Private equity (PE) represents a critical component of the global financial ecosystem, characterised by investments in non-publicly traded companies. Its significance escalates in the context of economic growth, especially in emerging economies like Namibia. This article explores how PE, as a source of patient capital with better risk-adjusted returns, fills the crucial equity financing gap in emerging economies and consequently catalyses economic development by exploring two investments made by Eos Capital in the agriculture and infrastructure sectors.
PE stands distinct in its nature as patient capital. Unlike public equity or debt financing, PE involves longer investment horizons, allowing businesses to focus on long-term growth strategies without the pressure of immediate returns. This risk-tolerance and patient approach make it an ideal form of investment, particularly for industries and sectors where growth prospects are substantial but accompanied by higher risk.
PE is thus important as businesses in emerging economies like Namibia often face significant challenges in accessing traditional forms of capital, like bank loans. High-interest rates, stringent lending criteria, and a limited range of financial instruments create a financing gap which hinders the growth of startups and SMEs, which are essential for economic diversification and development. PE thus steps in to fill this gap by providing the much-needed capital infusion.
Eos Capital (Eos), a Namibian PE firm with over N$1 billion in assets under management, has been instrumental in funding local businesses across sectors such as agriculture and infrastructure to mention a few. These investments not only offer financial resources but also bring in expertise, governance, and global best practices, leading to significant value creation for the investee companies. Eos’ involvement as a PE investor has therefore translated into tangible economic growth.
For example, Eos’ strategic investment in Cherry Irrigation, through the Euphrates Agri Fund, stands as a significant catalyst for economic growth in the country. Cherry Irrigation specialises in the design, installation, and maintenance of commercial irrigation systems and research indicates that each hectare of land equipped with irrigation contributes to the creation of approximately one job, highlighting a direct link between irrigation and employment creation. In addition, Cherry Irrigation’s technical expertise empowers local farmers to optimise the use of their natural resources—land and water—thereby maximising the value derived from these assets and increasing the national tax base. This expertise is not only instrumental in enhancing agricultural efficiency but also plays a crucial role in catalysing local food security. By enabling more efficient food production locally, Cherry Irrigation directly contributes to the stability and self-reliance of the country’s food supply chain. Lastly, given that about one-fifth of Namibia’s workforce is employed in the agricultural sector, the impact of such investments is far-reaching, supporting a sizeable portion of the country’s population.
Another example of this is Eos’ investment in StudentStay, a Purpose-Built Student Accommodation developer and operator. This investment has a significant economic impact in both the short and long-term. During the construction phase, the project has generated over 100 jobs, providing a substantial boost to local employment. In addition to immediate job opportunities, the project also contributed to skill development among the local skilled workers. The completion of these facilities will also lead to long-term improvements in educational outcomes by providing a conducive and affordable learning environment for over 750 students.
These case studies comprise of only 2 of 14 investments Eos has made. The unique characteristics of PE, particularly with regards to operational and strategic expertise through active management, flexibility in financing structure, and the ability to capitalise on market inefficiencies and niche opportunities, distinctly positioned Eos as the ideal financier for both Cherry Irrigation and StudentStay, and ultimately, the catalyst of the economic impact created by the respective entities.
The flexibility in financing structure offered by Eos was crucial for both projects. This flexibility allowed for tailored financial solutions that matched the specific needs and timelines of Cherry Irrigation’s and StudentStay’s development phases. Traditional financing methods with rigid structures might not have accommodated the unique requirements or the scale of these projects. In addition, Eos’s capacity to identify and capitalise on niche opportunities and market inefficiencies was instrumental in recognising the potential in both Cherry Irrigation and StudentStay. The opportunities also represented niche markets where Eos could leverage its resources and expertise to create significant value and socio-economic impact.
In conclusion, PE in Namibia, exemplified by the strategic efforts of Eos Capital and other local PE players, is more than just a source of funding; it is a catalyst for transformative economic and social development. The case studies of Cherry Irrigation and StudentStay demonstrate the multifaceted impact of PE investments. By bridging the equity financing gap, Eos has not only enabled these enterprises to thrive but has also contributed significantly to job creation, skill development, food security, and educational advancement in Namibia. The unique attributes of PE—patient capital, risk tolerance, flexibility in financing, and active management—have enabled Eos to turn potential into tangible growth and progress. This underscores the vital role that PE plays in emerging economies, not merely as investors but as partners in nation-building. Namibia’s experience with Eos Capital offers a blueprint for how PE can be leveraged effectively to foster sustainable economic growth and development in other emerging markets.
About Author: Etuna Hango is a Senior Associate at Eos Capital