Investment strategy and process
Investment Strategy
Africa has significant agricultural resources and mining reserves. Exports from these sectors are increasing significantly, driven by the accelerating needs of newly industrialising, high growth nations around the globe. As a result, these economies are having a profound impact on Africa's strategic importance, which is now accelerating also. The World Bank estimates that annual capital investment in infrastructure would need to double in order to support the targeted real growth rate in Africa. This creates a very significant opportunity for inward investors.
PME intends to invest in the transportation, telecommunications, energy, water and sanitation and infrastructure-related real estate sectors and to form part of public-private partnerships. The Investment Manager intends to ensure diversification by limiting the amount of investment in terms of country, sector and project. It anticipates that once PME is substantially invested, it will hold approximately 10 to 15 infrastructure or infrastructure-related projects.
PME will invest through special purpose companies or other entities. It will seek to obtain controlling interests or significant minority interests so as to carry board representation and/or meaningful investor protections.
Process
Investment opportunities are sourced by the management team through referrals, direct approaches and general development strategies employed within the target sectors. The number of such opportunities is enhanced by PME's extensive network of contacts and those of its Board of Directors. Accordingly, PME envisages that it will generate a consistent pipeline of potential investments.
If a prospective investment develops to the point of becoming sufficiently attractive and falling within PME's quality guidelines, a concise overview of the investment opportunity will be prepared and presented to the PME Board. An investment will not be recommended unless its rationale clearly fits within the scope of the portfolio. A new transaction will then only be pursued if a majority of PME's Board approves it.
Once that approval is received, a detailed due diligence and feasibility study will be performed by the management team, supported by its external consultants: firms of accountants, lawyers and sector specific experts. This process will aim to resolve the best terms and structure of the proposed investment with the objective of minimising risk and maximising return.
In parallel with, or on completion of, negotiations, a final investment submission is made to the PME Board. It details the business case, the results of the due diligence and feasibility study, and the terms of investment. With a majority Board approval, the investment can be committed.
The management team's pre-disbursement report ensures that conditions precedent have been satisfied, and that all legal documentation and any regulatory issues have been complied with. The portfolio company's business strategy and its own investments are monitored regularly, both formally and informally, by our management team. PMEIM will be deeply involved in direction and strategic decision making, as this process is essential in ensuring that its projects develop and grow.
The PME Board will review PME's investment portfolio on at least a quarterly basis and will supervise the overall adherence with the fund's investment objective and policies.
Exit strategies will include sales to strategic or financial investors, listings on local, regional and/or international exchanges or sales to existing shareholders. Should a good opportunity to exit an investment present itself, the management team will prepare and present a realisation report to the PME Board for approval.
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