Black-led private equity firm Zico specialises in quite a lot of things - management buy-outs, leveraged buy-ins, expansion capital, growth capital, replacement capital or acquisition capital, privatisation, restructuring or unbundling initiatives, acquisition of strategic equity interests, and joint ventures.
And it does all of that with black empowerment at its core.
The Johannesburg-based firm, which was established by prominent business activist Sandile Zungu, invests in all stages, except start-ups and early stages.
According to CEO Tshego Sefolo, it prefers to invest in companies operating in automotive (motor retail and allied services), operational services, which include specialised, security, cleaning, laundry, hygiene, pest control and fumigation, human capital recruitment, training and development, financial services, and mining and resources.
But it will consider "almost any investment opportunity".
"We've traditionally invested in the South African market, but we have now set our sights on expanding across the broader African continent," explains Sefolo.
Zico comes with a proven track record, he says.
It is a black economic empowerment styled player, launched "off the back of" South Africa's economic redistribution.
The business has however emerged as a credible diversified investment holding company.
"Zico has grown into one of the most prominent players and matured into a fully fletched investment house," Sefolo says.
Zico has participated in some of South Africa's biggest BEE equity transfer deals. Recently the group scooped an equity stake in KwaZulu-Natal based operation Spring Lights Gas (SGL), together with Kwande Capital, an emerging investor in the energy space. It was a major boost for the province.
"We are fairly established in the South African market," says Sefolo. "We see South Africa as a gateway to Africa so, in that context, we see ourselves as well positioned to expand and take opportunities outside of the South African borders. Of late, we've been aggressive with mining and resource opportunities in the rest of Africa in places like Zimbabwe, Zambia and the DRC and Ghana. We think there is clearly an opportunity there. If you look at the infrastructure projects that are happening in the rest of Africa we think there is scope to tapping into those investments, largely born out of the legacy of under investment in infrastructure in the rest of Africa and it is in that context that we see the continent as a compelling place from an investment perspective."
Zico has a measured approach, which balances exposure through partnerships with other players seeking African equity, he says.
That approach is designed to mitigate the risk inherent in growing an African portfolio.
"Our view is that Africa as a continent isn't homogeneous and the different countries have got their very specific requirements that any investor would have to be sensitive to. To mitigate some of those issues and potential risks, you can enter into partnerships with local players who are familiar with the market. It gives us a lot of comfort that we have someone on the ground closer to the issues and able to respond to some of the challenges as opposed to us being based in Johannesburg. In any market it is very difficult to try and operate or manage via remote control. You need to be fairly close to the market so that, as and when the issues arise, you're positioned to respond to them."
Sefolo referred to partners such RMB Corvest, which has enabled the acquisition of a share in Nigerian-based company, Vital Products Plc, a successful manufacturer and importer of a range of food products.
"Yes, we have gone with RMB Corvest and then we own Vital products with local shareholders, including a management team. Nigeria, if you look at it from a size point of view, it is a population size three times the size of South Africa. I think it's in excess of 160 million people. So from a market point of view, it is a massive opportunity. It is a very fragmented market, though. Logistics is quite a challenge. Your ability to move freely and move goods freely is quite a challenge but if you are able to put processes in place to get around that, you're able to tap into that market place. We see that as an opportunity. Any investor looking to invest in that sort of market, with the characteristics that it displays, is really compelling."
Zico's mining and resources arm, African Vanguard Resources, recently entered into a restructure of Rockwell Diamonds Incorporated, a mid-tier diamond mining and development company which represents the focussed evolution of the company's strategic goals.
"The Rockwell transaction represents a milestone in the development of Rockwell and the maturation of African Vanguard Resources' goals, but it facilitates the entry of new participants into the diamond mining industry. We took one of our underlying diamond assets and spun it into Rockwell Diamonds to enable it to have a bigger platform in terms of assets to mine."
Mining is a market Zico is aggressively targeting.
"We are pursuing mining opportunities through African Vanguard Resources," says Sefolo. "We invested in several mining companies, namely Harmony Gold, One Gold, Rockwell obviously, and Goliath Gold."
Sefolo says the company is also close to concluding a "major deal in the sector".
Another target market is energy.
We've mentioned the fact the group recently brought a take SLG.
It is a deal Sefolo is excited about.
"We are pleased to have partnered with Kwande Capital in concluding an acquisition of one of the leading piped gas suppliers in SA."
ZIco is also planning investment into the soft services industry and has concluded a number of deals in other sectors over the last 12 months.
Is Sefolo happy with Zico's performance?
"We are very pleased with the performance of our portfolio of investments, which are performing in line with our expectations," he says. "This enables us to focus on identifying new investment opportunities, while working with our management teams to extract value in the businesses we have invested in."
Zico focuses on the acquisition and active management of a number of investments within the automotive, services, mining and resources sector.
Whilst committed to delivering a consistent performance for its shareholders, the company simultaneously strives to select investment partners that together can creatively respond to the needs of both local and African communities.
"As I said, the portfolio is performing very well and in fact I think we can confidently say that it is performing ahead of expectation which is a very good position to be in because it enables you to spend more time reaching for new investment opportunities instead of managing challenging assets in the portfolio. On the back of that it does mean that you have to continuously monitor it and make sure that it continues to perform well. I think it is performing in line with expectations. We don't have businesses in the portfolio that worry us, every now and then one has to have interventions over specific issues but we are currently very happy with the direction it is moving in."
To learn more visit http://www.zico.co.za.
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