Africa is a land of immense opportunity, where relative risk has declined more than asset values currently reflect. In this interview with The Kenyan Wall Street, Richard Okello, Co-founder and Partner at Sango Capital, speaks about how the pan-African investment management firm is navigating the AfCFTA, the continent’s growth boom, to help mid-market and SME companies achieve the scale they need to compete effectively.
Sango Capital emphasizes ‘trusted relationships’ and ‘deep local networks’ as core to its investment philosophy. In a market often characterized by information asymmetry and governance challenges, how do these relationships translate into identifying and securing truly ‘overlooked’ investment opportunities that others might miss, and what unique mechanisms do you employ to mitigate the inherent risks associated with such opacity?
Trusted relationships are only one part of a two-part key. You need them to access high-quality, actionable information- the kind that helps you decide not just when to invest, but also when to stay out.
Years ago, for example, one of our most trusted local partners strongly advised us against a particular African market. Their credibility came not only from trust, but from being deeply networked and having their own long-term capital at stake. They were right: the market deteriorated sharply, giving us the chance to enter later at a better valuation and generate outsized returns through a secondary investment.
That said, such guidance should always be triangulated with other trusted and differentiated sources to manage the risks of both the known and the unknown unknowns.
For the first time in a few generations, Africa’s major economies have all floated their exchange rates, and this reform is already pulling capital into those markets.
Your focus on ‘mid-market focused investment opportunities’ is notable, especially given that SMEs are the ‘backbone of the economy’ but face significant financing constraints. How does Sango Capital’s approach specifically address this financing gap for mid-market companies, and what unique value creation opportunities does this unlock compared to investing in larger, more established entities?
SMEs are the backbone of most global economies. In the U.S., for instance, they account for more than 40% of employment and economic activity. In emerging and frontier markets like East Africa, SMEs can also be powerful engines of growth- but their performance is less predictable, given the challenges they face. In our experience, SME revenues in the region have fluctuated by as much as +/-20% year to year.
Sango Capital partners with fund managers skilled at guiding SMEs through value creation, while also investing directly in larger SMEs that are on the path to institutionalization. In our direct investments, we add value in tangible ways- for example, sourcing C-suite talent to accelerate growth or supporting geographic expansion, such as helping West and North African firms enter Kenya.
With discipline and patient capital, these initiatives can multiply a company’s scale several times over, while creating jobs and contributing to national development.
With declining foreign aid and rising public debt compelling African governments to shift towards private sector-led development, how does Sango Capital assess and mitigate policy and regulatory risks in a dynamic environment where the ‘fiscal contract’ and ‘business readiness’ are still evolving? Are there specific reforms you actively seek or engage with governments on?
Our investments are medium to long term, which means we have to think carefully about policy, regulatory, debt, and other risks in our focus countries. The central question is whether the countries and sectors capable of generating attractive returns are both ready to absorb capital and structured in a way that allows those returns to flow back to investors- because that, in turn, attracts more capital and more investors.
One long-awaited reform, now finally taking root, is the flotation of African currencies. Kenya faces fewer challenges here compared to some of the economies that only recently floated.
Currency clarity is hard to overstate- it sets the very price at which capital is willing to come in, and at which counterparties, both domestic and foreign, are prepared to transact. When market forces determine that price, it can certainly be volatile. Yet even with volatility, it is typically more trusted- and more productive for a country- than a pegged exchange rate vulnerable to sudden devaluation.
For the first time in a few generations, Africa’s major economies have all floated their exchange rates, and this reform is already pulling capital into those markets.
Sango Capital’s commitment to responsible investing and ESG is clear. Beyond simply managing risks, how do you identify and capitalize on opportunities to create tangible environmental, social, and governance value within your portfolio companies, particularly in sectors like food, energy, and infrastructure, and how does this contribution translate into superior risk-adjusted returns?
Our focus on middle-market growth delivers both strong return potential and meaningful impact. These sectors are not oversaturated with capital and often remain less efficient, creating space for superior risk-adjusted performance when strategies are executed well. At the same time, because the middle-market and SME space touches the greatest number of Africans, it also presents powerful opportunities for broader ESG impact.
At Sango, we don’t aim to “boil the ocean” on ESG. Instead, our responsible investing approach zeroes in on areas where focused attention drives tangible results- such as environmental improvements and the creation of quality jobs. Since we began investing, our portfolio companies have generated more than 83,000 direct jobs and over 240,000 indirect jobs.
The questions we constantly ask ourselves are: Are we acting as responsible fiduciaries of our investors’ capital? Is that capital flowing into opportunities that can deliver sustainable returns even beyond our exit? And where can deliberate focus amplify positive outcomes without compromising financial performance?
A recent example is our investment in a combined-cycle power plant for one of our industrial companies. The project not only reduces energy waste but also positions the business as one of the lowest-cost producers in its sector.
Given Africa’s rapid urbanization and the projected growth of mega-cities, where do you see the most significant ‘overlooked’ opportunities in urban-centric infrastructure and logistics that go beyond traditional large-scale national projects? How is Sango Capital positioning itself to capitalize on these localized, high-growth urban needs?
Five years from now, about 150 million more Africans will live in cities across the continent- that’s roughly the population of two Germanys. Most African cities are responding to this growth rather than proactively building for it, which makes infrastructure harder to adapt once development has already taken place.
As a result, cities will need to provide energy more flexibly to new residents. This creates opportunities in distributed power generation and private grids- areas we have already invested in Nigeria.
Cities will also need to harness technology and artificial intelligence to improve logistics, manage traffic flows, and deliver goods and services more efficiently. That, in turn, demands more intercity high-speed fibre networks. More technology also means more data, which drives demand for data centers.
We are invested in companies like WIOCC, which is expanding precisely this infrastructure in Nairobi and Mombasa. Beyond this, we are also exploring opportunities in education and housing infrastructure, both of which are essential to support sustainable urban growth.
Africa’s economic future lies in ‘creating local industries that can process and export finished goods,’ moving beyond raw material exports. How is Sango Capital actively investing in or supporting this strategic shift towards local value addition and industrialization within your target sectors, particularly in the food value chain and energy, to unlock higher-value opportunities?
I think Africa needs to first reduce imports in areas where it already holds competitive advantages such as agriculture, light manufacturing, and tech-enabled services. The priority should be producing more high-value goods for domestic consumption and then moving toward global competitiveness in those same sectors. Achieving this shift requires several foundational changes.
Energy costs must come down, as African businesses currently pay about 20% more per kilowatt hour than the global average. We’ve already invested along that theme: for example, in South Africa, we are invested in the country’s leading power trading company, which accelerates the integration of smaller, built-to-suit renewable generators and efficiently channels that power across the grid to where it is most needed. Beyond energy, more efficient food production is critical.
Our past investments in Africa’s fertilizer and irrigation leaders have proven how such innovations can transform productivity and scale. Finally, access to affordable technology is essential, enabling individuals to boost their own output and apply their talent to solving local challenges.
The digital economy and fintech are booming in Africa. Beyond traditional mobile money and payments, what specific sub-sectors within the broader digital transformation (e.g., ed-tech, health-tech, ag-tech, e-commerce infrastructure) do you view as most promising for overlooked investment opportunities, especially in serving underserved populations or SMEs?
We’ve invested across several areas we see as especially promising. For example, in education technology, the challenge is preparing millions of young Kenyans entering the workforce over the next decade with skills that not only make them employable but also enhance their ability to create jobs themselves.
In health tech, the question is how do we deliver better outcomes to people in remote areas- say, parts of Kakamega- while enabling ministries of health to digitize monitoring and service delivery, as Rwanda has done? In wealth tech, we’re focused on platforms that allow ordinary citizens to start saving and investing with as little as KShs 1,000, creating both financial security for individuals and development capital that benefits the broader economy.
Beyond Kenya, in Egypt we’ve partnered with others to back technology that aggregates and solves pressing problems for micro and small businesses, a model that has already proven profitable and is adaptable to most African cities.
The African Continental Free Trade Area (AfCFTA) is poised to transform regional trade and integration. How is Sango Capital leveraging or planning to leverage the AfCFTA to unlock cross-border, ‘overlooked’ investment opportunities within your target sectors, particularly in areas like integrated logistics, regional supply chains, or multi-country consumer plays?
This transformation has already begun- with encouraging signs. An updated report from the Africa Labour Research and Education Institute shows intra-African trade rising from US $69 billion in 2019 to US $81 billion by 2023, including a 7.2% rebound in 2022.
Portfolio companies tell us cross-border expansion is both highly desirable and among the hardest tasks, while acquirers see multinational reach as a premium value driver. The main obstacles are physical infrastructure and bureaucratic barriers. AfCFTA is addressing the latter by reducing customs times, resolving non-tariff barriers, lowering costs, and streamlining payments.
Infrastructure is also improving: by 2022, transit time from Mombasa to Uganda’s Busia border fell to 77 hours and to Malaba to 80, both down from over 100 in 2020. Our focus is on helping investee companies navigate these shifts through local fund partners and on-the-ground support, enabling them to optimize logistics, strengthen compliance, and scale cross-border growth more effectively.
Africa has long been underestimated- whether in its economic growth, resilience, or global contribution.
Given the persistent challenge of job creation and poverty reduction in Africa, how does Sango Capital measure and contribute to tangible socio-economic impact beyond financial returns, particularly through your mid-market focus? Can you share examples of how your investments directly contribute to inclusive growth and sustainable development?
Growing companies on a sustainable footing generate both direct and indirect jobs while stimulating entire spin-off sectors. Take a grocery business as an example, rising demand for fresh produce drives more organized supply from farmers, who in turn sustain an ecosystem of full-time and seasonal workers, transporters, and local food vendors.
As these suppliers expand, they also consume more power, pay higher taxes, and circulate greater income throughout the community.
What is Sango Capital’s long-term vision for the role of private equity in Africa’s economic transformation, especially in mobilizing domestic capital and reducing the continent’s reliance on external aid? And what key advice would you offer to potential global investors who are still hesitant about the ‘riskier’ perception of African markets, particularly regarding the ‘overlooked’ opportunities we’ve discussed?
Private equity in Africa is no different than private equity in China, Indonesia, Brazil or Turkey. It has proven to be transformational in people’s lives, in national growth, productivity, and more. Local capital pools are growing, and we expect that they will be mobilized to generate returns for their clients, but also grow in ways that positively affect those same clients.
Africa has long been underestimated- whether in its economic growth, resilience, or global contribution. By now, I would hope that smart investors with access to balanced and objective information on Africa, as well as the rest of the world, recognize that relative risk has declined more than asset values currently reflect.
The most astute global investors are already engaged and actively seeking opportunities to participate in Africa’s upside.