So argues Henricus J. Stander III, CIO of Henshaw Capital Partners, a London and Johannesburg-based alternative asset management company that launched the first-ever Pan-Africa private equity fund of funds early last year, in a fascinating piece penned for Africa investor in July.
To help escape the “second wave of effects” stemming from the credit crisis–“reduced export demand for natural resources, lower remittances, lower tax revenues, lower capital inflows, lower concessional lending, lower tourist arrivals all leading to “twin deficits” at the national levels; depressed capital markets and devalued currencies”–not only must domestic bond markets gain traction, but more importantly for the entrepreneurial engine that ultimately ignites and sustains economic recovery and growth, “the vast pools of capital that sit underutilized in African’s pension and insurance balance sheets” must be tapped, he states:
“In Nigeria, the pension industry has grown to more than US $7 billion in just a few short years, yet it cannot invest in private equity. In Namibia, the national pension fund is large by any emerging market standard, and yet it is only now considering private equity. Nigeria’s insurance companies are growing quite rapidly even in this market and yet for them, single project real estate investments form most of their non-tradable securities. In short, the two largest pools of domestic capital, by and large, across Africa sit idle, while the pundits and politicians cry out for more [official development assistance].”
This very model, Stander concludes, “of taking long-term liabilities and matching them with long-dated assets, has built an economy in the U.S. that has consistently reinvented itself and its industrial advantage through wave after wave of Schumpeterian renewal (i.e. “creative destruction”).”