PRIVATE equity firm, Brainworks Capital, has managed to attract foreign investors in the financial and commodity-focused sectors. In this question and answer with Standardbusiness (SB), managing director, George Manyere (GM), spoke of the conditions necessary to attract foreign investors.
SB: It’s now a year since you started operations. What is your assessment of the year in terms of the operating environment? GM: Our view is that the Zimbabwe business operating environment is improving and will continue to improve. We believe that what is critical in operating in this environment is to ensure that corporates have ideal optimal capital structure and avoid debt as a way of recapitalising their businesses. What we have seen in the market is that most local investors are prioritising avoiding dilution at the expense of running a business that is undercapitalised and with an improper capital structure.
SB: The shareholder profile of Brainworks includes African Development Corporation (ADC) at a time foreign investors are wary about government’s empowerment rules. How did you convince ADC to come on board at a time foreign investors are sitting on the fence? GM: Our view is that investment opportunities that this country offers are the catalyst for any committed and serious foreign investor to come and invest in Zimbabwe irrespective of perceptions on the environment. ADC has invested in Zimbabwe since 2009 when they partnered with us in Premier Banking Corporation Limited. Foreign investor confidence starts with local partners and it’s important to give comfort to our foreign counterparts on investment deals we consummate with them, as well as allaying negative perceptions on government policy.
SB: What does it mean for Brainworks to have shareholders such as ADC and local pension funds? GM: ADC and some local pension funds’ investment in Brainworks is indicative of confidence in the company and the strategy that we are pursuing. From a foreign point of view, ADC’s investment is also a strong sign of confidence for our country and the opportunities that it offers. The investment provides a strong foundation for our growth and development of shareholder value.
SB: You are venturing into the micro-finance business at a time the central bank announced a hike in minimum capital requirements to US$5 million for deposit taking organisations. Are you venturing into that line of business?
GM: We believe that the micro-finance sector has significant developmental impact for our economy if strong players with significant experience and deep pockets enter the market. Micro-finance requires access to credit lines and systems to handle the large number of micro-loans and we are excited at the depth and expertise that our foreign partners bring to our investment. We believe that a minimum capital base of US$5 million for this sector is reasonable and supportive of the business opportunity and we are at an advanced stage of achieving that level of capitalisation. We have just commenced operations with an initial capital injection of US$1 million and US$10 million in credit lines at final stages of being arranged. We expect the first US$2,5 million of the credit lines to be availed soon.
SB: What attributes do you have to venture into the already flooded insurance sector, where market share is controlled by the big players? GM: With the assistance of our foreign shareholder, ADC, we have invested a lot of time in identifying such kind of international operating partner that has potential to positively develop our insurance industry. We are looking forward to the successful completion of our licensing process with Ipec so that we can commence operations with our foreign partners.
SB: Who are the brains behind Brainworks? GM: The creation of Brainworks is a collective effort which includes management, the board and the founding institutional shareholders. All of us have been conscious about the need to build value for investors, primarily for local investors who lost significant value during hyperinflation and Brainworks Capital and its private equity investment approach is a product of that process.
SB: At a time some investors are wary of the empowerment laws, how have you managed to attract lines of credit? GM: Our investment philosophy of partnering with strong international investors in our investments has been a good formula in mobilising capital into the country and we believe that this trend will continue.
SB: Private equity funding is a new business here in Zimbabwe. How are you going to leverage on that and raise the capital required? GM: Most investment opportunities that Zimbabwe has to offer are best accessed through a private equity investment model so in that regard, we are pursuing one that has a good chance of success. I mean having a medium to long-term investment approach and being pro-active in managing investments as a shareholder and having effective board representation.
