Together with Pinsent Masons and in collaboration with Nairobi International Finance Centre (NIFC), we convened, hosted and moderated a round table conversation aimed at creating a platform where opportunities and challenges in the private equity and venture capital space were discussed with the aim of improving the investment ecosystem in Kenya. The round table brought together various stakeholder players in the private markets space, including regulators, PE and VC funds, professional service providers, associations focused on PE and VC, development finance institutions, multilateral organizations and government officials.

The panel was made up of Diana Gichaga (Founder & Managing partner of private-equity support), Peter Fry (Director, Kua Ventures Limited), Mohamed Saeed (Investor Relations & Capital Raising Manager, Zoscales Partners) and was moderated by Oliver Crowley (Partner, Pinsent Masons).

Need for proper documentation and record keeping by entrepreneurs.

Lack of documentation combined with unrealistic expectations set by entrepreneurs, unwillingness to give capital and an unfavorable macro-economic environment were highlighted as some of the key barriers to PE/VC investments in Kenya. Proper record keeping and documentation significantly support investment decisions by investors. It enables investors to verify representations made by the entrepreneurs as accurate especially during the due diligence process. Diana argued that lack of documentation often translates to lack of preparedness by entrepreneurs thus deterring investors.

Relationship management and mutual understanding by both entrepreneurs and investors

Entrepreneurs also need to set realistic expectations with investors which is crucial for building trust, managing risks, avoiding disappointment and generally maintaining credibility. Peter Fry observed that entrepreneurs need to manage relationships with investors whilst maintaining transparency and making investors aware of the aspects of their businesses that need investor support. By the same token, it is crucial for investors to understand entrepreneurs better by thinking through their lenses and therefore understanding their businesses better.

Coupling of investment and exit strategies for successful deals.

A successful PE exit marks the success of the investment lifecycle. The panel acknowledged that the region’s exit environment has not been without challenges, whilst highlighting that Africa’s initial public offers (IPOs) are scarce and therefore not suitable as an exit mechanism for PE investors. Mohamed attributed exit success to applying a multifaceted approach such as diversifying exit options, longevity in the assessment period and planning on the exit prior to acquisition. This coupled with strong investment strategies contribute to a successful exit option. He gave an example of Zoscales’ ‘3c’ investment approach which entails (a) concentration by having relatively few portfolio companies; (b) control through obtaining an equity stake in the entrepreneur’s business; and (c) champions by working with industry leaders.

Navigating the Investment Landscape

The Panel was made up of Belvas Otieno (Investment Officer, International Finance Corporation), Joseph Murabula (Chief Executive Officer, Kenya Climate Innovation Center), Chibuzo Ene (Chief Executive Officer, Nathan Claire) and was moderated by Lisa Botha (Partner, Pinsent Mason).

Kenya remains an attractive investment destination, albeit more can be done.

Kenya is deemed to have many investment opportunities in comparison to other jurisdictions including in sectors such as climate, water, energy, consumables, infrastructure, energy and many more, due to various factors including being a regional gateway. It was suggested that incentivizing entrepreneurs by lowering tax rates as well as enhancing the ease of complying with tax procedures would be beneficial to the country’s entrepreneurial ecosystem.

Data driven decision making is crucial in enhancing governance in the region.

The panel recognized that the quality of governance has significantly improved in the course of the years in Kenya which has contributed to its success as a financial center compared to other African destinations. Kenya and other countries in the region should however be more deliberate in harnessing quality data and utilizing such data to guide decision making by government agencies and authorities.

Development impact is clear, but commercial return remains elusive.

Investment in Kenya (and Africa generally) generates clear developmental impact results. However, there is a scarcity of deals that offer promising commercial viability and consequently, there is an apparent need for entrepreneurs to enhance return to their investors in order to deepen investment by attracting commercial investors, whose investment participation is crucial for later stage investment rounds as opposed to development finance institutions (DFIs) whose participation should be more prevalent at the earlier stages.

Lisa, summarized the discussion by noting that there’s need to maximize returns and narrow the loss gap; entrepreneurs need more clarity on legislation; SMEs need more access to innovative finance suitable to grow business; there is need to incentivize the growth of talent as well as harness it so that top talent with entrepreneurial skills does not remain working independently thereby limiting their ability to grow; and there is need to enhance the involvement of stakeholders, including at grassroot level, in decision-making by government.

Sample Page

Investment Perspectives

Navigating the Investment Landscape

Awards

Contact Details

Quick Links

Recent Insights