ORIGINALLY PUBLISHED IN AFRICA GLOBAL FUNDS DIGITAL MAGAZINE, JULY 2022 (https://www.africaglobalfunds.com/magazine/).
AFRICA GLOBAL FUNDS (AGF): PLEASE TELL US ABOUT GEMCORP.
PARVOLETA SHTEREVA (PS): We started Gemcorp Capital in 2014 – an independent asset manager aiming to address the vast funding gap in emerging markets and, particularly, in the private credit space. We put together an experienced and multidisciplinary investment team – many of us hail from emerging countries and have dedicated our entire careers to the emerging markets. Gemcorp, currently has roughly $1bn of assets under management and another $1bn wrapped up in co-investments across emerging markets.
AGF: WHAT’S YOUR APPROACH TO INVESTING IN AFRICA?
PS: We focus on private credit lending to both sovereigns and corporates in Africa. We look to back proven businesses as they seek to expand in their home country or across the continent. I would describe our approach as local and high touch. We have offices and local employees in a number of African countries and use our extensive local networks to source, evaluate and manage investments. We look for long-term collaborative engagement with our borrowers and are very focused on providing them with the right type of funding and support – this goes beyond just the provision of capital and includes introductions to investors, customers, bank relationships and so on. We find it is very important to structure funding solutions that don’t overburden the borrower or rely on unrealistic market exit expectations. We are also very focused on foreign currency risks – whether direct or indirect – and make sure that our borrowers have sufficient export revenues or ability to exchange or hedge their local currency exposure. These last two points are very important as exit and FX risks have been responsible for a lot of value destruction in private investments in emerging markets.
AGF: WHERE IN AFRICA DO YOU SEE INVESTMENT OPPORTUNITIES?
PS: We believe that private credit is truly the missing piece of the capital structure in Africa and allows our investors to benefit from very attractive returns while having structural protection. In recent years we have seen very large, underserved capital needs in the areas of smart infrastructure – mobile telephony and data provision, financial technology as well as energy – renewables and conventional – and agriculture and agri industry. We also currently have in our pipeline some very impactful large-scale water and sanitation projects. It is our belief that access to utilities, connectivity and data is essential for development in Africa – to educate, equip and prepare the workforce of tomorrow. Africa as you know is a very young continent, so jobs and essential public services remain a crucial focus.
AGF: WHAT TRENDS DO YOU SEE IN THE PRIVATE CREDIT / SPECIAL SITUATIONS SPACE IN AFRICA?
PS: After a few years of being almost alone in the private credit space, we have started to see more interest recently from both investors and co-investors. Unfortunately, the need is rising every year and we feel that the international private investor community is too slow and still slightly reluctant to embrace African companies and sovereigns even as some of them have handled the Covid crisis very well and have made huge strides in their development. In terms of special situations, we are closely watching some of the sovereign debt restructuring processes that are under way and some still to come- we hope that these will be conducted in close co-operation with commercial creditors and not be unduly politicised. African sovereigns need to preserve their hard-won place in mainstream EM debt portfolios.
AGF: WHAT ARE YOUR FUTURE PLANS FOR AFRICAN INVESTMENTS?
PS: In line with the significant opportunities and deal pipeline we see in Africa, we are looking to expand our product offering, potentially including a permanent capital vehicle. We are looking to invest at least $10 billion in Africa over the next decade, mainly in the form of debt deals in partnership with other institutional investors. We have our eyes set on countries such as Ghana, Kenya, Uganda, Zambia, Angola, Liberia, and Tanzania, which provide good potential for investors due to their young populations and existing funding gaps. African markets do not lack the talent or drive for growth and success. Instead they require access to alternative forms of affordable finance and financiers that are truly invested in their growth and sustainability. African organisations have their own stories to tell a global audience, and we believe we have the ability, passion, and experience to make their voices heard. Gemcorp Capital is looking forward to working with both key local and international investors to grow its portfolio of growth-oriented companies. The objective is to achieve consistent, risk-adjusted returns whilst at the same time create a lasting difference for the continent’s exciting and much-needed businesses.