London headquartered private equity company Actis Capital LLP – an emerging markets focused firm that invests exclusively in Africa, Asia, and South America – this week announced its latest investment in Africa.
Actis have announced via a press release on its website that it has invested in Compuscan, who are a South African credit bureau. This is not the first deal Actis have concluded in the fast growing financial services market on the continent, and in their press release they noted that they saw this deal as “the first in a series of investments” within the finance industry.
These future investments are unlikely to be exclusively focused on South Africa. Given the fast emerging presence of a true middle class in Africa, there is a growing demand among consumers for loans and other financial services and products.
However, this industry has not yet developed to be fully immersed within the usual supply and demand dynamics. Actis clearly anticipate there being a big opportunity in this area in the immediate future, which is why they are targeting the industry in the manner they are.
It is likely that Actis will be involved in the development of credit products and services that can potentially be sold onto banks and other lenders to ensure they can make responsible decisions when they receive loan and mortgage applications. The development of such a service in the African continent will in turn continue to boost the economy there, which will itself increase the attractiveness of the region to investors.
The terms of the deal have seen Actis set up Credit Services Holdings (CSH), which will then acquire the Compuscan business. The Actis investment will then be made into the new company, with the existing Compuscan management team making personal investments and staying on to lead the renamed business.
Actis did not make public any further details, including the sums of money involved in the deal and who will hold what percentages of the newly formed company. While Compuscan are based predominantly in South Africa, they have a presence in other sub-Saharan countries including Uganda and Ethiopia.
Jonathan Matthews, who is the Director of Actis’s Johannesburg office, said in the on-site press release, “Actis is backing an excellent and entrepreneurial management team led by CEO Remo Lenisa and we are delighted to attract Michael Jordaan to help build the brand and take it to the next stage of growth.
Only 5% of adults in Africa are covered by credit bureaus compared with 64% in OECD countries, and many countries are still without the necessary bureau infrastructure. We are excited to be investing in Compuscan and making the first steps towards bridging that gap.”
Another of Actis’s recent investments into the finance industry in the area has been hugely successful. Actis established Emerging Markets Payments Holdings (EMPH) in 2010, since when the business has grown to become the widest reaching payments company in Africa, working with 130 banks in 40 countries.
If Actis can replicate this success with the newly formed CSH, they are likely to see large returns and excellent opportunities for creating further investment avenues in Africa.