Germany’s ADC: Africa Is The Future

The African Development Corporation (ADC) is a German financial and investment holding company focused on sub-Saharan Africa. It was founded in late 2007 and its shares have been listed on the Frankfurt Stock Exchange since December 2010. Its main interest is in SSA banks and insurance companies. The financial services company belongs to Frankfurt’s Angermayer, […]


The African Development Corporation (ADC) is a German financial and investment holding company focused on sub-Saharan Africa. It was founded in late 2007 and its shares have been listed on the Frankfurt Stock Exchange since December 2010. Its main interest is in SSA banks and insurance companies.

The financial services company belongs to Frankfurt’s Angermayer, Brumm & Lange Group. The World Bank’s Multilateral Investment Guarantee Agency (MIGA) insures the company against various risks, including political upheavals – a critical provision in the light of the current events in North Africa.

African Business editor Anver Versi explores the ADC’s African strategy with managing director Dirk Harbecke.

Anver Versi: While it is very encouraging to see a major German company investing in Africa, I have to ask you why you have chosen Africa?

Dirk Harbecke: The most successful investors have been those that have seen and recognised long-term trends.

There were such trends, let’s say, 20 to 30 years ago when the first investors started to invest in Southeast Asia; earlier, there were similar trends in Latin America.

We have been watching sub-Saharan Africa very closely over the past 10 years and, about five years ago, the indicators of future growth started to become very, very strong.

Africa’s economic growth was consistently large, there was a change in the style of leadership and suddenly the private sector had become more dominant compared to development aid.

We saw that in some key countries, the real engine of the economy, the financial services system, had started to grow and develop. At this point, we said these are now the decisive triggers for us to also get started, and this is why we set up ADC in 2007.
This period also coincided with the resources boom. Natural resources, as you know, are a vital ingredient of  SSA economies.

As all these various factors came together, we were determined to be among the first international investors on the ground. All the signs point to strong growth for the Africa region over the next 20 to 30 years.

AV: How did you first become involved in Africa?

DH: In our German group, apart from Europe, we already had investments in India and China and we realised that there was a huge potential in SSA. In 2007, we decided to go to Rwanda and have a look around because Rwanda had a very good reputation.

We saw many investment opportunities on a small scale, but the companies were very interesting with very creative young entrepreneurs.

And so we acquired the first two investments in Rwanda. As always, when you are entering new markets, not everything goes as planned. But most of the things we did right. With an office in Rwanda, we then expanded into Kenya. We are looking into activities in Uganda and Burundi as well. Following the investment in Zimbabwe, we are looking into Mozambique and Zambia.

We want to use Equatorial Guinea as a hub to expand in the whole West African region so we are looking into investment in Ghana and Cameroon at the moment. The idea is to build up regional hubs.

AV: People outside sometimes forget that the Africa region is made up of 55 independent countries. Which of these are you targeting?

DH: We are investing in what we consider the real frontier market in Africa – markets which are at an early stage and where we expect even higher growth potentials in the future. We are not going to South Africa or Nigeria.

When you go into these markets, you have to take with you not only capital but also strong relationships and expertise. We are able and willing to provide a lot of management support and if necessary, to propose our own CEOs or chief operating officers for a certain period of time.

This means that we always work closely with our local partners. We  would never take 100% of anything. When we bring in our own people, it is only for a limited period – one or two years during which we train our local partners to be able to take over.

AV: What is your area of expertise?

DH: Financial services. Our focus is banks, payment processes and insurance. We aim for a significant stake, anything between 25% and 70% of the assets we are investing in. Our time horizon is between four and seven years.

AV: Give me an example of the kind of institutions you like to invest in.

DH: We carry out a very detailed screening of the whole market and consider several factors before we make investment decisions. We do not look simply at market position but also at the strategy of the companies involved.

We might be interested in smaller players because they have specialisation in certain segments. For example, in Zimbabwe, we invested in a smaller bank, Premier Bank, because they specialise in corporate and investment banking. The retail area, which is already dominated by South African banks, does not interest us.

Another example is Resolution Health East Africa (RHEAL) Insurance in Kenya. Although this company is number three in Kenya, we found a very strong management team and the skills of the workforce there are exceptional.

The people are extremely motivated there and by providing capital and some strategic support, we can turn this into the number-one player over the next two years.

AV: What sort of returns do your shareholders expect?

DH: Over a period of, let’s say, five years, we expect a return of something like 30% per annum. This doesn’t mean that we must have this return after the first two years because usually the first two years you spend a lot of time in restructuring or optimisation and this very often goes along with additional financial investments.

This could mean initial losses but we do this with a perspective that after the restructuring, the company is really set for us to earn growth. We expect to end up on average with a return of 30% over this investment period.

AV: I believe you had a successful IPO recently?

DH: Yes, we went public with our investment holding on the German stock exchange in Frankfurt in December.

The reason for this is that, on the one hand, we have investors that like to go into our markets with a long-term view; but we also wanted to give them the ability to disinvest a little bit earlier if they so wish. When you have a stock market-listed entity, you allow your investors access to liquidity; they can buy and sell shares and it does affect the underlying value of capital we are managing.
The IPO and listing also give you a lot of publicity.

This is very important for us to market SSA as an investment destination, especially in Europe where knowledge about the region is sketchy.

We raised overall roughly €43m. This also gives us the opportunity to do capital increases with existing and new investors. Once we have invested this €43m we will do a capital increase and raise much more money.

AV: What is your current capitalisation?

DH: The market capitalisation at the moment of ADC is roughly €80m.

AV: Are most of your investors institutional or private?

DH: Our investors, where we placed the whole IPO, are all institutional investors and big private family offices of very wealthy individual families from Europe and from the US mostly.

AV: But this is not necessarily more investors from Germany?

DH: No. The German market is still a very difficult one. When we founded ADC in 2007 of course all our investors came from Germany then so the base is still German investors. But over the past years we have more and more international investors coming on board, because at the moment the appetite for Africa is still greater in the US and London. You still need to do a lot of work to convince the Germans how interesting these investments are.

AV: So why Frankfurt, not London or New York?

DH: We are German after all. We’re very well connected in Europe but especially in Germany and  there are advantages to be German when you’re investing in Africa because the German way of running businesses has a very good reputation worldwide.

AV: Your current investments in Africa?

DH: Most  most of our investments are in banks but we have several offers on the table outside of this banking industry that we are currently looking into. In addition to Premier Bank in Zimbabwe, we own 25% in Banco Nacional de Guinea Ecuatorial (BANGE), a key bank in Equatorial Guinea which we are also managing. Apart from RHEAL in Kenya, we have just acquired 20% a stake in BancABC a regional bank present in Botswana, Zimbabwe, Tanzania, Mozambique and Zambia.

We are also investing in Iveri, an e-payment specialist in South Africa, and run Simtel, the payment switch in Rwanda, managing the ATM and point-of-sale network and issuing cards.

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