AfricaLive: What was your inspiration for starting Alta Semper Capital, and where do you see opportunities on the continent?
Afsane Jetha: My seventeen years of experience in the private equity sector gave me a solid background. Alta Semper was started with the backing of two American visionaries: Ronald Lauder, Chairman of Clinique Laboratories and Richard Parsons, who is the Chairman of the Rockefeller Foundation. They have a minority stake in the company and have been a big inspiration. I have also been investing in emerging markets and particularly Africa for the past five or six years. This inspired me to get started back in 2015. My focus on Africa has taught me not to have a blanket approach when looking to invest in the continent. It is very dangerous to look at the whole continent as an asset class. Doing a banking deal in Nigeria is very different from doing a manufacturing deal in Egypt. Both of those are also very different from doing a hospital deal in Kenya. A blanket private equity approach will, therefore, not work in my opinion. The idea of setting a big diversified Africa fund, for instance, sounds good until you factor in the diversity. In other parts of the world, the most successful funds are those that have had a sector-focused approach. This works way better than a continent-focused approach and is what I want to apply.
Our Africa approach focuses heavily on the health sector, which is largely underinvested in due to structural challenges. This is a shame because the health sector can yield great investment returns and also leave a great social impact. We are currently focusing on some of the most stable African countries that are well interconnected. We are looking at East Africa as a block, as well as countries like Egypt, Nigeria, and Senegal. Our approach is to actively create meaningful operational change and long-lasting social change. If you look around Africa, there is a massive opportunity. The Moroccan government, for instance, can only treat a third of its cancer patients. In Nigeria, most of the local governments don’t have a single pharmacist and most of the drugs are counterfeit. These are the massive challenges that present an opportunity for investment and growth. As we look at these markets, we must seek to align with sustainable development goals as well. This is in terms of access to education, healthcare, and job creation. We must, therefore, not just look at making good returns, but also help these countries reach middle-income and high-income status.
AfricaLive: You take great pride in a very flexible approach to investing in Africa. What does that mean for you and companies that might want to partner with you?
Afsane Jetha: Though we want to invest in developed double-digit GDPs, we understand that there is no reward without risk. African markets can be risky because of a few factors. They tend to suffer high inflation, dollar liquidity which makes access to the U.S dollar difficult, and the banks tend to be undercapitalised. Markets in the USA and Western Europe tend to have better fortunes. There are growth Capital firms that put in growth capital into a business then take up minority share. They usually have certain governance rights and can force structural changes after a couple of years. Then there are leverage firms that bring in leverage and have a six or so year period where they maintain the deal. Our approach is different because we look at good businesses all over Africa that have a good market share. These kinds of companies are the ones most likely to be taken over should a multinational enter the market. We also tailor our capital to a business’s needs.
When we invest in a business in North Africa where the market is a little bit more sophisticated, we adopt a typical equity structure. Here we agree on a valuation upfront and put in equity, which will be used in growth services. Our approach to investing in Sub Saharan Africa is focusing more on incentivising business founders. We mustn’t make business founders feel squeezed out of their businesses. We have to be more creative when investing in Sub Saharan Africa because these businesses are usually smaller and need capital too. We, therefore, have to ensure that founders feel like they are retaining ownership while also protecting our downside. Investing in Africa needs flexible investing and a good understanding of structured products and market structures.
AfricaLive: What are the challenges you have faced in entering the African market, and what are your future goals?
Afsane Jetha: The challenge most start-ups tend to fall into is thinking that Africa is a country. A lot of foreign people don’t know that Africa is a diversity of countries, languages, cultures, social-economic structures and belief systems. One of our main challenges since opening in Africa has been accessing human capital. Even in more sophisticated North African markets like Morocco, they only have a fraction of the oncologists and radiologists recommended by the World Health Organisation. We, therefore, have to be more creative as far as our human capital and staffing models. One of the most exciting things we see now throughout our portfolio is the role of disrupting technologies. Specifically, disruptive medical technologies that could be anything from medicines to AI-based imaging models. It can also be in terms of development in immunotherapy where resources are not wasted on treating diseases that don’t respond to certain medications. One example is that almost forty per cent of pancreatic cancer does not respond to chemotherapy, yet the process is quite expensive and debilitating. Other disruptive medical technology advancements include the ability to call a doctor on a mobile phone. People can also get drugs via drones and get blood results done by a machine while you’re in the village. These disruptions will improve healthcare, and Africa is racing to get there.
AfricaLive: What would you say are some of the risks that come with investing in Africa?
Afsane Jetha: Investing in Africa has a different risk to reward ratio than say the United States. One of the risks for dollar investors is currency risk. African currencies tend to be volatile and devalue in the long term against the dollar. It is, therefore, important to invest in African countries that are looking to control this. One such country is Egypt, where the Egyptian pound has been doing well against the dollar. Another challenge that affects not only developing countries is the locking of fiscal spending in the run-up to a general election. One of the ways we mitigate against African risk is by getting involved in extremely vital industries. These include the health and consumable sectors that do not get hit so badly even in times of high inflation.
AfricaLive: What are some of the projects you are involved in or are looking to undertake?
Afsane Jetha: We are proud to be investors in one of the largest cosmetic businesses in Egypt which is doing quite well. We also have a strong gender focus throughout our portfolio where we seek out and support female business owners. We are involved in Nigeria’s and West Africa’s largest pharmacy chain led by an incredible female entrepreneur. We are hoping to push her brand in underserved areas of the country. We are also looking to promote more Nigerian made medical products. We happen to be the largest private health platform in Morocco as well. This is something we are very proud of.
AfricaLive: How can the education sector work with the private sector in a way that makes sense for local communities?
Afsane Jetha: They have to work together to reduce the supply-demand gap. Africans hold education in high regard, which is great. Unfortunately, they largely value the most prestigious degrees that don’t guarantee local graduates jobs. The education sector must work with the private sector to impart vocational skills that will make graduates marketable. Training to be a biologist is great, but it defeats the purpose if you can’t find a biology lab to work at. Big businesses and leading academic institutions must get together and give graduates on the job training that will make them relevant.
AfricaLive: How can African finance institutions create a supportive environment for African entrepreneurs?
Afsane Jetha: A lot of African SMEs fail because they lack proper access to capital. If you go to the average Sub Saharan bank they mostly charge double-digit figure interest rates for lending. It is also almost impossible to access a loan if you lack collateral some sought of real estate collateral. This leaves a lot of SMEs undercapitalised and unable to get off the ground. If African institutions can have less aggressive conditions, then it would go a long way. Governments can also help provide incubator capital to banks to help them get incentivised to back SMEs.
AfricaLive: What is the role of private equity in the future of African development?
Afsane Jetha: I am highly confident about Africa because there are great opportunities. A lot of the banks are largely undercapitalised and the stock markets don’t have as much depth as their western counterparts. This creates an opportunity for funding and growth. There are also a lot of privately owned businesses in Africa that private equity can back. Private capital is very well suited for Africa because most of the businesses are not listed. Backing businesses that don’t need to report to investors quarterly enables private funds to invest long term.
AfricaLive: What would success be for Alta Semper Capital in the next five years?
Afsane Jetha: Success to me would be remaining true to our vision. This is creating meaningful operational change and leaving a lasting social impact. Success will also be the ability to back exceptional businesses and help them have more reach and create new products.