SOWETO INVESTMENT CORPORATION (PTY) LTD
 
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Our Business
 

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Akayi™ Capital
is an Africa focused Private Equity Firm and one of Africa's most diversified alternative asset management
firms. We manage funds which invest across several segments and core industries throughout Africa. Our knowledge of Africa, scale, and brand enable us to access opportunities in virtually every market on the Continent.
Akayi™ Capital Private Equity has investment professionals in the following African Economic Communities (AEC):

 map

CEN-SAD
Founding states (1998):

Joined later:

COMESA
Founding states (1994):

Joined later:

Former members:
ECOWAS
Founding states (1975):

Joined later:

Former members:
UEMOA-94: UEMOA state from 1994

UEMOA-97: UEMOA state from 1997
WAMZ-00:
WAMZ state from 2000
WAMZ-10:
WAMZ state from 2010

EAC
Founding states (2001):

Joined later:

ECCAS
Founding states (1985):

Joined later:

Former members:
CEMAC-99: CEMAC state from 1999
SADC
Founding states (1980):

Joined later:

SACU-70: SACU state from 1970

SACU-90: SACU state from 1990

IGAD
Founding states (1986):

Joined later:

UMA 1
Founding states (1989):


Our Corporate Private Equity fund is organized by geography or industry and advised by separate teams of professionals who live and work in the markets where they invest. We believe this diversity of funds allows us to deploy more targeted and specialized investment expertise and strategies, and offers our fund investors the ability to better tailor their investment choices. Our Corporate Private Equity teams have two primary areas of focus:
 

  • Buyout Funds - buyout teams advise a fund that focuses either on a particular geography or a particular industry.
  • Growth Capital Funds - growth capital fund is advised by regionally-focused teams in West, East, Central, and Southern Africa.
   

REAL ASSETS

Akayi's Real Assets segment, will be established with our first U.S. real estate fund and will have several investment professionals, carry funds, NGP management fee funds focused on real estate, infrastructure, energy, and renewable resources. Our real estate funds will pursue real estate investment opportunities in Africa and BRICS countries. The funds will focus on acquiring single-property opportunities rather than large-cap companies with real estate portfolios. Our energy and renewable resources activities will focus on buyouts, growth capital investments, and strategic joint ventures in the midstream, upstream, power and oilfield services sectors, as well as the renewable and alternative sectors of the energy industry.

GLOBAL MARKET STRATEGIES

Akayi™ African Market Strategies segment, will be established with our first high yield fund, will have a group of funds that will pursue investment opportunities across various types of credit, equities, alternative instruments, and currencies, commodities and interest rate products and their derivatives. These funds will have several  investment professionals and will include:

  • Carry Funds - funds in three different strategies: distressed and corporate opportunities; corporate mezzanine (targeting middle market companies); and energy mezzanine opportunities (targeting debt investments in energy and power projects and companies).
  • Hedge Funds - We will establish an Akayi™ Asset Management LLC in order to have long/short credit hedge funds focusing on the African high grade and high yield markets. In addition, we will create Akayi™ Emerging Sovereign Group LLC, in order to establish emerging markets equities and macroeconomic hedge funds. Additionally, we will create Akayi™ Commodities, LLC, to create funds which will primarily focus on commodities investment.
  • Structured Credit Funds. Our structured credit funds will invest primarily in performing senior secured bank loans through structured vehicles and other investment products.

 Private Placement

Akayi™ Capital intends to raise $250million, through a large network of institutional, family office, and high-net worth investors who have appetite for the continent. The vehicle will attract commitments from both global and Africa-based private and institutional investors, including the African Development Bank, Industrial Development Bank, and South Africa's PIC. The Akayi Team will spread its capital across 15 African countries, primarily targeting buyout and growth capital deals. Akayi plans to back large national companies seeking intra-regional market expansion and vertical integration across countries. Akayi will have hubs in South Africa, Nigeria, Ghana, Kenya, Ivory Coast, Angola, and Zambia

Sales & Trading                                                                                            

Fixed Income
The firm will also offer a full suite of fixed income and equity sales and trading capabilities. Akayi™ will be active in municipal, corporate, and asset backed securities as well as in performing, non-performing, and re-performing loans. In addition, the firm will advise small, medium-sized, and large mortgage originators on growing their origination business, dealing with the government agencies and finding take out partners for mortgage servicing rights and new loan production.


Akayi™ will also tap into the vast network of professionals to help distribute and source various products in this space. For smaller deposit institutions, Akayi™ will offer access to larger buy side and sell side institutions. Akayi will distribute fixed income products to small and medium sized firms that are below the typical asset size for larger institutions. Akayi will provide analytics, portfolio optimization, balance sheet analysis, market color, as well as top to bottom solutions by combining its proficiencies in capital markets with its investment banking unit. Our sales and trading group will compete on the total value we bring to our clients, not simply on price.    

Equities
The Akayi™ Equities Group will be committed to top-tier service and providing best execution for institutional clients. We will be active in Africa's listed stocks, ETF’s, equity and index options. Our capital markets and corporate access teams will always be looking to provide great syndicate and access opportunities for our clients.
We will work with best-in-class software and tools in order to provide clients with the services they deserve. In addition to exchanges, we will   have access to over 25 dark pools and utilize dozens of algorithms to meet client needs for liquidity with minimal market impact. Our focus will be on delivering the best results for our clients – we are confident that if we consistently outperform for our customers, their success will be our success. The Akayi™ Equity Trading group will be committed to working with clients to meet their long-term goals.
   
Investment Banking                                        
Akayi™ will provide expert, objective and conflict-free advice on mergers and acquisitions, private placements, and corporate finance issues for privately-held businesses, publicly-traded companies and financial sponsors. Akayi’s investment banking team will also be uniquely skilled in private equity and structured products transactions as agent/underwriter, lender and principal. The team will have a tremendous focus on capital intensive industries and financial sponsor coverage.

  • Financial Services
  • Energy and Natural Resources
  • Real Estate, Lodging and Gaming
  • Capital Asset Management
  • Project Finance & Infrastructure
  • Financial Advisory Counsel 

Financial Advisory & Consulting

Akayi™ will offer independent financial advisory and consulting services to the National and Provincial governments and    
financial institutions such as investment and commercial banks, and investors in the areas of portfolio valuation and advisory 
services, transaction advisory services and financial consulting. Our core strengths are in housing, MBS, MBS     
securitizations, structured products, asset and loan sales, risk management, pricing and valuation of fixed income portfolios. 
We will work with senior executives, investors, management teams and business owners worldwide.

Capital Introduction
Akayi™ will provide capital introduction services for hedge funds and private equity funds. The firm will create a team of professionals that will be focused on this effort and maintain a large network of institutional, family office and high-net worth investors. Utilizing the firm’s extensive global network, Akayi™ will able to make targeted introductions for asset managers to leading investors. Capital introduction services will include:

  1. Pre-marketing consultation including materials review and creation
  2. Fund raise strategy, planning and positioning services
  3. Targeted introductions to potential capital sources
  4. Other marketing support services                                                                                                                                                                                                                                        

RISK

1. Foreign Exchange - FX



                                                                                           

The Johannesburg Stock Exchange (JSE) has launched a currency index to track the performance of the South African rand against five global currencies. The South African Rand Currency Index (RAIN) tracks the rand’s movements against the euro, dollar, pound, yen and China’s yuan. The weighting of each currency in the index will be calculated using trade data from the South African Revenue Service. The currency index will be calculated and distributed by the JSE on a daily basis and will be listed on the Yield-X platform. “The objective is to summarise the effects of rand appreciation and depreciation against foreign currencies in the competitiveness of SA goods relative to goods produced by South Africa’s main trading partners,” said the JSE. RAIN has been structured to enable the investors to gauge the financial market pressure on the Rand, and can therefore also be used as an FX risk management tool, the JSE said.

2. Regulation

Africa has historically been profiled as a high-risk investment region, but the perception of the level of risk is significantly higher than reality, according to a number investor’s active in the region. The investors were speaking at the Africa Investor conference, on March 24 in London which covered both public and private equity investments across the Africa. The speakers agreed that although committing capital to the continent carries some risks, the challenges are not very different from those posed by other emerging market regions.

The speakers admitted that political risk is still a concern across a number of African nations, but cited a number of innovative ways of mitigating the risk. One buffer that the investors are increasingly looking at is the use of World Bank’s Multilateral Investment Guarantee Agency (MIGA) contracts. A typical MIGA contract is structured to protect investors against the risks of expropriation, war and civil disturbance and breach of contract. The protection also covers the non-honoring of sovereign financial obligations and transfer restriction, including inconvertibility.

3. Structured Products

Standard & Poor (S&P) has launched three new benchmark and investable indices –  S&P Pan Africa, S&P Africa Frontier and S&P Africa 40. The new indices are designed to provide investors with access to Africa’s developing equity markets, benchmarking the performance of these markets. The S&P Pan Africa Index covers Botswana, Cote D' Ivoire, Egypt, Ghana, Kenya, Mauritius, Morocco, Namibia, Nigeria, South Africa, Tunisia and Zimbabwe. The S&P Africa Frontier Index covers eight smaller frontier markets from sub-Saharan Africa, including Botswana, Cote d’Ivoire, Ghana, Kenya, Mauritius, Namibia, Nigeria and Zimbabwe. The indices aim to capture 80% of the total market capitalization of each country, and thus providing investors with a benchmark on African markets.

The S&P Africa 40 Index is designed to provide tradable exposure to 40 ofthe largest and most liquid companies that operate purely in Africa. To qualify for inclusion, Companies must be domiciled in Africa or have the majority of their assets and operations in Africa. The index is dominated by companies from the financial, materials, telecommunications and industrials sectors, with MTN Group (SouthAfrica), Orascom Construction (Egypt), First Quantum Minerals (Zambia) and Standard Bank Group (South Africa) among the largest constituents.

The S&P Africa 40 recorded returns of 36.35% from March 2007 to March 2008, and 49.78% annualised on a three year basis. The S&P African Frontier Index gained over 52% for the three years up to 2008 while the S&P Pan Africa Index gained over 18% in the same period. “The strong performance of many African markets has made the region an increasingly attractive investment opportunity. These three new indices provide investors with a unique exposure to the African equity markets,” said Alka Banerjee, vice president of portfolio services at Standard & Poor’s.            

Tapping Africa’s Growth Opportunities



When Africa proved resilient to the 2009 global downturn, companies without a presence in the continent started taking another look, and those already selling there continued to expand.  By Nikhil Prasad Ojha, Matthew Meacham and Rohithari Rajan of US-based global consulting firm Bain & Company. Heineken, with a long history on the continent, acquired two factories in Ethiopia just last year. Meanwhile, newer entrants from other emerging markets such as India have significantly stepped up their presence across various African markets, with Godrej having made four acquisitions in Africa, as has Marico, over the past seven years.

Several factors contribute to the rosier picture of Africa today. The continent’s GDP of $1.5 trillion is similar to that of Brazil, India or Russia, and is expected to grow faster than most non-BRIC emerging markets. While instability still plagues some nations, overall, political risk has diminished over the past 20 years. And, even though Africa remains fragmented with over 50 countries, the emergence of trading blocs has dramatically improved the business environment. Moreover, a new consumer class is emerging so quickly that total consumer spending is expected to double by 2020. Consumer product companies not yet in Africa need to quickly reassess their strategy.

According to Euromonitor and the African Development Bank, the continent’s middle class already accounts for one-third of the population. In eight years, five major countries alone will have 56 million middle-class households with disposable incomes totaling more than $680 billion. Consumption spending per capita matches India or China. Combined, these facts present a compelling picture, despite the challenges of the continent. Growth opportunities are massive for companies that can overcome hurdles like poor infrastructure and a talent shortage. Another challenge: the opportunities are quickly attracting competitors, who are enjoying strong profitability. More than 70% of the top 50 global consumer packaged goods makers are already present.

For 20% of these companies, Africa represents over 5% of global sales – as much as 14% for Diageo and 10% for Parmalat. Meanwhile, global leaders face emerging market competitors such as Singapore’s Olam and Saudi Arabia’s Savola Foods and India’s Marico, Godrej Consumer ProductsBSE -0.59 % and DaburBSE 2.98 %. The intensifying competition is narrowing the window of time for companies to successfully enter, expand or shape the landscape to their benefit. But before moving, it is critical to understand a few characteristics of this unique continent.

Deciding where to invest

Foremost among the considerations is where to enter and expand. In most emerging markets, you can carefully plan expansion by first establishing yourself in the biggest markets, then in primary regions or cities, and finally moving to the smaller regions or towns. But in Africa, following such a logical sequence may prove difficult.

You may start in the 10 markets that, according to Euromonitor, account for 75% of GDP (South Africa, Egypt, Nigeria, Algeria, Morocco, Angola, Libya, Sudan, Tunisia and Kenya). Depending on your category, you may also prioritize markets from the next tier. For its part, Marico first entered the hair care and styling market of Egypt, acquiring local brands Fiancee and HairCode and then moved to South Africa, with its purchase of the consumer division of Enaleni Pharmaceuticals, followed by the acquisition of Ingwe/Medi-Pac range of healthcare products from Guideline Trading.

In South Africa, Marico’s operations grew 33% in the fiscal year 2010-2011 over the previous year, and continued to see double digit growth in 2011-2012 with revenues from the market crossing one billion rupees. But what’s often critical for success is the flexibility to jump on opportunities, even if they arise unexpectedly. Africa’s fragmented markets, quickly changing political and regulatory environment and shortage of local incumbents with scale mean global players need to act swiftly to acquire available promising companies or seize the chances opened up by privatization.

For example, Ethiopia was not the top priority market for Heineken. Even so, the company recently snapped up two Ethiopian breweries when they became available. The lesson: prioritize markets, screen them for rare opportunities, and be agile when they arise.

Partnering for position and profits

A second consideration is how independent you can afford to be in Africa. Few consumer goods companies have succeeded on their own. Partnerships and acquisitions are a fact of life. For instance, since 2005, Indian companies have acquired or invested in at least 79 African companies. In 2010, deals by Indian players accounted for one-third of the total value of deals in sub-Saharan Africa.           

Winning companies look for specific opportunities: brands with strong competitive positions or robust equity with local consumers, companies with route-to-market capabilities, or players offering production capacity or access to supply. Godrej deftly followed the strategy of pursuing dominant brands: It acquired Rapidol, Kinky and Tura, all of which were leaders in the market.

Winners also understand that the availability of targets varies among markets and categories. The average acquisition is usually smaller in size and higher risk in Africa than elsewhere. To minimize risks, many players start by holding the majority position in joint ventures, with an out-clause in case the venture fails. As they learn more about the target, they can opt to increase control or move to a full-blown acquisition. Godrej acquired 51% of Darling Group, a leading player in hair extension products, in 2011, and plans to raise its stake to 100% over the next three to five years.

But acquisitions come with their own set of challenges. For example, given the relative lack of reliable market data as well as financial and business transparency, acquirers need to apply more practical-and basic-due diligence, including tapping local contacts and running primary consumer research.

What to sell?

A final consideration: which categories, products or brands should you sell? As in many other developing markets, instead of entering local categories to gain ground, firms can push their existing core categories and brands. To launch consumption leaders sometimes invest in consumer education. UnileverBSE 1.60 %, for example, grew the market for its toothbrushes and toothpaste in Nigeria with its “Brush Day and Night” campaign. The company educated the public about oral hygiene with easy-to-remember visuals in the backs of vans or in rural area schools, building robust growth over the past decade.

STOCK EXCHANGES IN AFRICA

Economy Exchange Location Founded Listings Link
West African Regional Stock Exchange Bourse Régionale des Valeurs Mobilières* Abidjan ( Côte d'Ivoire) 1998 39 BRVM
 Algeria Algiers Stock Exchange Algiers 1997 3 SGBV
 Botswana Botswana Stock Exchange* Gaborone 1989 44 BSE
 Cameroon Douala Stock Exchange* Douala 2001 2 DSX
 Egypt Egyptian Exchange* Cairo, Alexandria 1883 EGX
 Cape Verde Bolsa de Valores de Cabo Verde* Mindelo BVC
 Ghana Ghana Stock Exchange* Accra 1990 34 GSE
 Kenya Nairobi Securities Exchange* Nairobi 1954 50 NSE
 Libya Libyan Stock Market* Tripoli 2007 7 LSM
 Malawi Malawi Stock Exchange* Blantyre 1995 8 MSE
 Mauritius Stock Exchange of Mauritius* Port Louis 1988 88 SEM
 Morocco Casablanca Stock Exchange* Casablanca 1929 81 Casa SE
 Mozambique Bolsa de Valores de Moçambique* Maputo 1999 BVM
 Namibia Namibia Stock Exchange* Windhoek 1992 NSX
 Nigeria Abuja Securities and Commodities Exchange Abuja 1998 ASCE
Nigerian Stock Exchange* Lagos 1960 223 NSE
 Rwanda Rwanda Stock Exchange Kigali 2008 4 RSE
 Seychelles Seychelles Stock Exchange* Victoria 2012 10 SSE
 Somalia Somalia Stock Exchange Mogadishu 2012
 South Africa Johannesburg Stock Exchange* Johannesburg 1887 410 JSE
 Sudan Khartoum Stock Exchange* Khartoum KSE
 Swaziland Swaziland Stock Exchange* Mbabane 1990 10 SSX
 Tanzania Dar es Salaam Stock Exchange* Dar es Salaam 1998 17 DSE
 Tunisia Bourse des Valeurs Mobilières de Tunis* Tunis 1969 56 BVMT
 Uganda Uganda Securities Exchange* Kampala 1997 17 USE
 Zambia Agricultural Commodities Exchange of Zambia Lusaka 2007 ZAMACE
Lusaka Stock Exchange* Lusaka 1994 16 LuSE
 Zimbabwe Zimbabwe Stock Exchange* Harare 1993 81 ZSE

African Economic Community
Pillars
regional
blocs (REC)
1
Area (km²) Population GDP (PPP) ($US) Member
states
in millions per capita
AEC 29,910,442 853,520,010 2,053,706 2,406 54
ECOWAS 5,112,903 300,000,000 703,279 1,748 15
ECCAS 6,667,421 121,245,958 175,928 1,451 11
SADC 9,882,959 233,944,179 737,335 3,152 15
EAC 1,817,945 124,858,568 104,239 1,065 5
COMESA 12,873,957 406,102,471 735,599 1,811 20
IGAD 5,233,604 187,969,775 225,049 1,197 7
Other
African
blocs
Area (km²) Population GDP (PPP) ($US) Member
states
in millions per capita
CEMAC 2 3,020,142 34,970,529 85,136 2,435 6
SACU 2,693,418 51,055,878 541,433 10,605 5
UEMOA 1 3,505,375 80,865,222 101,640 1,257 8
UMA 2 5,782,140 84,185,073 491,276 5,836 5
GAFTA 3 5,876,960 166,259,603 635,450 3,822 5
1 Economic bloc inside a pillar REC

2 Proposed for pillar REC, but objecting participation
3 Non-African members of GAFTA are excluded from figures

  smallest value among the blocs compared
  largest value among the blocs compared

Source: CIA World Factbook , IMF WEO Database


SECTORS

  • Agriculture & Agro-industries
  • Consumer
  • Energy & Power
  • Education
  • Financial Services
  • Healthcare
  • Logistics & Transport
  • Media & Television
  • Infrastructure
  • Real Estate
  • Oil & Gas
  • Technology
  • Telecommunications
  • Hospitality & Tourism
  • Water Supply & Sanitation
  • INFRASTRUCTURE

    The need for infrastructure improvements in Africa is critical. Millions of lives are threatened every day due to lack of clean water or safe sanitation. Investment in infrastructure projects forms a key part of Akayi™ Capital institutional strategy.
     
      









       


       

          








       



    Overall progress

    Activities
    Regional bloc Free Trade Area Economic and monetary union Free Travel Political pact Defence pact
    Customs Union Single Market Currency Union Visa-free Border-less
    AEC proposed for 2019 proposed for 2019 proposed for 2023 proposed for 2028 proposed for 2028  ?
    CEN-SAD proposed for 2010
    COMESA in force 1 proposed for 2008  ? proposed for 2018
    EAC in force in force proposed for 2015 proposed for 2012 proposed  ? proposed for 2015
    ECCAS CEMAC in force in force  ? in force
    Common proposed for 2007 ? proposed for 2011 ? proposed proposed proposed  ? in force
    ECOWAS UEMOA in force in force proposed[4] in force
    WAMZ  ? proposed for 2012
    Common proposed 2 proposed for 2007 proposed[5] proposed in force 1 proposed proposed in force
    IGAD
    SADC SACU in force in force de facto in force 1  ?
    Common[3] proposed for 2008 3 proposed for 2010 proposed for 2015 proposed for 2016
    UMA

    1 not all members participating yet
    2
    telecommunications, transport, and energy - proposed
    3 sensitive goods to be covered from 2012

    AKAYI CAPITAL 
       [Terms]

    Name:                           Africa Focused Investment

    Strategy:                Focused on projects in the developing countries of Africa and the emerging
                                    markets

    Jurisdiction:                 New York

    Liquidity:                     1 year lock, early redemption penalty for 2-3 years from subscription, no penalty     
                                          for > 3 years  

    Target Fund Size:       $250 million

    Min. Investment:        $50,000

    Management Fee:        2%

    Performance Fee:         20%

    Early Redemption

    Penalty Fee:                 8%

    Hurdle Rate:               10%

    Carried Interest:         20%

    Term:                            3-7 years from the Initial Closing Date

    Administrator:            State Street Corporation (NYSE: STT)

    Prime Brokers:            Merrill Lynch/Wells Fargo

    Performance Fee:         20%

    Auditors:                      Mitchell & Titus

    Return on Investment:   Estimated between 20% and 25%

     
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                                                                     PPM

    A detailed private placement memorandum is available to help Accredited Investors fully evaluate the risks and opportunities of this investment.

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     The private placement memorandum is updated from time to time. Please be sure to check for the most current copy prior to your final investment decision.

              

     
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                                                       AKAYI™ CAPITAL
                                              Africa Focused Private Equity