ELLIOT REFSON: How Africa’s strong bonds with Jersey can help in sourcing capital

In our rapidly evolving global market the choice of fund domiciliation has become a salient issue for investors and fund managers looking for efficiency, stability and transparency.

The shifting geopolitics introduced by the Russia-Ukraine war, Brexit, Trumpism and the pandemic have reconfigured Africa’s place in the world and driven its rapid ascendancy. These geopolitical issues have highlighted that political risk is not unique to Africa and the so called “emerging markets”, but are features of markets everywhere.

As African economies emerge from this crisis it is clear that local and traditional sources of finance and investment will not be enough to fuel and grow economies. Governments will have to deploy and use different methods and sources of investment to return to the growth trajectory that will enable the continent to achieve the AU Agenda 2063. Financial and other incentives will need to be ramped up to make African economies more competitive and attract the international capital that will inevitably be looking for a home.

International finance corporations that can demonstrate quality service, sophisticated expertise, commitment to the highest standards of governance and regulation and global reach will have the potential to play a vital role in sourcing overseas capital securely and efficiently to ensure Africa can achieve its aspirations.

Jersey’s relationship with Africa is broad, deep and based on shared interests. One area with strong growth is sustainable finance, specifically impact investing. The Global Impact Investing Network’s Annual Impact Investor Survey 2020 sized the market at $715bn, and this deep pool of funds presents a golden opportunity for Africa.

In countries like Kenya there is a wide range of companies solving societal issues through profitable and scalable models, making these firms magnets for investors searching for sustainable investment opportunities. For example, Brighter Life, a Kenyan company domiciled in Jersey, managed to raise $65m in June 2020, enabling more than 1-million people living off-grid in Kenya to access d.light solar home systems and related solar energy products.

Extra budget

SA managers account for the seventh-largest pool of capital globally, in respect of Jersey-based fund promoters. Using Jersey for SA fund assets is also on the rise; in 2021 statistics reported a 38% year-on-year increase. They are ahead of the curve with these opportunities and the past two decades have seen SA private equity expertise facilitate investment into retail, consumer, real estate and infrastructure investments across the wider African continent, typically partnering with development finance institutions (DFIs) from the UK and Northern Europe to drive economic development with often spectacular returns.

Jersey Finance’s report “SA Fund Managers: Trends in Fund Domiciliation & Capital Raising” pointed to the fact that many DFIs are now allocating extra budget to emerging markets, and that investors who have been in Africa know the opportunity and its rewards and therefore remain committed to supporting that growth. These days, it is considered far riskier to be outside the African opportunity than to be inside it, actively participating in its economic acceleration.

As a jurisdiction, Jersey acts as a bridge between capital raising in Europe and investment in Africa, and accounts for about $18.7bn in deployed capital across Kenya, SA, Uganda and Egypt.

Jersey can play a vital role in sourcing overseas capital securely and efficiently, helping  support economic growth and job creation in Africa. The island has been at the forefront of fund services for more than 60 years. It provides a straightforward tax-neutral environment, strong regulatory and legal frameworks, and vast experience in the alternative asset classes, including private equity, venture capital and infrastructure funds.

This, combined with a forward-thinking approach and the ability to offer certainty, stability and substance, gives Jersey the international pedigree that appeals to investors across Africa. Offering a safe, familiar environment for European investors across institutional, high-net worth and pension funds, as well as meeting market access requirements, makes Jersey an attractive option for investors in Europe, offering a clear solution for private equity deal structuring in Africa.

• Refson is head of funds at Jersey Finance.