Zambia could become a showcase for African economies

In a 2015 paper, researchers from the World Bank stated that Africa was “...the second most attractive investment destination in the world – ranking just behind North America”. And much has been written about the appeal that Africa offers to investors.? Yet, the destination remains an uncertain option for many investors from the established economies of the world.

We at Spear Capital do not need convincing about the potential that the continent offers for solid investment.? Owing to a range of factors - which you can see discussed in the video in this newsletter - the region offers opportunities that are no longer available anywhere else on the globe. And, because of the hesitancy among investors to get involved, there is relatively little competition.? So, once we identify a business we like and that we believe will be suitable for putting our clients’ funds into, we find it fairly easy to move forward with the deal.?

In addition to feeling positive about the fact that we are assisting a business with a good track record to grow and about the likelihood of achieving solid returns for our clients, it’s great to know that we can positively impact a community through our funding choices.

We focus on particular countries in the SADC region, but the main point for us is to identify those firms looking for growth capital that meet our criteria, even if the macro conditions in the country may not be perfect.?

Of course, our work is made that much easier when a government is investment-friendly and when State institutions are easy to engage with. Zambia fits this bill, especially since a new government came into power in 2021. Led by President Hakainde Hichilema, the government has demonstrated its focus on economic stability through a number of measures it has introduced. President Hichilema made his goals clear in an August 2022 tweet when he focused on the recent gains achieved in bringing inflation under control and in stabilising the Zambian currency.? In fact, the currency, the Kwacha, was named by Bloomberg as “the world’s best performer against the dollar“ in early September.?

This good news came on the heels of the country’s poor performance in late 2020, when it defaulted on the repayment of a eurobond. With the new government showing that it is capable of redirecting the economy along the right path, the World Bank has responded by offering a number of monetary initiatives geared to assist the country to stabilise and to grow its economy.

And so we at Spear are on the lookout for good businesses in Zambia that we could partner with. Our role as growth investors in SMEs drives our search for suitable businesses for investment, and we also look at the attitudes of management in the business towards sustainability. For us, sustainability refers to the potential for the enterprise to grow and expand, as well as to develop skills and competencies internally so that the growth can be meaningful and sustained.?

When we identify a business we’ve selected for investment, we’ll keep you in the loop and share more details.