Black-owned Novare rapidly expands to other African markets

It started as a small pension funds advisory, but today, Rosebank-based financial services group Novare has become one of the fastest-growing black-owned and black-managed investment firms in SA.

It has more than R150 billion in assets under advice, over R10 billion of property assets in Nigeria, Zambia and Mozambique, and is seeking to raise an additional R2 billion for its new impact fund that has ambitions to revive agriculture and manufacturing in the country.

When Novare was founded in 2000 by Johan Henn and Derrick Roper, it was only an investment advisory business, advising South African pension funds on how to invest their members’ monies. But it quickly expanded to offer offshore investments, domestic multimanager funds, as well investment consulting across a range of asset classes.

Not long after, it went beyond South African borders, where Novare Equity Partners bought and managed shopping centres in Nigeria, Zambia and Mozambique.
When one of the founders of Novare wanted to retire in 2019, current CEO Olaontse Leepile led a management buyout, which saw him and his other colleagues take up a 37% stake in the company, making it majority black-owned.

“To their credit, I think the founders realised very early on and saw empowerment as a competitive advantage and a necessity to do business in South Africa,” said Leepile. He said it was always their intention to build a transformed company. They signed the first empowerment deal within three years of the company’s existence. In 2003, they sold a 26% stake to Tokyo Sexwale’s Mvelaphanda Group and upsized that stake to 52% around 2005. When Mvelaphanda Group unbundled its stake, Novare sold 26% of its company to Nehawu Investment Holdings.

So, when black management offered to buy out the funders, there was no hesitation on their part.

“The management consortium that we have now is made up primarily of black management and staff. The business is now 54% black owned. We transformed it from within,” said Leepile.

But one thing the management consortium had to guard against was a decline in the performance of Novare’s funds, lest some people bemoan the change of hands in the company’s ownership.

It clinched the “Best Fund of Hedge Fund” award in the multi-strategy category at the HedgeNews Africa Awards in 2020.

But the company has been through some rough patches too.

Expanding to the rest of Africa and listing a REIT

When it expanded to the rest of Africa in the late 2000s, it took a big bite by going into Nigeria first, buying a stake in a pension funds administrator there. It started investing in real estate, building malls and offices. Soon after, it was in Mauritius, Zambia and then Mozambique.

“At the time, Africa was booming. It had seven of the fastest-growing economies in the world. It was around the time of that famous front page of The Economist, titled ‘Africa rising’,” recalled Leepile.

But the opportunity Novare saw turned out differently than envisaged. The 2014-2016 oil price crash sent Novare’s operations in Nigeria into a tailspin.

Now that the Nigerian operations have stabilised, however, Novare is planning to list a real estate investment trust (REIT) company in Nigeria. The company already manages its properties itself since the oil price crisis, and Leepile believes Novare Equity Partners is now ripe for listing a property company.

The company plans to capitalise on the Nigerian pension funds market’s rapid growth and regulatory changes. Regulations in Nigeria prevent pension funds from investing directly in property. So, having a REIT would allow Nigerian pension funds to invest in Novare’s business because it would be a listed investment vehicle.

“That Nigerian pension funds market has grown significantly over the last couple of years. You are looking at around $32 billion,” said Leepile.

The impact investing drive

After the management buyout, the new owners saw an opportunity to expand Novare into new territories. They launched Novare Impact Investment Partners, headed by former Public Investment Corporation’s impact investing principal, Benedict Mongalo.

Novare launched that fund in the middle of a pandemic, which made fundraising a trying task. Of the R2 billion the company wants to raise, it has only managed R150 million.

But with lockdown restrictions gone and investors keenly looking at putting money in emerging markets again, Leepile is looking forward to a better fundraising year.

The fund targets three sectors: agriculture, economic infrastructure and manufacturing. The rationale is that agriculture and manufacturing have a high labour absorption rate, and SA needs those kinds of jobs to deal with its youth unemployment crisis.