When the African Capital Alliance (ACA) was founded in 1997, its aspirations were continental, but it had to start somewhere. Its first foothold, as a pioneering private equity firm seeking to establish its credentials in raising funds for investment, was in Nigeria’s commercial capital, Lagos.
It was a most inauspicious time, in the final days of General Sani Abacha’s military dictatorship, when Nigeria was an international pariah shunned by the West. But African Capital Alliance was able to raise its first tranche of $35 million within a year of its creation in 1998, proving its robustness from the outset in a difficult environment.
Thriving in such circumstances for more than two decades now, the ACA seems indeed to have come of age. With more than $1.2 billion raised since its inception and offices in Nigeria, Ghana and Mauritius, the company finally seems ready to realize its initial dreams. It currently manages five funds with investments in 51 portfolio companies spanning seven industry sectors in 10 African countries.
“Yes, Africa has always been at the center of ACA,” said co-founder and chairman Okey Enelamah. African Affairs in an interview from Lagos. “The decision to start with West Africa was partly influenced by the size and potential of certain economies in the region such as Nigeria, Ghana and Côte d’Ivoire. The objective has always been to invest throughout Africa.
Early investments bear fruit
With the first round of funds raised by ACA, he became one of the first investors in the Nigerian unit of South African mobile company MTN, which was granted a license to operate in the most populous country in Africa in 2001.
It became the most successful investment made since its first fundraising, with MTN Nigeria’s value rising from $400 million when the money was invested to $13 billion when the ACA left. that initial investment in 2012, according to company records.
Part of the funds raised later by ACA were also donated to MTN Nigeria. Apart from its own participation, ACA also contributed to the success of the mobile phone company by creating the financial structure and the “special purpose vehicles” that allowed other Nigerian investors to participate.
Beyond telecommunications, ACA’s investments have covered financial services, media and technology, fast-moving consumer goods, agribusiness, energy, education and healthcare. Beneficiary companies range from Business day newspaper, Continental Reinsurance and the online travel agency Wakanow.
Crossroads of ideas
ACA is the product of the crossroads of ideas between an American professional, Richard Kramer, and a young Nigerian doctor, Enelamah, more than three decades ago. Kramer had come to Nigeria in 1978 to set up a unit of the accounting firm Arthur Andersen.
Enelamah had followed a different path, finishing high school at 16 and admitted to study pharmacy at the University of Nigeria, Nsukka, in 1979 before switching to medicine a year later. After graduating from medical school in the mid-1980s, he wondered if he really wanted to be a practicing doctor.
While in this state of mind, Enelamah recalls, an opportunity arose to join Arthur Andersen as a trainee.
“They had tried engineers but had never tried a doctor before,” he says. Both parties were ready to take the gamble, and Enelamah began her education as a business professional, which included qualifying as an accountant and attending Harvard Business School in the United States. The rest, as they say, is history.
After successfully raising its initial $35 million, ACA’s next round in 2005 raised $100 million. Three years later, she raised $165 million for her first real estate fund. Further seed rounds that followed indicated growing investor confidence with nearly $400 million raised in 2009 and $567 million in 2015. During this period of expansion, the company also established subsidiaries asset management and real estate.
Create a conducive business environment
While Kramer was chairman, Enelamah served as CEO from its inception until his appointment as Nigeria’s trade and investment minister during President Muhammadu Buhari’s first term. He saw his role primarily in terms of easing various bureaucratic bottlenecks that acted as obstacles slowing down or deterring investors.
“One of our main priorities was to create an enabling business environment,” says Enelamah.
The reforms he initiated as minister resulted in policies such as offering visas to business travelers upon arrival in Nigeria and simplifying the business registration process. A new Companies Act that came into force in 2021 provides more flexibility in setting up companies, including the introduction of limited partnerships and allowing individual ownership of limited liability companies.
Invest across Africa
Kramer retired as chairman in 2018 and died in April at age 88. Enelamah, who returned to the presidency after his ministerial term, continued to push the founders’ goals. This involves mobilizing “capital, managerial expertise and technology to create a modern African economy”, he says.
Enelamah sees the establishment of the African Continental Free Trade Area as a boost to corporate objectives and an indicator of new emerging opportunities that call for an intensification of its presence across the continent, with more offices envisaged in East and North Africa.
“Indeed, over the past decade the company has consciously sought to partner with and invest in companies with footprints that span the continent,” Enelamah said. “Funds currently raised will reflect a much wider geographic spread, both in number and size.”
Beyond the excellent returns on investment, Enelamah highlights the company’s impact on society, which is not usually evident due to the self-effacing nature of the private equity business. In addition to its job-creating investments, its standards of corporate governance, business integrity and regulatory compliance generally trickle down to the companies that receive its investments, according to the ACA.
Some of the investments have also produced significant positive social and economic impact. For example, by enabling Continental Reinsurance to work with organizations and governments in Nigeria, Kenya, Zambia, Uganda, Malawi, Tanzania and Zimbabwe to provide 10 million farmers with insurance coverage against bad harvests.
Another recipient of its funds, Global Accelerex, provides electronic payment services in Nigeria and Ghana, supporting agency banking services that have increased the inclusion of more citizens in the financial system. It plans to expand to Ivory Coast, Tanzania, Kenya and South Africa.
Enelamah expresses his belief that “the combination of capital, technology and management expertise will be catalytic” for Africa’s development.
“So the private equity model is much more than just a for-profit model for us,” he says.
“It is also a way to have a lasting impact by driving economic growth through partnerships and investments in well-run, high-impact businesses that would help transform the African continent.”