How attractive is Côte d’Ivoire to investment firms?
LAUREEN OLSSON: The revision of the Uniform Act on private companies of the Organisation for the Harmonisation of Business Law in Africa (Organisation pour l'Harmonisation en Afrique du Droit des Affaires, OHADA) allowed the introduction of variability in capital. This permitted investment firms to implement changes that mimic the functioning mechanisms of private equity funds (PEFs). This OHADA reform was paramount because – depending on capital calls – it allowed for the progressive increase or decrease of capital, enabling funds to perform for their investments, and support their operating expenses, but also to redeem capital gains to investors subsequent to divestment.
Prior to this reform, these mechanisms were challenging to implement due to a tedious legal framework governing capital increases and decreases for limited liability companies. This reform now enables private companies to have a variable shareholding structure, provided that their regulations specifically state a minimum and maximum stated capital. Consequently, each capital increase or decrease – provided it is consistent with a pre-defined range – benefits from a lighter administrative and legal process, requiring simply a notary stamp.
This reform offers attractive investment opportunities for insurance companies while enabling mobilisation of local savings. Indeed, insurance companies are not permitted to participate in the regional private equity industry as they are not allowed to invest outside the Inter-African Conference on Insurance Markets zone.
However, based on the available liquidity of insurance companies, and the significant funding needs of small and medium-sized enterprises (SMEs) in the region, this reform offers a revolutionary mechanism to fund the private sector while offering investment opportunities, and an alternative asset class to local and regional institutional investors.
In that context Côte d’Ivoire has a significant role to play in improving its attractiveness to PEFs and fund managers, and more can be done from a fiscal standpoint, as long as PEFs register their investment companies in Côte d’Ivoire and focus their strategies on financing SMEs. These funds should be encouraged through fiscal, legal and economic incentives. Otherwise, the majority of investors may choose to put money into other jurisdictions.
Which sectors provide opportunities for investment companies in Côte d’Ivoire?
OLSSON: Our investment strategy focuses on the local consumer. The aim is to invest in sectors that are paramount to promoting local consumption that is driven by middle-class growth. Amethis is very confident in supporting the banking and insurance sectors, as well as distribution, agri-business, health, fast-moving consumer goods and other similar areas. Côte d’Ivoire is a strategic country in our investment approach, and we aim to support more private companies to foster growth and expansion, and contribute to the emergence of local and regional champions.
How can capital investment firms exit their investments in Côte d’Ivoire?
OLSSON: The West African Regional Stock Exchange has significant potential as more and more initiatives are being implemented to increase its appeal to international institutional investors. This was demonstrated by the dynamism and strong performance of three initial public offerings on the exchange recently.
Prospects and valuations are also gaining popularity compared to the rest of the continent. In the banking sector, average valuations are around two times the book value and close to 15 times the price-to-earnings ratio – while those of Nigeria are 0.9 times and seven times, respectively. So, the appeal of the market is there; all that is lacking is liquidity in the secondary market. The question is whether or not these valuations are sustainable. Additionally, the ability to exit through the stock exchange will depend on the ticket sizes, since actual liquidity levels may not be able to absorb large-scale transactions.
In terms of other exit routes, trade sales and secondary buyouts are increasingly common. Our recent investment in NSIA as a secondary buyout is also a sign that the private equity industry is maturing. I believe we will witness a growing number of secondary, perhaps even tertiary, buyouts.
Stay updated on how some of the world’s most promising markets are being affected by the Covid-19 pandemic, and what actions governments and private businesses are taking to mitigate challenges and ensure their long-term growth story continues.
Register now and also receive a complimentary 2-month licence to the OBG Research Terminal.
Register Here×In what ways can the banking sector in Côte d'Ivoire support the government's efforts to achieve the growth targets set by the National Development Plan 2021-25?
With efforts to accelerate the pace of economic growth and boost domestic employment taking centre stage under the new government of Prime Minister Marouf Bakhit, a new law is under discussion...
The Turkish Prime Minister Bulent Ecevit has spent the last week in the US hoping to garner support for economic reforms at home and trade concessions for Turkish exports to the US.
