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Musa Capital – Harvest SA Interview

Musa Capital Advisors, Ltd. (“MUSA”) is a boutique merchant banking firm, with expertise and transaction experience in private equity investing, property development, structured finance and investment banking advisory services.

MUSA has a unique focus on the African markets and since its inception, has principally engaged in the pursuit of executing profitable transactions on the African continent, thereby creating wealth for its clients, investor partners, and portfolio company principals. Richard Akwei, principal at Musa Capital provides us with a corporate profile of the company.

Q: When and how was Musa Capital established?

Richard Akwei: The Company was started in 1995 by three African-Americans who made a decision to investin the telecommunications sector in Sub-Saharan Africa. They were fortunate enough to secure a $30 million commitment from a MiddleEastern investor who asked them to invest in a broader  mandate focusing onfinancial services, real estate as well as telecommunications.  This became Musa’s first fund, which waslaunched in 1996.

That fund was mostly invested in sub-Saharan Africa ex South Africa, in partnership with, and in well-known companies like MTN Uganda, Sonatel, UBA and Cal Merchant Bank in Nigeria, Uganda, Senegal, Ghana, and Zimbabwe. The success of the first fund was largely based on selecting the right sectors and the right partners, and the result was an attractive five times return for investors.

The second fund is very different. By the time of its launch in 2008, African private equity had begun to transform into a more value-added approach which required more active involvement with portfolio companies. Companies in the second fund are largely based in South Africa, and by then Musa had established its headquarters in Johannesburg to ensure proximity to portfolio companies.  The investment philosophy around the firm is very simple: to provide basic goods and services to base-of-the-pyramid consumers in Sub-Saharan Africa, recognising that the vast majority of the population do not have access to basic financial services, affordable housing, or food security.

The business philosophy is equally simple and holistic; that is to generate an attractive return to investors while addressing the broader needs of the respective stakeholders.  This ensures that not only do the middle market portfolio companies in which we invest benefit, but the SMMEs which support them, and the broader community in which they operate benefit as well.

The second part of our business is advisory and capital markets. Specifically, this entails providing innovative debt and equity funding solutions, corporate & financial restructuring and mergers & acquisition solutions to multinationals looking to invest in Africa, sovereigns looking to raise funding and parastatals with financial and strategic objectives.

SS: What is your involvement with African Frontier Holdings and Matlapeng?

RA: African Frontier Holdings and Matlapeng are both portfolio companies in Musa’s second fund, and we are actively engaged in assisting them to fund and execute their growth strategies. Matlapeng builds and manages first time homes for miners and their families. We believe that it is possible to make good returns while also delivering on development objectives like home ownership. So when we build houses for the miners, we structure a programme which has a combination of private sector which would be, let’s say, Kumba or BHP Billiton, which provides some guarantees and pays us for delivering on the houses as long as the miner remains employed. Matlapeng executes provide the affordable housing for them; it also manages and delivers the on-going payment and upkeep of those houses. Through another Musa portfolio company called Abacus, we also provide finance through a pension-backed loan system enabling the miners – in many cases it’s their first house – to gain some equity where they live.

African Frontier Holdings is a company which is present throughout the agriculture value chain and actively promotes SMME and small-scale farmer development. In the area of primary production, we take a commercial entity or farm and integrate the emerging farmers around it in such a way that the emerging farmers get access to finance, equipment, and inputs. That makes it much easier for the emerging farmer to sell his products without having to worry about storage, getting things to the nearest market, etc., and also in time, that emerging farmer will grow and become a commercial farmer in his own right.

SS: So African Frontier Holdings kind of epitomises your philosophy of the partnerships and the kind of investment infrastructure you want to set up.

RA: Absolutely. To give you another example, there’s a lot of debate in the use of communal land, or tribal landownership. We have no interest in buying land, but we do have an interest in transforming currently unutilized land in provinces like KwaZulu-Natal and Eastern Cape to address regional food security needs and broader socio-economic development requirements. We come in and we provide the necessary elements to execute a working farm and integrate the surrounding community in such a way that they benefit directly from financial returns and the food production replaces the food that currently is being bought and transported from other areas in and outside of South Africa using government funding.

SS: In terms of the company’s actual operations and functions, are there any innovations or services that Musa is introducing?

RA: The firm is focused on: 1) executing of our strategic plans and enhancing portfolio company’s operational performance, and 2) expanding our core competencies and regional footprint into sub-Saharan Africa. Currently the firm is focused on SADC. However, our business model is based on partnerships, and we have established partnerships in Namibia, Botswana, Zambia, Ghana, and Nigeria that will support our growth in Sub-Saharan Africa. Through these partnerships, Musa has a footprint of people on the ground in those markets that understand the regions and are best able to identify investment opportunities and where we can use the expertise in affordable housing and agribusiness to provide those types of products into those markets. We know what we’re good at and our idea is to use our current South African platform to effectively identify and execute on investment opportunities across Sub-Saharan Africa.

SS: Please give us a few highlights in terms of what you do outside of South Africa?

RA: We are currently advising the government of South Sudan on ‘capital raise’ and infrastructure projects, we are also advising several states in Nigeria, particularly Bayelsa State, in terms of developing infrastructure around healthcare, hospitals, hotels and ports. In Zimbabwe, we are advising Agribank, one of Zimbabwe’s agricultural banks, on privatising that entity. We expect this part of the business to grow quickly with our expanded regional footprint in Sub-Saharan Africa.

SS: As a principal, could you give us a brief background about your career? Where do you come from? How did you get into this industry?

RA: Sure. I’m originally from Ghana. I got into the industry after going to business school in North America. I joined JP Morgan investment bank and was there for 16 years in Latin America, North America and Europe, covering South Africa, then proceeded to the buy side, where rather than advising companies you are actually investing people’s money, and worked with The Rohatyn Group, based in New York, it’s an emerging market asset management company that focuses on both listed and unlisted investments across the globe; I covered the Middle East and Africa for them. And I joined Musa about a year and a half ago.

SS: Where do you see the company in ten years’ time?

RA: We are in the process of launching a Sub-Saharan Africa private equity fund, which will be our next fund.We are also in the process of launching an agribusiness investment company which is currently South African-based but which will have a Sub-Saharan African focus. So we intend to become bigger, more profitable and also gain a very Sub-Saharan African reach based on the partnerships that we  establish across the continent.

SS: And who are the major role-players in the firm?

RA: The major role players: Will Jimerson, who heads private equity; Antoine Johnson, who heads the advisory part of the business;  and Charles Kinzer, who heads the capital markets business. The four of us work together essentially to drive the execution.

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