Long-term perspective is the secret

Longevity is a luxury many investors cannot afford, but Michael Turner who runs the Actis east Africa office, says it is crucial to making money in the region's volatile frontier markets. He believes permanent capital structures without an end date may ultimately offer better access to returns than fixed-term funds. “In frontier market if you pick the winner in a market which is growing and often lacking any competition then the returns are stellar – but you may not make than in 10 years” he says. “if we’d kept shares in two of our companies  in our 10 year fund until today, they would be worth 40 times what we paid 15 years ago.” Says Mr Turner. “But it requires a long term commitment to the market; not all pension funds in the US that are dipping their toe (in Africa) for the first time are quite prepared to do that”. Multinationals such as `nestle have always known this and are better placed to play the long game in Africa. In the past six years it has built two factories – in Kenya and DR Congo –in an attempt to serve some of the most under-developed markets. The company is trying to establish a foot hold in Ethiopia while the market is still young to strengthen its brand and distribution – led by its stock cubes – before the market grows, opens up and attracts competition. Tightly –held and locally –grown family businesses have developed into just the sort  of 1 billion –turnover conglomerates in which private equity is eager to invest or eventually list, delivering everything from cooking oil and soap to toothpaste and toiletries.