African Rainbow Capital to Grow Investments in East, West Africa

LAGOS (Capital Markers in Africa) – African Rainbow Capital Investments Ltd. is expanding its portfolio outside its home market of South Africa to back businesses in the renewable energy, cold storage and financial-services sectors in West and East Africa.

Through its recently-created emerging-markets division, the Johannesburg-based investment firm has entered into partnerships with the African Development Bank and the European Investment Bank to focus on infrastructure projects in the rest of the continent, co-Chief Executive Officer Johan van Zyl said in an interview Thursday.

“If you go into Africa, this is what they need,” he said. “They need energy to start up things, they need cold storage, they need resources really going and then they need credit. And this is what we are trying to push.”

The firm added four funds that will span the different industries to its structure during the six months through December. ARC, as the company is known, grew its intrinsic net asset value by 1 percent to 9.6 billion rand ($663 million) in the same period. The firm is targeting a growth rate of 16 percent annually over time, Van Zyl said.

Tough Economy
ARC and some of the companies it is invested in, such as Alexander Forbes Holdings Group Holdings Ltd., are being held back by weak economic growth in South Africa and an increasingly cash-strapped population of consumers. But switching up its investment approach is not the answer to driving growth, Van Zyl said.

“If you think about our strategy, we should do better on a relative basis in bad economic periods,” he said. ARC is focusing on investments in companies that provide low-cost services to make the bulk of its income. These include data provider Rain, new digital lender TymeBank, and stock exchange A2X.

“If you use our product set we can make a difference of between 400 to 500 rand per month in your pocket,” Van Zyl said. “Increasingly in emerging markets people with the lowest costs win.”

ARC has more than 40 investments spanning asset management and life insurance to telecommunications and agriculture. Its goal is to get these companies to partner where beneficial and is focusing on doing more with its existing businesses, rather than acquiring more investments, Van Zyl said.

Source: Bloomberg Business News