Africa needs to attract more long term Investors

Africa has become a magnet for investors but we need to examine the tenacity and durability of these investments. While we celebrate the benefits from what we have, we cannot close our eyes to the bigger picture. Taking the example of the Citadel Capital, Africa’s largest private equity firm which finally received the much needed shareholder approval for a capital increase of close to US$3.64 billion.

The proposed share increase will be used by the company to reach 51-100% ownership in most of its platform companies, in its five core industries: energy, transportation, agrifoods, mining and cement. The increase will see Citadel Capital’s total paid in capital rise to (US$ 1.15 billion) from around (US$ 625 million) through the issuance of over 728 million new shares.

This is a major development because it indicates a dramatic shift in the company’s business strategy to long term investments from short to medium term, a move very welcome in a continent which though growing very rapidly lacks the long term investments necessary to foster sustainable development.

Being in the final stages of transition to an investment company, Citadel Capital has been making investments in the private equity of companies over periods ranging from five to seven years using a variety of  investment strategies, the aim being to get a reasonable return to its investors in a relatively short time thus minimizing the risk  of long term exposure.

This approach while generally beneficial to the investors, presents many drawbacks to the countries  where the capital is directed, first the volume of investment in real terms can never be very large, second,  systems/governance  structures are normally developed specifically for the investment period and the last, the eventual exit of the Private Equity partner can lead to a loss of confidence in the company or the entry of undesirable shareholders who may lack knowledge or motivation to run the company effectively.

While it’s true that Africa as a continent cannot afford to look at investment “gift horses in the mouth