The bottom line: PSG’s new ‘play on Africa’ is hot to trot

Keep tabs on the next PSG shooting star 
The point has been made time and time again; keep a close eye on what PSG Group is nurturing in its private equity nursery PSG Alpha. 
Hardly eight years ago private education juggernaut Curro was a minuscule holding worth less than R100-million tucked away in PSG’s private equity division, then known as Paladin Capital.
One investment that has hardly garnered any market attention is fast-moving consumer goods distributor CA Sales Holdings, which was recently listed on the Botswana Stock Exchange and the 4 Africa Exchange (4AX). It looks like it is shifting gears quickly. Recently released results for the year to the end of December showed headline earnings grew 29% to R137-million on the back of a 17% hike in revenue to R4.7-billion.
CA Sales looks like an intriguing “African play”with operations spanning Botswana, Lesotho, Mozambique, Namibia, South Africa, Swaziland, Zambia and Zimbabwe. The firm reported that all major operations exceeded expectations which should drive further acquisitions across southern Africa.
CA Sales recently topped up its shareholdings in two subsidiaries, increasing its stake in Logico Unlimited from 61% to 80%, and Pack ’n Stack Investments from 67% to 84%.
The bulk of revenue (more than 65%) is still generated in Botswana, which suggests new opportunities might involve forays into other southern African territories in order to balance the geographic footprint.
CA Sales has cornered viable southern Africa niches that hold sufficient critical mass to appeal to some of the JSE’s larger mobility-logistics companies. It might be surprising if CA Sales is not subject to a takeover tilt or two in the short term.Strong mining competition from Zim
South Africa faces real competition for mining investment to the north of its borders. Zimbabwe made a strong pitch that its doors are open for those wanting to explore, develop and run mines in what has long been a pariah state.
New Mines Minister Winston Chitando and the chairman of the parliamentary portfolio committee on mining and energy, Temba Mliswa, both spoke on Monday of the changes in attitude towards mining.
Under former president Robert Mugabe, who left office last December, mining was seen as a cash cow and a politically easy target for the government to show it was master of the economy. The new government under President Emmerson Mnangagwa has adopted a more pragmatic approach. All mineral operations apart from those in platinum group metals (PGMs) and diamonds can be wholly owned by foreigners, while Chitando said he could exercise discretion when it came to the 51% ownership requirement for mines in PGMs and diamonds.
Amendments will be enacted in May as will mineral-specific development policies to create a more certain operating environment. South Africa is in the throes of renegotiating its third iteration of the Mining Charter that guides on transformation of the mining sector and it too is waiting for amendments to its mining act.
Both countries are dealing with the perceptions of foreign investors that mining regulations are uncertain and the operating environment is difficult and unfriendly from a government perspective. While South Africa’s mineral endowment is well known, Zimbabwe is less developed after 37 years of Mugabe rule and it poses real competition for investment in the region if it gets its regulatory and operating environment right.