CENTUM INVESTMENT www.centum.co.ke
Projects of Scale
INVESTMENT An exclusive feature with James Mworia, CEO, recently awarded the 2014 African Business Leader of the Year by the Corporate Council on Africa (CCA) and considered to be one of the top ten youngest power men in Africa, discusses increasing assets under Centum’s management and growth of the Kenyan economy. By: Nicholas Paul Griffin
Aspire Africa · July/Aug 2015
stablished in 1967, Centum Investment is a leading East African investment company, listed on the Nairobi Securities Exchange and cross-listed on the Uganda Securities Exchange. The company’s inception 48 years ago was intended to create a vehicle to mobilize capital from Kenyan citizens to invest in the country. It has since grown significantly, embarking in 2009 upon an aggressive five-year Pan African strategy that saw the company re-organised into three distinct business lines: Private Equity, Quoted Private Equity and Real Estate & Infrastructure. This was followed in 2012 by the company’s repositioning to better manage third party funds and growth by reorienting the three business lines to become wholly owned subsidiaries of the parent company Centum.
James Mworia Centum Investment is now the largest public quoted investment company in Kenya, boasting a market capitalization of $450 million and total assets in excess of $1.3 billion. The company invests across a range of sectors critical to the growth of the economy, and has been the best performing listed stock in Kenya for the last two and half years, offering a seven times return on investments since 2009. The company’s plan is to increase assets under management to $8-9 billion by 2018. This will be achieved through the development of investment grade opportunities, and the 4
Centum Investment Company · Kenya
Investment creation of assets that will lead to investment products aimed at attracting investors from all over the world. Centum’s CEO, James Mworia, says the process is “not just about making investments, it’s about making investments of scale, that have significant developmental impact, besides the investment impact.” Assuming the role of CEO at Centum in 2008, Mr. Mworia has over ten years work experience, including Investment Management at Trans-century, and on his appointment became the youngest CEO of a listed company in Kenya. He is a CFA Charter holder, Certified Public Accountant, and holds a Bachelor of Law Degree from the University of Nairobi. He is also an Advocate of the High Court of Kenya. Speaking at Centum’s Kenyan offices at the start of 2015, Mr. Mworia outlines the company’s intent to provide its clients with “access to inaccessible investment opportunities—and that’s what we’re doing. We have investment grade opportunities of scale, that investors, not just in Kenya, but also across the region and across the globe, can participate in.”
James Mworia receives the CCA Leader of the Year award
In 2011, Mr. Mworia was named by Forbes as one of Africa’s youngest power men, an impressive honour, which he admits was a humbling experience. He believes such an award is not only reflective of the achievement of his generation, which he describes as a “generation of leadership”, but also goes some way to highlighting a change in the narrative of Africa, a narrative which has for so long been one of aid and assistance, but is now telling the tale of the continent’s move into an age of business and enterprise. Mr. Mworia’s recognition highlights the growing understanding that there is high quality private sector leadership on the continent. “My advice [to aspiring African enterprises],” Mr. Mworia says, “is that there is a significant Aspire Africa · July/Aug 2015
It’s an obligation upon us to help create opportunities for many of our brothers and sisters who do not have formal employment opportunities.” James Mworia
opportunity in Africa, for those of us who are fortunate enough to be in a position where we can make a difference.” He speaks of his role as the head of Centrum as a “calling”, driven not only by the returns made by the company and its obligations to investors, but also by a wish to be involved in helping rewrite the story of Africa. “It not only makes business sense, but I think it’s an obligation upon us to help create opportunities for many of our brothers and sisters who do not have formal employment opportunities.” Centum’s mission statement promises the creation of real, tangible wealth by providing the channel through which investors can access and build extraordinary enterprises in Africa. Mr. Mworia speaks of the focus being on creating high quality investment in companies and enterprises, ranging across many different sectors—from motor vehicle manufacturing to real estate & infrastructure. The company vision is to be Africa’s foremost investment channel, and from the results so far, it seems Centrum is well on its way to achieving this lofty goal.
Kenya Kenya’s economy has been touted as one of Africa’s current shining lights, with growth for 2013 registered at 5.7%. But Mr. Mworia is adamant that there is plenty of room for further improvement: “I actually believe that the potential growth for Kenya specifically is a lot greater than the 5%,” he says, believing it should soon be moving into double figures, which would be in line with the potential of the economy regarding its recent performance. But there have been significant problems over the last few years that have restricted growth, problems such as quality of infrastructure. The poor transport infrastructure in particular has represented a major challenge. The good news is that these problems are now on the verge of being solved. Projects such as the expansion of the Port of Mombassa, and the introduction of a highspeed Standard Gauge Railway link between the Port and Nairobi, as well as noteworthy power capacity expansion projects, are key developments guaranteed to have a positive impact on the growth potential of the economy. In addition to these industrial projects, law reforms and the harnessing of administrative support from the public sector have played an equally vital role in the ability of the country to produce goods and services competitively.
James Mworia Speaking at the CCA Awards ceremony
Mr. Mworia attended a high level meeting last year where the competitiveness of the country as a whole was discussed at length by captains of industry and the Head of State, reflecting key national issues surrounding land reform, dispute resolution and licensing. “All those issues have been addressed so we can make this country a better investment destination,” he declares. When asked about the current level of Kenyan
Centum Investment Company · Kenya
Two Rivers project construction underway
investment, Mr. Mworia once more identifies room for improvement. “Investment is a function of savings,” he says, “and savings are a function of income. As a country our savings rate is growing, but it’s below the current global average. However, if one looks at the trend over the last ten years, there’s been significant increase in the scale of investment, the market capitalization of the Nairobi Securities Exchange has increased considerably; the quantum of foreign direct investment into this country has increased considerably. Given that we are still below the global average, I still see significantly greater volume for growth.”
bankable opportunities that are investment ready. And this is where Centum comes in— not content with waiting for others to develop these opportunities, the company acts as an institutional sponsor to help such projects get off the ground. Mr. Mworia believes there is still sufficient appetite from local investors, retail and institutional, for high quality investment opportunities such as Centum’s projects of scale.
Mr. Mworia reiterates the need for projects of scale, of the kind Centum is working specifically to implement.
There is the potential for investors to do well in any sector, as the level of competition in the country is a lot lower than the rest of the world. The difference is in the execution, so the quality of the local investment partner and management team on the ground is perhaps the single biggest factor in what makes or breaks a good investment in Kenya
There is still a lot of capital interested in participating and investing in East Africa, and Kenya specifically. However, some constraints still exist, particularly in the availability of 8
Centum Investment Company · Kenya
The key to successful investment in Africa is comprised of several issues, but Mr. Mworia believes the quality of local partnerships is critical.
Investment Development Sectors In line with company goals, Mr. Mworia explains how Centum has identified seven sectors likely to prove critical in terms of the country’s continued economic development. Centum has made it a priority to be involved in all of these sectors, and to help push the economy forward through the development of key projects in each. In the area of energy, one of the biggest development opportunities identified, the company has worked hard to oversee the generation of around 1100 megwatts of power, which will go some way to helping the power generation capability of the country. Another key area of involvement is real estate and infrastructure. Nearly half of Africa’s
nation’s cities are not yet built, and this represents an opportunity to provide the infrastructure and development guideline for well governed cities, as well as presenting opportunities to develop asset backed securities. Another area of focus is financial services, where Centum has recently acquired a bank, as well as being involved in microfinance and insurance brokerage. The company is now the second largest asset manager in the country in terms of managing pension fund capital, handling a portfolio in excess of $1.2 billion. In addition, the company is heavily involved in fast moving consumer goods, not just distribution but also manufacturing. Centum is one of the largest investors in Coca-Cola bottling facilities
Aspire Africa · July/Aug 2015
The Two Rivers development is the next evolutionary step in Eastern Africa for investment and lifestyle.
Carrefour Group signs up at the Two Rivers Lifestyle Centre in Kenya, as well as having a vested interest in the alcohol industry. Further opportunity lies in agriculture, which for a long time in Africa has been geared towards the production of cash crops, primarily for export. There has not been enough focus on developing capital and expertise in the commercial production of food crops. The final sectors the company is looking to improve are education, healthcare and ICT. One of Kenya’s strengths is the quality of population and innovations, and Centum’s projects are geared towards supporting technological innovation in the country. All of these endeavours are indicative of the company’s transition from being simply a portfolio manager to being a developer of investment grade enterprises with significant catalytic impact across the country 10 Centum Investment Company · Kenya
Investment Key Developments Over the last few years, Centum has been involved in several projects of scale aimed at encouraging Kenya’s economic development, particularly in the area of Real Estate & Infrastructure. One of these is the Two Rivers development, a real estate project comprising 100 acres of development space, located in the affluent Runda/Gigiri area of Nairobi, and comprising of a state-of-the-art shopping centre, large water front, residential apartments, two hotels and a hospital. Centum describes the Two Rivers development as the next evolutionary step in Eastern Africa for investment and lifestyle, and the company has already been successful in attracting various international brands to set up offices there. “We are literally building a new city,” Mr. Mworia says. Work is well underway on the development, which is set to open in October of 2015. But perhaps the company’s most significant move has been into the power and energy sector. Centum is currently involved in two large-scale power projects, acting as sponsor in both cases. The first is the Lamu Coal Power project, a 980MW base root power project representing one of the cheapest sources of power being introduced into the economy. The second is the Olkaria Geothermal project, a 70MW project, expected to rise to 140MW in the near future. Kenya is in the bottom twenty countries in East Africa when considering the current per capita installed generation capacity of power, which means there is a substantial need for more power, a need which will help create future investment opportunities. Centum’s approach has been to enter the industry Aspire Africa · July/Aug 2015 11
The Centum Team with Carrefour Group representatives at an early stage, creating investment grade opportunities beneficial both to investors and the country as a whole. It might seem unusual for an investment company to be foraying into the energy sector, but Mr. Mworia explains the motivation behind the move: “We see an opportunity to play a role in unlocking one of the biggest bottlenecks that we have had in our development, which is access to affordable power at scale. You cannot develop industry if you don’t have affordable power at scale.” Both of these power projects will be base root sources of power and will provide a considerably cheaper energy option for the company and the country in general. The move into power represents a low risk enterprise, an opportunity to have a longterm revenue stream backed by government support, helping to create asset-backed
securities which many different kinds of investors can invest in. The company sees considerable scope to continue playing this role across many other sectors in the future. It is clear to see that Centum are leading the way in developing investments and projects capable of carrying the Kenyan economy forward, but perhaps even more impressive is the socially conscious intentions behind the company’s business. “What is for me more satisfying is the opportunities that we are able to create for the people we employ directly,” Mr. Mworia says, “but also for the businesses that then connect with the businesses that we are developing. I believe this generation has a significant responsibility to play a role in changing the destiny of this continent.” It is fair to say that Mr. Mworia and Centum Investment are more than playing their part in this responsibility. ASPIRE
CLICK HERE TO WATCH OUR EXCLUSIVE INTERVIEW WITH JAMES MWORIA 12 Centum Investment Company · Kenya
www.centum.co.ke 5th Floor, International House, Mama Ngina Street P.O. Box 10518-00100 Nairobi, Kenya. Tel: (+254) 20 228 6000 /3316 303 (+254) 709 902000/722 205339 Fax: (+254) 20 222 3223 email@example.com