Africa Merchant Capital Management’s vision is to be the leading boutique investment manager focused on the Pan-African region, primarily outside of South Africa.

About

Founded in January 2014, Africa Merchant Capital Management’s vision is to be the leading boutique investment manager focused on the Pan-African region, primarily outside of South Africa.

We believe through sound research, a structured investment process and local insights we can deliver attractive returns to investors while managing the associated risks. The firm currently manages a Sub-Saharan Africa ex-SA listed equity fund and offers managed/segregate accounts. The firm has ambitions to build a multi-asset class investment management business over time.

To view our latest portfolio factsheet please click here.

Key to our investing philosophy are the following principles:

Quality

Investments should be thoroughly analysed on a fundamental bottom-up basis to determine the quality and risks of the underlying assets

Value

Investments should be purchased at a discount to their fair value with sufficient upside to warrant the underlying risk assumed

Quantify

Qualitative information should be quantified in a structured objective manner which creates discipline in investment decision making and mitigates emotional biases

Risk Control

Risk should be quantified using the underlying risk factors rather than statistical metrics as an integral part of the investment process

The firm has a number of competitive advantages which enables it to offer market leading investment management services in Africa:

Strong team with extensive African experience

Our team has complementary African professional experience including investment management, merchant banking, corporate finance advisory and private equity investing

On-the-ground Sub-Saharan Africa partners and neworks

Part of the AMC team is based in East and Southern Africa. Our team has spent a substantial amount of time on the African continent building relationships and conducting investment due diligence

Proven proprietary structured investment process

Our in-depth fundamental research feeds into a structured investment process where qualitative information is evaluated objectively and risks are quantified

Boutique model enables investment in over-looked opportunities

A small nimble team can identify and respond quickly to market opportunities. Portfolio structures allow meaningful portfolio allocations to overlooked opportunities with potential for higher returns

 

Why Africa?

Why Invest in Sub-Saharan Africa?

With forecast growth of 5.75% in 2015 according to the IMF, Sub-Saharan Africa is set to overtake Developing Asia growth rates. This growth is supported by the following factors:

Favourable Demographics

Africa’s rising middle class (34% of population, AfDB), young population and urbanisation rates are driving consumer demand

Telco and tech revolution

Unique mobile subscribers grew by 18% CAGR from 2007-12 reaching 253 million subscribers (GSMA)

Investment set to increase

World Bank forecasts FDI to reach $54bn in 2015 ($37bn in 2012); EMPEA2 predicts market inflows from SSA Private Equity managers

Regional trade

Intra-Africa FDI growth expected to continue (42% CAGR, 2007-11, fDi intelligence)

Political reforms

30 ruling parties or leaders have been democratically removed by voters from 1991-2011, compared to only 1 peaceful transition of power from 1960-91 (Economist)

The region is distinctly different and better positioned for growth compared to North Africa and South Africa. North Africa, often covered as part of the MENA (Middle East and North Africa) region, is experiencing ongoing political uncertainty following the Arab Spring, whilst the more mature market of South Africa is delivering weak economic growth due to structural constraints.

Why Invest in SSA Public Equity?

We believe the best way to capture the growth opportunity whilst mitigating downside risks is to invest in a portfolio of diversified public equities, including small- mid- and large-cap shares. The case for investing in SSA public equities is supported by the following factors:

Undiluted SSA exposure

We believe local African exchanges are the best route to access pure SSA economic exposure. Less than 6 JSE stocks derive >30% of revenues from the SSA ex-SA region. Offshore listings with SSA ex-SA exposure are concentrated in junior miners

Low correlation

Low correlation with emerging and developed markets is attractive for asset allocation

Broad diversification

Access to stocks from >20 countries, on >10 exchanges

Improving liquidity

SSA ex-SA exchanges continue to implement liquidity improving measures, including new technology, lower fees and market making. We estimate 26 IPOs in 2014

Stronger corporate governance

Stock exchanges enforce higher standards of corporate governance, financial reporting and regulatory oversight than private companies are subject to

Investment Strategy

The long-only strategy seeks to invest in quality, undervalued public companies operating in Sub-Saharan Africa (ex-South Africa) which we believe are well positioned to participate in the region’s economic growth.

Click here to view our latest portfolio factsheet.

The investment process is value-driven bottom-up stock selection encapsulated in a structured framework. Africa Merchant Capital conducts in-country, in-depth fundamental company research, including assessments of markets, management and operations. This qualitative assessment feeds into a structured framework where information is evaluated objectively. The highly structured process creates discipline in investment decision making where predefined quantitative and qualitative factors are used to determine conviction and risk.

While the investment strategy does not follow a top-down approach it employs an in-house risk control process. Political, macroeconomic and micro risks are identified, assessed and managed as an integral part of the investment process. Companies selected are weighted on a risk adjusted basis.

The strategy’s planned size cap and liquidity terms allow it to include, alongside large-cap shares, smaller, under-researched companies with potential for higher returns.

The strategy will primarily invest in equities listed on African exchanges although it may invest in offshore listed companies provided they derive a significant amount of their revenue from the region.

The diagram to the right is illustrative of the concepts and processes that we employ.

 

 

 

 

Team

INSIGHTS is our news section featuring our latest perspectives on Sub-Saharan Africa investment.

Go to INSIGHTS

Careers

There are currently no open positions.

Contact Us

Africa Merchant Capital Management (Pty) Ltd
The Oval
1 Oakdale Road
Newlands
7700
South Africa

info@africamerchantcapital.co.za

+27 (0) 21 671 3640