In Conversation With Zain Latif
Zain Latif is the principal of TLG Capital, a firm that focuses on frontier
markets. Mr. Latif was an Executive Director at Goldman Sachs in the New Markets division focusing on Sub-Saharan Africa across all products. Zain joined Goldman Sachs from Merrill Lynch where he was involved in originating and executing a number of groundbreaking emerging market transactions in Africa. Prior to that, Zain spear-headed the special situations African effort at HSBC which culminated in the inaugural debt/equity hybrid structure for a leading Nigerian financial institution that was widely reported. Zain has a Masters degree in Finance achieved at the age of 19 from Cass Business School, City University in London.
Read about TLG and its relationship with CIPLA and QCIL.
What motivated you to look at Africa as an investment opportunity during your time at Banking?
My motivation into Africa was not a pre-meditated move – Focusing on emerging markets financing at the time, particularly in Eastern Europe, I realised that the investor community at large ignored the wider Sub-Saharan Africa (SSA) region as a means for investment. After undertaking some exploratory visits to the region, it was obvious from the beginning that “information arbitrage” was a real issue in SSA where the reality on the ground differed from what the mainstream media focused on. Henceforth, my resolve was to focus on the region and understand better the dynamics surrounding investments and financing of the deals.
What challenges did you face as you worked on bringing FCMB, the first Nigerian Bank to the International markets?
The challenge in itself was not so much the individual deal but generally in bringing any African deal into the market. SSA has commonly been brushed as one broad stroke where instability and volatility in some countries have led to widespread generalisation about the entire region! Yet the general trend over the past few years have definitely been positive. Let’s take telecoms as an example. In 1995, New York City had more phones than the whole Africa. Today, inside a generation, Africa has as many phones as the whole of the United States! We can extrapolate such growth to other sectors and we are confident in a transformation of lives for Africans in the region particularly in the fields of healthcare and consumer goods.
What motivated you to form your investment firm TLG Capital?
The decision to run a fund that invests solely in these markets mainly in the Sub Saharan African region is due to the compelling opportunities available given that often evade the radar of traditional international based funds given that their typical individual transaction size has often stretched beyond the $20m mark. My experience particularly focusing on Africa stretching from HSBC to Merrill Lynch and most recently at Goldman Sachs gave me a unique insight that the majority of transactions in Africa remain well under that transaction size and beyond the numbers, at TLG Capital we focus on investing in existing management and in an ethical manner that contributes to the growth of Africa.
Why did you invest in QCIL?
Our first investment was in Uganda into Quality Chemicals Industries Ltd (QCIL), a joint venture between Cipla and Quality Chemicals of Uganda. The opportunity is a perfect means through which we are able to convey our perspective on the proper solution to some of the problems facing less developed economies. Investing in one of the largest pharmaceutical plants in Africa has seen it provide generic ARV (antiretroviral) drugs at more affordable rates than the patented versions. The trans-migration of technology and the support of Cipla ($4bn market cap) come as a result of TRIPs and the ratification of India to the WTO. As a result, Cipla needs to respect patents and consequently phase out the production of generic life saving drugs to LDCs (Least Developed Country) like Uganda.
Are there other investments in Africa that you are pursuing?
TLG is also the largest shareholder in the largest cancer treatment facility in West Africa. The project, which is in Ghana, will commence operations in H1 201 0 and will not only provide a much needed service to the region, but also employment opportunities for specialised African medical professional in diaspora. Our partners in the project include Swedfund (funded by the Swedish government), Elekta, and Fidelity Capital. We believe it is important to execute these projects in partnership with local entities so that it becomes a real ‘African solution’ – as with the Ugandan plant where the Ugandan government is currently a shareholder. Though we are commercially focused, we are committed to a social and ethical manner of private equity believing that they represent the best way to garner long term returns.
While looking at Africa as a potential investment how does one deal with the lack of a developed capital markets base?
We try and work within the constraints of the markets where we are involved in rather than adopt pre-existing gospels on return by focusing on an exit or IPO event. By that I mean that we never try to time an exit in our investments given that they are practically impossible to do as African capital markets are still very much in their infant stages. We also focus on being judicious in how we do things typically investing in defensive high growth sectors and implementing structures that would allow us to build indigenous businesses and generating strong internal cash flow.
Effectively, this means that TLG Capital tries to utilize effective structures, where downside protection is possible but participation in future growth can still be achieved via instruments like convertible preferred stock. It is difficult trying to do an IPO in Nigeria right now as it would be tempting fate with all that is going on which is rather surprising given that the country’s stock market was one of the best performing markets only a couple of years ago! And in Uganda, for example, there are just over 10 companies on the stock exchange; so one has to be careful in pursuing the right structures to generate the return in these markets!
What is the secret to your career success? How did you reach the rank of a VP at Merrill Lynch at the young age of 23?
I do not like to classify my career as a success given that we are still at the root level of what we want to achieve but I have always been passionate about creating a platform for a “trans-migration” of technology from the likes of India to Africa. Clearly I have had the good fortune of being able to understand better than most the SSA markets which eventually became my specialization. The ability to connect on a business and cultural level with a deep rooted conviction that the vast majority of Africans want to move forward in a sustainable manner has paid dividends. Combined with African governments recognising that economic growth is the best way for one to stay in power has contributed substantially to what is hopefully a new era in African development.
You are originally from Pakistan, which is going through a rough patch right now. Are their entrepreneurial opportunities that you would consider that would help turn the country around?
Clearly investments alone will not change the course of a nation. The issues relating to Pakistan are more far-reaching and will require a period of strong governance particularly in the current geo-political climate.
We have been looking closely at India and we are hoping to close our first deal in the country in H12010. We have already identified a number of companies all of whom possess the trait of being able to transfer their technology and human capital to Africa. India’s most potent strategic asset is the human capital that must be tapped for Africa and other frontier markets for the country to realize its full potential. We want to play a part in that process of driving development across nations through a more efficient uses of comparative knowledge and skill set.
What advice would you have for young South Asian considering a career in Investment Banking?
With the changing of the financial industry over the past couple of years, it is important to remain flexible and adaptable. The ability to critically analyse and be able to see beyond the immediate future will always hold good stead in the field of banking.
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