Why the Africa and Indian Ocean platform sits in Port Louis

The Port Louis hub opened in the third quarter of 2023 with six people and one function: to hold and route capital between the origination markets of southern and eastern Africa, the pharmaceutical and data relationships of India, and the deployment markets of Europe and the Gulf. It was not opened to originate. Origination in South Africa begins when the Johannesburg office opens in 2024. The platform came first because the routing has to exist before the first position is entered, not after it has been realised.

The routing logic is arithmetic. A position entered in South Africa and realised in five years produces proceeds that face three choices: stay in rand, move to a European vehicle, or move to a Gulf co-investment vehicle. The Mauritian holding entity holds the position through a treaty-based structure that the jurisdiction's tax authority recognises, and the structure preserves the option to reallocate without a second change of control. The cost is an operating entity with substance: a resident director, a local administrator, audited accounts and a lease at Caudan Chambers.

Two positions are held through the platform at February 2024. The first is a minority stake in a veterinary vaccine producer in the Western Cape, entered in November 2023 at US$9 million alongside a local co-investor. The second is a receivables facility of US$4 million to a licensed crop-input distributor operating in three East African countries. Both are small. Both were chosen because the counterparties, the licences and the welfare standards could be verified on the ground by people the firm employs, not by agents acting for it.

India enters the platform through relationships rather than positions. The Information & Data division covers Indian information infrastructure and data analytics from Singapore, and the Mauritian entity provides the holding route when a position is taken. The firm's correspondent relationship in Mumbai, Elephanta Mercantile Bank, was established in 2023 for settlement in rupees. No Indian position had been entered at the date of this note. The route is built, the pipeline holds four names, and the Investment Committee has approved none of them.

The Johannesburg office, planned for the second quarter of 2024, adds the origination that the platform was built to serve. Its remit is animal-health and agri-science origination in southern Africa, rand-denominated commercial finance for exporters, and coverage of founder families. Its initial headcount is four. The Nairobi representative desk, planned for 2025, will refer East African aquaculture, dairy and crop-input opportunities to Johannesburg and Port Louis. Neither office originates without the welfare standards that travel with the capital under the Ethical Technology Charter.

The region's figures are the smallest in the group and will stay small for some years. Client portfolio attributed to the region at 31 December 2023 was US$5 million. The group figure was US$468 million. That gap is the point. The platform exists so that capital earned in Australia, the United States or Europe can enter an African position when the four tests are met, and leave it for a better use when they are not. Capital mobility needs a road before it needs a destination, and Port Louis is the road.

Published 2024-02-13 by the Private Equity division. Research is prepared for eligible counterparties and does not constitute advice.