A Fundamental Investor’s Guide To African Frontier Markets – Greg Barker

Greg, sustainable capital has built its reputation on deep on the ground research across African markets.

I'm curious to hear a little bit about what that looks like in practice.

Yeah, in practice, it means actually getting away from your desktop, getting on a airplane and heading into these frontier African markets where the gap between disclosure and reality can be quite wide.

And that's actually part of the opportunity as well.

And the reason for being for sustainable capital, which we founded nearly 20 years ago, was because we saw extreme levels of imperfect information, gross market inefficiencies, in contrast to more well-penetrated emerging markets, developed markets where lots of smart people chasing the same opportunities.

The rest of Africa frontier public equity markets and probably one of the last jurisdictions in the world where you can still do old school traditional fundamental analysis and garner a true information advantage just you know by going through the weeds finding uh world-class companies that are flying below the radar screen but are often you know neglected by the mainstream investment community because partly because of the burden of actually researching these companies, which does involve getting your whole investment team into Nigeria, into Morocco, into Kenya, into Egypt and going through the back end of African streets in a taxi for a few hours to find a head office and going to actually see whether the quality of the assets is representative of what management are saying in their PowerPoint presentation.

So I think you can't get around the logistics and the practical requirement to actually go into these countries and our real blueprint, the DNA of sustainable capital, the most valuable proprietary research outcomes all come from those, you know, that kind of firsthand boots on the ground research.

That sounds really interesting.

Can you share a moment when being on the ground completely changed your view of a particular investment?

Oh, yeah.

I mean, there are so many, but one that really sticks with me was in the post-COVID period.

You know, a lot of us convinced ourselves during COVID, look, these Zoom calls are working well enough for management interviews.

But we did one particular trip into North Africa where we met a pharmaceuticals company and we were sitting in the boardroom.

with a couple of representatives from the company at the time when the chief executive officer walked in.

Big boardroom table, sort of like 20 chairs.

You know, there was no greeting of the staff, went straight to the head of the table.

It was like we all looked at each other and just we had the same conclusion at the same time.

We would never have figured out that the leader of this company is borderline psychopath.

If we had been on a Zoom call, if we hadn't actually been in country, if we hadn't seen the body language and This is often the case, you know, that the devil's in the detail.

It's often a throwaway line.

It's the small differences that make all the difference to the investment case.

And we walked away from that investment case entirely based on that evidence.

We dodged a serious train wreck there, which was leadership driven.

That forced break we had for COVID and the subsequent experience that we've had is just reinforced.

You cannot do this work on Africa frontier markets in the context of our investment process, which is fundamental research, bottom up, agnostic to country and sector.