DPI has been investing growth capital in Africa since 2007. How has investor sentiment toward the region evolved since your inception and how is that reflected in your LP base?
In the early 2000s, the “Africa Rising” narrative, catalyzed by high-digit growth rates and greater political and macro-economic stability across the continent, led to increased positive sentiment among international investors and asset allocators, driving them towards African private equity. In recent years, the outperformance of developed markets, both public and private, combined with macro-economic volatility in various emerging markets, has dampened investor interest in the region.
Despite the changing market dynamics, DPI has maintained a strong track record of scaling businesses through up and down cycles, which, coupled with our long-term commitment to impact, has helped us attract a robust and diverse investor base that spans North America, Europe, the Middle East and Africa.This includes global asset allocators, from sovereign wealth funds, pension funds and development finance institutions, to impact investors and family offices. That said, the investor base which was becoming increasingly private sector driven now has a larger percentage of DFI LPs than 10 years ago, although we believe that this may change again in the next few years.
You recently joined forces with CDC and EBRD to create Kelix Bio (previously Zanzibar), a pan-African biopharmaceutical platform seeded by your acquisition and combination of Egypt’s Adwia Pharmaceuticals and India’s Celon Laboratories. Please describe the projected impact of this investment and the opportunity it represents for investors.
We established Kelix Bio (previously Zanzibar), along with the CDC Group and the European Bank for Reconstruction and Development, to facilitate the delivery of essential and affordable therapeutic pharmaceuticals to key markets across the continent and to broaden access to life-saving drugs. Kelix Bio plans to deploy up to USD750m to execute a clear acquisition strategy and a strong pipeline in Africa.
While healthcare systems across Africa continue to improve, with increasing state and private investment in core medical infrastructure, large parts of the population still lack access to essential and affordable pharmaceuticals. As domestic pharmaceutical industries are still underdeveloped in many regions, pharmaceutical production across Africa remains low, with the continent importing more than 80% of consumed prescription and over-the-counter drugs.
The platform, the first of its kind in Africa, provides investors with the opportunity to back a solution that addresses the increasing healthcare demands of the region and to invest in select assets across core, large markets where primary care infrastructure is expanding. In addition to expecting a high commercial return from this investment, DPI expects Kelix Bio to reduce costs to the African consumer in pharmaceuticals by 50% and deliver pharmaceuticals to parts of Africa that currently do not have access to these products.
In September 2020, DPI ADP III was chosen as the first 2X Flagship Fund for its commitment to gender equity. How does gender diversity both at the fund and portfolio level translate to commercial returns?
DPI has a long-standing commitment to advancing women’s economic empowerment and promoting gender equity at the firm itself, as well as within our portfolio companies. At DPI, we see that gender equity often leads to higher performance and better employee engagement, with gender-balanced management teamsoften demonstrating 10-20% higher returns.[1]
DPI is proud to be a woman-led firm and our commitment to gender diversity is reflected internally with strong representation of women in key roles. Across the firm, 49% of all employees are women. Women also make up 33% of both Partners and members of the Investment Committee.
As a firm, we believe that our diversity has been instrumental in changing how our team, at all levels, perceives all decisions, from hiring and sourcing to working with our portfolio companies. We have also recently launched a firm-wide unconscious bias training program, as well as senior executive coaching and formal mentoring programs. In conjunction with our 2X work, all DPI professionals participated in a 2X Challenge gender lens investing workshop organized by the CDC Group.
At the portfolio level, DPI has invested in women-led companies or businesses that market their goods and services to women — with some of these investments being the best performing in our funds. An example of this is Food Concepts, the operator of Chicken Republic, a fast growing QSR brand in Nigeria. DPI worked closely with Food Concepts to promote women at every level of the business, with 50 female staff members promoted to managerial positions in 2019 alone. Today, 53% of staff are women and female staff members are being promoted into managerial positions at an equal rate as men, with four of seven members of Executive Committee being women.
Please share the most emblematic exit from the last 24 months.
A recent example would be the exit of our ADP I and ADP II’s investment in Eaton Towers that closed in December 2019. DPI was an early-stage investor in Eaton Towers, an independent tower company that acquired, built and managed shared telecommunications infrastructure across Africa, working in close partnership with its management team before its eventual sale to American Towers. The sale, with an estimated enterprise value of USD1.85b, was one of the largest exits in African private equity history. Further to this, DPI continues to work on the realization of investments across its portfolios.
[1] See IFC Report, 2019: Moving Toward Gender Balance in Private Equity and Venture Capital.