Early growth-stage companies are going public – in Africa

Going public is typically an exit strategy for large companies seeking expansion capital and returns for their investors. A small group of companies in Africa is testing the public markets as an early-growth strategy.

Agrifood investor Africa Eats is now a listed entity along with two of its portfolio companies on the Stock Exchange of Mauritius. The goal: to help its portfolio of small and mid-sized food businesses – and itself – overcome Africa’s financing gap for companies needing growth capital. That capital gap is especially hard on non-tech businesses that don’t qualify for venture capital, says Africa Eats’ Luni Libes.

“Finding a way to list these companies on the stock exchange would be especially crucial for businesses that need short-term funding to meet orders or unexpected expansion and which cannot afford to wait on long investment cycles,” Libes told ImpactAlpha in an interview about the strategy earlier this year.

Designing a market

Africa Eats debuted on the Mauritius exchange on Tuesday, Dec. 4 at $2.25 per share. It trades under the ticker symbol EATS. Its portfolio company Ziweto in Malawi, which runs a veterinary services network for smallholder livestock farmers and trades as ZWTO, opened on the same day at $1.60 per share. Rwandan meat processing and export company Paniel Meat Processing, trading as ELIT, opened at $1.85 per share.

Africa Eats worked with the Stock Exchange of Mauritius to launch a subset of the exchange, called SEM X, for small and growing African businesses. The companies have a set trading time between 2:00 and 2:30pm local time on Tuesdays to encourage investor participation and address concerns that small companies would have too little trading activity, said Libes. 

Primed for growth

Africa Eats is looking to help at least five more of its portfolio companies list on SEM X. To qualify, a company must be profitable, show at least 25% compound growth over the last five years, and have minimal debt.

To encourage investors to support the fledgling market, Africa Eats is looking at new strategies to facilitate trading, including an app that will allow traders to place bids on new IPOs. Investors in the US and Mauritius are eligible to participate. The goal is to open up the opportunity to a broader set of African investors.

“We talked to investment banks, pension funds, insurance companies, fund managers and wealth advisors – everybody who makes the capital market work in Mauritius,” said Libes. “And with rare exceptions, they were all on board.”