Africa is the fastest growing Foreign Direct Investment (FDI) market in the world. From 1990-2013 FDI inflows in to Africa increased 19 fold – from $ 3 billion to # 57 billion. This has opened the door for great opportunities and forward looking South African companies have in recent years bolstered their profits and their growth by expanding into Africa. Many now claim to have ‘African knowhow’ – an understanding of how businesses and governments work in this continent.
It is logical that South African businesses, viewing themselves in this way, should see the African continent as their rightful playground, an area in which they are probably better equipped to perform than other enterprises. Nevertheless the continent has never been an easy nut to crack – and many South African businesses have burnt their fingers here. Investors from other countries, keen to capitalize on the continent with cheap labour, land suited to many uses and an abundance of raw materials, have sometimes moved in without sufficient preparation.
Gavin Commins, the CEO of the professional valuation company, The Valuator Group, talking recently to potential European and Middle Eastern investors looking for opportunities in Africa, stressed the huge importance of using a professional valuation service of the kind The Valuator Group offers when contemplating expansion into this continent:
“In a great many cases,” said Commins, “the new investor into Africa will be looking to amalgamate with or buy into a local operation. He may also as part of the process be looking to buy buildings, equipment, plant and other assets, the values of which can be very hard to assess in a different country, one in which the new arrival has not operated before.”
In these situations, said Commins, it can be very useful – and a wise precaution – to employ one of the few valuation companies, such as The Valuator Group, which have multi-faceted experience and are able to put accurate value tags on the business itself as well as key assets – and also offer an advisory service on the overall operation and its future prospects. Besides open market values such firms offer valuations for insurance purposes – and replacement cost.
The Valuator Group, said Commins, which has been involved in this way with many companies throughout Southern, Western and Eastern Africa, with offices in Ghana, Zambia Mauritius and throughout the major centres in South Africa. They are currently negotiating to open offices in Tanzania, Kenya and Nigeria where they will team up with local professionals to provide their all-inclusive package of valuation services, he said. The Group is also targeting the Middle East and has just finalized the opening of an office in Dubai to service Middle Eastern clients.
“Huge investment is pouring in to Africa from the Middle East and we see ourselves not only servicing our clients in the Middle East region itself but also ‘holding their hands’ as they expand in to Africa where we have so many years of experience and contacts,” said Commins.
Valuations in Africa, he said, are also often required by governments and parastatals to help get loans from the big international public funding agencies such as the World Bank, the IMF and the many organizations involved in one way or another with local upliftment and partnership programmes – but it is the chance of introducing new business to Africa that excites him.
“Our aim,” said Commins, “is to partner with any companies, whether African or international, which are offering services to, or are direct investors expanding into Africa, and to help them to set up successful local businesses. When our existing clients use our services it has been found that they genuinely benefit and new clients report that it is easier to make use of us to ensure that whatever investment they are looking at has accurate asset values, i.e. fair value in relation to the many different factors that must be taken into consideration with any investment. We can be very useful to such people, not just as a one-off exercise but on an ongoing basis and we affirm that those companies moving into African now are likely to be seen ten years down the line as the ones with the real foresight.”