Snapshot: Cauris talks opportunities in West Africa

As Cauris Management prepares to return to market next year with its third fund, partner Jean-Marc Savi de Tové talks to PEI about the untapped potential in Francophone West Africa.

Based in Abidjan, Cote d’Ivoire, and Lomé, Togo, Cauris Management is currently investing its third fund, the 2011-vintage €60 million Cauris Croissance II, in SMEs in Francophone West Africa.

The fund will be making its final investments over the coming months, and Cauris intends to hit the fundraising trail again next year. While the strategy and geography are likely to remain the same, the target size has yet to be set, although it is likely to be larger than the current fund.

As the firm prepares to come back to market, partner Jean-Marc Savi de Tové talks to PEI about the opportunity set in Francophone West Africa and the “slow revolution” among business owners.

What are the kinds of opportunities that you’re looking for?

We tend to look at regional plays. A company that comes from Mali or Cote d’Ivoire but is very keen on expanding geographically — which is not easy. We do a lot of work in terms of understanding how they’ve been operating and whether we think that the way they are organised internally can be replicated across borders. Because the region is small, the countries are small, people underestimate the amount of work that it takes to take one company that is successful in its original country into another country.

We’re talking about SMEs, maybe a bit larger than SMEs, but at the end of the day your human resources are scarce. So that’s what we focus a lot on.

One example is the Azalaï Hotels, for instance, that we backed out of Mali. They have four hotels in Mali, one in Burkina [Faso], one in Benin Republic, we are about to finish the construction of a hotel in Cote d’Ivoire, and we are refurbishing a hotel in Mauritania as well.

Are there any regulatory issues you run into when expanding businesses into new countries?

Yes and no. The good thing about where we are in West Africa, especially Francophone, is that it’s the same language, French, it’s the same currency, the CFA Franc, so you don’t have to think about currency exchange. The laws are exactly the same, it’s called OHADA law, it covers 17 countries in Africa so it covers a pretty large region. If you go from Nigeria to Ghana the laws are not the same at all.

Is it better to be buying or selling in Francophone West Africa at the moment?

Both. It’s very good to sell at the moment because a lot of people are starting to look at West Africa. Obviously there are a number of investors that have started investing in Nigeria five years or so ago, but now they’ve realised that in West Africa you have another 15 countries which together pretty much represent the size of Nigeria. And within those 15 countries you have probably eight that are very homogenous in terms of speak[ing] the same language, [having] the same currency, [having] one single central bank, one single business law, so it becomes a bit more easy to do business and go cross-borders.

Are Cauris’ funds the right size to take advantage of the opportunity set?

I believe so, because I think the companies that are there are not that big. People don’t like the space we’re in because it requires a lot of work and it doesn’t bring, in terms of amount, too much carry. So the big players will not look into the space we’re in. But we like it because we’re locals and the idea for us is not to manage billions of dollars, the idea is to manage hundreds, so I think we’re on track for that, and I think we’re ideally placed, because there are quite a large number of companies in our space.

Are founders and entrepreneurs becoming more willing to sell their businesses?

People are not holding on to their assets anymore, they see it as just a financial asset, ‘I have some operational skills, I make it happen, but then I’m happy to sell and to move on to a different life’. And that, to be honest, 10 years ago did not exist. There’s a shift. Something is happening. Those things take time, obviously, but there’s a silent, slow revolution in the mind-set of people.