BusinessDay

Rich countries keener to fund private equity firms than African aid programmes – Arlove

Richard Arlove, regional CEO, AMEA at Ocorian, a fiduciary and corporate services provider, headquartered in New Jersey and with 700+ staff spread in 11 jurisdictions across in Europe, Asia, Middle East and Africa. The company has a representative office in South Africa and in Ivory Coast. The main office for the Africa, Middle East and Asia region is in Mauritius where it was previously known as ABAX. Arlove tells BusinessDay’s ISAAC ANYAOGU how the shift from aids to private equity by rich countries creates opportunities for Nigeria and other African countries.

 

What is your philosophy at Ocorian, what do you set out to achieve?

Ocorian is present in international financial centres with the objective of adding value to our clients through innovation. Our sense of purpose is in how we enhance enterprise value and protect investor value for our clients through the use of financial centres.

 

Secondly, we help to facilitate the flow of funds in and out of emerging markets. When you think of development of the African continent, it is my view that a lot of development is how do we facilitate the flow of funds. It is about intra Africa, it is really about helping to make funds flow to entrepreneurs. When they go outside the market and expand, we think of how to protect and enhance their value.

 

What practically things do you do to enhance and protect value for your clients?

First of all, we listen to the entrepreneurs. Let’s say an entrepreneur has developed a mobile platform capable of providing mobile banking. So what is going to happen is that the entrepreneur has launched his platform and is quite successful in his country. Now he realises that there are many other countries that requires such products and he wants to expand there and other countries. As soon as he goes international, he can have a number of issues. So when we talk to the entrepreneur, we understand what it his business model and what we call the component of value, because when you do business, you may not have profit yet but you can still have a lot of value.

If you look at Facebook, they did not have profit for a long time but they still had value. So what are these components of value and how do you think about the structure to open up your value? The value might be intellectual, because you have to develop the platform.

 

So you have developed the mobile money business and then fast forward to ten years and the value has risen to say $100 million. We can structure a Mergers and Acquisition deal, and the sale can happen through a structure we have created to facilitate it. This is where an international financial centre comes in.

 

It might also be that you need your central procurement to be somewhere because you are buying many things from different countries. So maybe Nigeria is not the best place to have for such central procurement, maybe in Dubai and maybe for the protection of your I.P , you need to be in a country like Mauritius, or London. Now if you put it in London, where is your server? Where do you recognise your revenue, do you start to recognize your revenue online? So these are the questions that we ask the entrepreneur as we look for how best to structure it.

 

You recently launched your platform in Nigeria, what are your plans for the market?

 

Well you see Ocorian, previously called ABAX, has been working with many companies in Nigeria – very large companies, entrepreneurial types, people who need the structure of a financial centre. So we already have a history with Nigeria clients. On one hand those that are within Nigeria and outside and also those of them coming into Nigeria.

 

A lot of business in Africa is now through private equity funds. Years ago a lot of African countries were receiving aids from richer countries but many have realised these aids effectively goes into the pockets of politicians and do not end up in projects they are intended. So there is a shift from aids from richer countries towards setting up private equity funds and development financial institutions investing in projects in Africa.

These private equity funds need to be domiciled somewhere and Mauritius has come out in the world over the past ten years as the prominent place where private equity funds for Africa is domiciled because it is an African financial centre with an eco-system that works. So a lot of private equity funds are in Mauritius and we administer a number of these funds.

 

Having travelled to many countries in Africa, what is your assessment of corporate governance in the continent since this is an important factor for private equity firms, how does it compare with other western countries?

 

Richard Arlove, regional CEO, AMEA at Ocorian, a fiduciary and corporate services provider, headquartered in New Jersey and with 700+ staff spread in 11 jurisdictions across in Europe, Asia, Middle East and Africa.

I think is not yet deeply rooted in Africa. I think this is often the situation. We have this entrepreneur who has started his business from savings or capital from family or friends. Soon he wants to expand. He will turn to a bank or private equity firm for finance. Then comes the problem of corporate governance because he will be told to produce his books and he may have several. Obviously, the financier will be hesitant providing capital.

 

So this is the main problem with corporate governance in Africa. Many businesses have grown a family business and the methodology of business was good 10 or 20 years ago but they are not appropriate today.

 

When you want grow an international business and access financial capital and be sustainable, governance is essential. But obviously governance is a pain. Many prefer to do their business their way. but if you want to grow and be sustainable, you need corporate governance, and this is where we come in.

 

If you want your business to be part of an international finance centre, then you need to have an independent board, you need to have audited financial reports, you need transparency and all these is what corporate governance entails. It is not just about board composition, it is how an investor can trace his money from everything  in your business, down to where it goes and how it comes back to him without leakages. That is what corporate governance is all about and this is where we come in to advise and help execute this flow of funds in and out of the business.

 

So in my view, with better corporate governance practices in Africa more funds will flow into businesses here. Many PE firms today have money lined up, saying I want good projects to invest in and you have many people needing these funds, but there is no match. We at Ocorian, call it financial gap. We tell people that if you want to access financial capital, you need governance capital.

Speaking of capital, do you think Chinese debt is actually a threat to the development in Africa?

 

It is a threat if we don’t make it an opportunity. So, the continent is very attractive to others because of its numbers. There is huge infrastructure required and it has vast resources. Hence, we must ensure we benefit from business with China because we are in a strong position.

 

I believe the Chinese have been pragmatic; they have their own way to the business which is different from what the Europeans have. The Europeans colonized our countries and we must be aware that there are a lot of bad things out of colonization’s however, there have been some few good things though. We don’t want to be colonized again we have been through that so how are we going to go through in the position where we are really in the positions were we are, play the Chinese, the Indians, the Europe and the Americans in a sense one against the other in other to gain from it. We can do that by playing according to our rules by allowing China to help developed our countries but we must play by our rules.

 

I will give you an example of Mauritius was I came from. In the late 70s and early 80s, the Chinese were looking for a place to build their textile because they are afraid that the Chinese will take over from the UK in 1997. This was when Mauritius now said why not in Mauritius because we got the free trade agreement with Europe, we got the electricity, we have got the cheap labour, and people are unemployed because the unemployment rate was about 20 per cent so come over. They came, we learnt from them and today there is no Chinese doing textile anymore the grains are now Mauritian grains, designed by Mauritians sold in Europe and in the UK and in The US and sold in South Africa.

 

So what we did, was to allow the Chinese in, learnt from them, they make their profit and create a new breed of entrepreneurs and industrialization and now they are gone, we are doing our own good business. So that is a small example of what can be done and if you think about the development of China in many countries, this is what they have done.

 

 

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