionate about the African investment case. African private equity is cheap, African stock markets have outperformed emerging markets in the past ten years, local currency bonds are offering yields of 12%. It’s no wonder he is passionate. The question is whether his firm can raise significant assets.
©2014 funds global mena