Play the Game of Life
Ryan Petersen's Blog

Kofi Bucknor, Managing Director of Kingdom Zephyr, a private equity fund investing in African businesses, joined our class on Entrepreneurship in Africa at Columbia Business School last week. He spent over a decade in investment banking and is the former chair of Ghana's Stock Exchange. A member of the Columbia Business School class of 1979, he says this was his first time returning to speak at Columbia, which he was quite embarrassed about. It won't be his last, as he'll be receiving many invitations.

Kingdom Zephyr is a partnership between Zephyr Management, L.P. and Kindgom Holding, the investment company of the Saudi prince Alwaleed bin Talal. They raised an $80 million fund, "Pan-African Investment Partners," with money not only from the Prince but also institutional investors and development finance institutions like the IFC.

The fund made its first two investments in December 2004 and has since made three others. In total, they have invested $73.5 million, and already have exited three of the investments for $80 million. That means they made $6.5 million and got the other two investments, with unrealized profits about about $110 million, essentially for free!! Quite a track record.

So far the investments have been primarily in the financial sector, not suprising given Kofi's expertise and vast network of contacts in this area. Although considering themselves a private equity fund (with a correspondingly high fee structure), the fund has actually purchased large stakes in several publicly traded companies.

The investments they've made so far include:

• 23.7% stake (purchased at $13.4 million) in Letshego, a publicly traded consumer finance company in Botswana
• 0.37% stake in Celtel (purchased for $5.2 million just prior to the sale to MTC of Kuwait, sold at $12.5 million)
• 4.5% of ETI ($18.3 million), a West African Bank. They sold this stake to a strategic buyer for $64.8 million in April 2007
• 12.3% of CNIA ($18.2 million), a privately held insurance company in Morocco.
• 1.3% of UBA (for $18.3 million), a publicly traded Nigerian bank. The value of this share went up by nearly 300% between purchase date in February 2007 and September 2007

Despite the 3x return over just 2 years, investors in this fund need to remember the fee structure: 1% of initial commitments, 2% of assets under management (including capital gains) per annum, and %20 of profits after a preferred return of 7.5% is earned.

The professor, Paul Tierney Jr., asked me to determine the returns to an investor after these fees are taken into account. Through some analysis, my friend and I determined that an investor in the fund is up 147% since December 2004. This sounds jaw-dropping until you remember that African stock markets have been on a tear since that time. An unweighted average of the indexes of Kenya, South Africa, Nigeria, Morocco and Egypt are up 145% since that time!

Kofi's now raising a $500 million fund, Pan-African Investment Partners II, with $250 million already commited from the Prince. They will be looking at investments in the telecommunications, financial and other sectors across the African continent.

The minimum buy-in is $5 million. If you had $100 million, would you invest some of it with these guys?

Labels: Africa, entrepreneurship, private equity