• Service: Enterprise, Family business
  • Type: Business and industry issue
  • Date: 7/29/2013

Africa investment for the Family Office 

Africa investment
Africa, as a region, presents enormous opportunity, and has done so for some years now. The capitalisation on this opportunity has been slow, and the continent has not accelerated at the anticipated rate. Poor infrastructure, a lack of regional integration, and political upheaval are some of the contributors to this slow, and sometimes stagnant, progression.

Sub-Saharan Africa has, however, begun to show the signs of change, “over the last two years one cannot help but note the palpable change on the ground,” said Oliver Zucker and Sam Emden of African Insight. The pair believes that we are at the beginning of an African “resurgence”, where the opportunity for growth, development, and progression is rife.

Approaching Africa as an investment region

In a recent white paper for African Insight, Oliver Zucker wrote about ‘How should Family Offices approach Africa?’ In the article, he discusses the ways in which a family office might invest in Africa. The article content is based on a project undertaken for a Family Office wishing to invest beyond South Africa.

It is noted that Africa is not an ideal investment location for family businesses and investors looking for stability and predictable returns. Zucker suggests that any Family Office approaching Africa for investment purposes, do so with an open mind and “entrepreneurial spirit”, focusing more on long-term potential. He further advises that there needs to be an understanding that the continent is still under-going massive shifts.

Areas for investment

The continent presents a unique set of challenges when it comes to transaction and investment. No one region is the same, and one cannot apply a blanketed approach to investment. Zucker recommends applying a more discerning approach, based on the understanding that “ North Africa, South Africa and the Sub Saharan countries are in very different stages of political, economic and social development.”

In the white paper, the author suggests shying away from North Africa for the time being, due to the political processes that the region is currently working through. South Africa is still a popular and recommended region for investment, given the country’s developed financial systems and economy. Politically and economically, however, SA is “still trying to come to terms with the post 2008 realities and re-orientation of its internal policies”, said Zucker.

Sub-Saharan Africa’s demographic and social changes have had a marked impact on the financial markets, and have opened the door to long-term investment opportunities. There is a “trend of improvement” in Sub-Saharan Africa, according to Zucker, a trend that can be capitalized on by the Family Office.

How to invest

Specialised knowledge in the form out outsourced investment managers and investment funds tend to be the preferred approach for most Family Offices. Zucker notes a preference for multi asset funds over pure equity funds, “given the liquidity of the equity markets it is sometimes important to be able to use currency deposits and bonds to express a view”, said Zucker. “We also believe that it makes sense to use funds which offer only monthly and quarterly liquidity. Once cannot invest in Africa and reasonably expect to be able to retrieve funds at a day’s notice.”

How much to invest

The value of African investment is dependent on the Family Office and their level of knowledge and experience in Africa. A passive investment is seen as one of between 1% and 2% of the portfolio value, while Family Offices looking for active involvement and investment in Africa, may consider an investment of up to 5%.

Zucker suggests that a 5% investment in Africa, would probably have to be from “someone with an Africa background, or running or owning a business in Africa and therefore sufficiently informed to hold these investments and ride out the occasional storm”.

Has your Family Office explored African investment? Share your views and/or experience with us.

Craig Steven-Jennings

Craig Steven-Jennings
After working with family businesses in various industries for 12 years and with the understanding of key drivers such as growth, risk and ownership control, I am delighted to share my experiences and knowledge with you.

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