DAKAR Three years after disputed elections led to bloodshed, Ivory Coast has emerged as one of the most exciting opportunities for private equity investors in Africa, with a dynamic workforce keen to put a decade of turmoil behind it, a senior investor said on Friday.
Jean-Michel Severino, chairman of Paris-based Investisseurs & Partenaires, said its two funds totaling 65 million euros aimed to provide investors with returns of up to 10 percent a year while fostering social development in Africa.
With interest in private equity in Africa booming, Severino said his firm was launching two new funds: a 50 million euro venture with Schneider Electric (SCHN.PA) for power projects and a 100 million euro vehicle for small infrastructure development.
"Our aim is to promote entrepreneurs. These are the people who can provide a solution to Africa's problem of unemployment and growth," said Severino, a former World Bank executive who ran the French Development Agency (AFD) for a decade.
I&P's two existing funds back 50 entrepreneurs across a range of sectors from healthcare to finance and agriculture, with just one golden rule - they avoid investing in economies dependent on oil or mining, like Nigeria.
"In these countries, which are victim to Dutch Disease, entrepreneurial activities are penalized," Severino said.
He cited Ghana - whose economy grew by 7.1 percent last year on the back of oil, gold and cocoa exports - as another country offering fewer opportunities to entrepreneurs.
Ghana's booming natural resources sales had pushed up prices, incentivizing imports and strangling economic diversification, complicating life for entrepreneurs, he said.
His firm is enthusiastic about Ivory Coast, by contrast. It made three investments there before the 2010-2011 civil war sparked by ex-President Laurent Gbagbo's refusal to recognize Alassane Ouattara's poll victory, and has made two more since.
"Ivory Coast has one of the best environments for investors in Africa," he said. "It has a strong entrepreneurial culture, a high level of education and a well-established economic infrastructure."
Severino also praised the liberal reforms undertaken by President Ouattara since he took office in 2011, though he noted that political risk remained an important factor.
Earlier this week, Carlos Lopes, executive secretary of the UN Economic Commission for Africa, also told the Reuters Summit that Ivory Coast was one of the continent's better prospects, along with Sierra Leone.
RETURN OF UP TO 10 PCT
With infrastructure projects in Africa, investors tend to look for a net 20 percent profit margin, Severino said, whereas I&P promises around 10 percent return on infrastructure projects due to the smaller size of investments.
"Any more than that and we'd be in the same space as traditional private equity. But to allow our investors to settle for this lower return, we have to ensure them a social impact."
A new and innovative source of funding for small businesses in Africa could increasingly be crowd funding. Severino cited the Kiva (www.kiva.org) site which allows people to lend small amounts of money to entrepreneurs in over 70 countries.
Since 2005, it has crowd-funded more than 1 million loans - providing half a billion dollars - at a repayment rate of 99 percent. Individuals do not make interest on their $25 loans.
CDS, a Mauritanian firm building rural water and energy installations in which I&P hold 40 percent, used Kiva to raise nearly 15,000 euros of funding in just one day. The funds were to replace diesel pumps with solar powered ones in the village of Wouloumbouni, providing cheaper and more reliable water supply in a more environmentally friendly way.
"African entrepreneurs are heroes. They have to face an enormous number of problems," Severino said. "In general, it's financing which is the most pressing one. But there is also the lack of reliable electricity, transport and water, the question of judicial uncertainty and environmental damage."
(Editing by Toby Chopra)