When the chronicles of Kenyan business trailblazers will finally be written, one name that must surely appear — even if just as a footnote — is Ayisi Makatiani. His name will appear not because he is an alumni of one of the most prestigious universities in the world – Massachusetts Institute of Technology, but because of mastering the art of business survival, and a rare entrepreneurial acumen that has seen him bestride the Kenyan business landscape like a colossus.
Makatiani, who last Wednesday tossed champagne at a local high-end hotel celebrating his achievement of convincing eight pension schemes, among them volatile ones from Kenya Railways and Kenya Power, to inject Sh3 billion into a new fund operated by Private Equity (PE) fund Fanisi Capital where he is the CEO, cut his business teeth far away from PEs – in a nascent ICT sector back in 1994.
“I like doing business in Kenya. Even after Silicon Valley came, and the ICT revolution changed us, PEs are now the in thing. Kenya now leads the region in private equity investments,” Mr Makatiani said in a recent interview with the Financial Standard.
More than 23 years ago, when Kenya and Africa lived in ‘the dark ages’ of internet connectivity, Makatiani, fresh from a US university led three other young Kenyans who schooled together in America to form Kenya’s arguably first digital company – Africa Online. It began as a service distributing news from Africa by e-mail. “We hooked up two computers, one in Boston, the other in Kenya,” Makatiani recalls.
This was a time when few companies enjoyed digital services, and the larger populace was beginning to learn of the enigma that was a computer; a world where few if any cyber cafés existed.
The other two were Amolo Ng’weno, daughter of Kenya’s pioneer journalist and prominent media owner, Hillary Ng’weno and Karanja Gakio.
The trio went on to connect dozens of offices and homes across East Africa to the internet, living an indelible mark in the region, and raking in millions of shillings doing the job.
It was from their idea that Kenya has picked up to be a global giant in terms of internet usage and online applications.
Recently, Kenya was ranked among the top five in terms of internet usage, accessibility and affordability, after Egypt, Algeria, Nigeria and South Africa.
The bubble finally burst, after a number of other Internet Service Providers, among them Wananchi Online, UUNET which re-branded to MTN Business, South Africa’s MWEB Africa, AccessKenya, Altech, Internet Kenya and many others noticed the monopoly enjoyed by Africa Online and moved in and crowded the space.
Everybody claimed a piece. Africa Online under the leadership of Makatiani, decided it was time to offload the entity, having made hay while the sun lasted. The three co-founders sold the internet venture to a new entrant, Johannesburg Stock Exchange listed South African fixed-line telecom operator Telkom SA for £10.32 million (Sh1.4 billion). But according to other media reviews, Africa Online was bought by Prodigy, an American technology firm.
Makatiani and his erstwhile youthful colleagues had already made their millions and left the risks of the new venture to the South Africans. The move was boldly calculated.
Two years later, Telkom SA made a dramatic retreat from the East African market, selling Africa Online which had now descended into loss-making to Gondwana International Networks.
Makatiani’s precocious foray into the ICT world was safely over.
According to reviews by international media agencies, it hasn’t been rosy for Makatiani. He temporarily left pursuing his dream and joined the African Management Services Company (AMSCO), based in Johannesburg, South Africa.
The organisation is the brainchild of the International Finance Corporation (IFC) — the World Bank’s private-sector arm — the UN Development Programme, and the African Development Bank. Its mission is to help small African firms become competitive.
It was a surprising move for an established entrepreneur. “My friends thought I was mad,” he chuckles. Ironically, his joining AMSCO was the result of a failure. For two years, he had tried to raise 300 million rand (Sh4.5 billion) to launch Gallium, a private-equity fund for Africa. After leaving Africa Online, he wanted to use his experience to help in turning around companies in the region.
But according to the review, he got only half the money he wanted, and decided to drop the idea. While looking for investors, however, he had approached the IFC. They thought he was just the man to run AMSCO.
The businessman that many describe as tough, disciplined, smart and calculating, has now targeted sectors that he believes the risks are minimal and returns are guaranteed – private equity investments.
“He was a director at Barclays back when I was in the private sector and I remember he was very tough and determined,” former Barclays chief executive and current Cabinet Secretary for Industrialisation Adan Mohamed said of Makatiani.
Last Wednesday, Makatiani led his Private Equity firm in convincing eight local pension schemes to commit Sh3 billion to a fund operated by Fanisi Capital.
The schemes are from Kenya Power, Barclays Group, Co-operative Bank, Kenya Railways, Alexander Forbes, Kenya Ports Authority and Laptrust. The fund is a 10-year creation that aims to raise between Sh7.5 billion and Sh10 billion.
Asked how simple or difficult it was to convince the pension funds to part with their money, given the strict regulatory framework the schemes operate within the confines of the Retirement Benefits Authority (RBA), Makatiani’s response was simple: promise the fund managers guaranteed returns.
The very essence of his business philosophy. “You see, pension funds are very risk averse. So we walked them through the returns which we guaranteed them are safe,” Makatiani says.
RBA recently evaluated its regulatory framework and allowed fund managers to seek alternative investments, one of them being PEs.
RBA acting Chief Executive Officer Nzomo Mutuku explained that the review of the policy was informed by the need to have a broad portfolio where the schemes can safely put their money.
They do not have to invest only in government securities and the stock exchange. Currently, Mr Nzomo said 0.02 per cent of the Sh1 trillion held by pension schemes is invested with PEs and about 80 per cent of this money is with Fanisi Capital.
“At Fanisi we only invest in sectors like health, education, agriculture and retail. You see with health, people will always go to hospitals and visit pharmacies where they will buy medicine. There is no haggling about it,” Makatiani asserts.
“Same case with education where people will always go to school. As for agriculture we all must buy food. That is why Fanisi’s investment in these sectors are guaranteed profits.”
Fanisi’s investment portfolio through out the East African region includes: retail pharmacy chain Haltons, which has outposts in Nairobi and other locations in Kenya, agro-processing outfit Kijenge Animal Products based in Arusha, Tanzania; and private education provider Hillcrest International Schools based in Nairobi.
From the days blooming as a business novice at Africa Online, to the mercurial investments with Fanisi Capital, Makatiani’s tough journey of survival has established him as one of the most shrewd and calculating businessmen in the country.
Asked if he would again join the now overly crowded ICT sector like he did in his youth, the straight-shooting businessman plainly avers: “My world now is in PEs. Building Fanisi Capital and making sure investments give returns is my only concentration.”