Increasing investment opportunities, along with market size and market demand were chief amongst discussions for using British Virgin Islands (BVI) corporate structures in scaling businesses in West Africa.
The discussions took place at the West Africa CXO Roundtable, hosted by BVI Finance and African Review on September 30.
Incubator Funds
“Look to BVI for the products available to scale up your business,” said Managing Partner at Sinclairs BVI, Adenike Sicard.
Ms. Sicard said the BVI is known globally for its reputation of cost effective corporate structures used for raising finance. According to the managing partner, one such corporate structure, the incubator fund, is very easy to access and ideal for scaling West African businesses.
“An incubator fund is a tool to quickly scale up, and to begin earning profits in the market that you choose.”
The managing partner explained that incubator funds have “light touch” regulation, and are very easy to set up. She also said incubator funds are good for holding crypto assets. Incubator funds are mainly used by investment managers who are looking for a low-cost option to set up a fund, to develop a track record, without having to comply with onerous regulations.
“BVI is a good place to launch an incubator because of the ease, economy and speed. Whether you’re an asset manager or investor, you can utilise BVI fund products.”
To set up an incubator fund, investors must be able to invest a minimum of $20,000, with a maximum of 20 investors, and investments must not exceed $20 million in net assets. Incubator funds can operate up to two years without an auditor, custodian, manager, or fund administrator. After two years, they must scale up to another regulated entity such as a professional or private fund, or it must wind up.
Incubator funds were first introduced to BVI in 2015, and to date there are over 100 established incubator funds.
BVI & Other IFCs Used to Boost GDP in Developing Countries
In highlighting the major role IFCs like the BVI play in facilitating investment, Ms. Sicard shared statistics from the 2019 Overseas Development Institute report. The report states that IFCs boosted developing countries’ GDP by $400 billion, and increased tax revenues by $100 billion, between 2007 and 2014. A lot of this investment was done via corporate structures, said Ms. Sicard.
Investment is further facilitated by the BVI’s independent court system, with a separate commercial court to deal with corporate activities solely, a robust legal system that is respected worldwide, and the Financial Services Commission, which Ms. Sicard commented, “is responsive to the needs of investment managers.”
“The BVI has a track record for being the jurisdiction of choice for investment managers.”
Jeffrey Kirk, Managing Partner, Appleby (BVI) Limited said that IFCs like the BVI can offer lots of added value, with regards to accessing capital. He also referenced the ODI report which indicated that developing nations were being held back by a lack of finance, and opined that an IFC, like the BVI, can play a crucial role in providing that financing.
Mr. Kirk said that BVI has been a jurisdiction of choice for Asian clients, due to its flexible business structure, business friendly implementation and processes, and in particular, lender friendly laws.
To that end, the Appleby managing partner explained that the use of IFCs like the BVI are favourable to lenders, adding, “If there’s a public-private partnership deal in West Africa, and there’s a development bank involved, the bank would prefer to have the financing level at an IFC level, because the laws in jurisprudence have historically been favorable to lenders.”
“This gives lenders comfort and satisfaction in knowing, should there be a default in enforcement, that they are in fact protected.”
In support, Ms. Sicard opined that the BVI has a very robust regime of protecting someone’s security, which is achieved through the registration of security.
Africa’s Unicorns
Roundtable discussions also focused on Africa’s unicorns, which total nine to date, according to Chairman & CEO, Atlantic International Refinery and Petrochemicals, Dr. Akintoye Akindele. A unicorn company is a private company with a valuation over $1 billion. The first African unicorn was created in 2019.
Dr. Akindele said that while these unicorns are mainly in the FinTech space, he opined that more unicorns are possible in other areas such as agriculture, banking, energy, and manufacturing.
The CEO encouraged more investment in Africa, stating, “The more you invest in Africa, the more attractive the yield,” citing advantages such as Africa’s young population, global partners, educated and skilled professionals.
Other panelists at the West Africa CXO Roundtable included Founder, CWG PLC, Austin Okere; Managing Partner, Pearl Mutual Consulting Ltd, Olufunmi Adepoju; and Executive Director and Group Chief Financial Officer, GZ Industries, Ayodeji Adelakun. The roundtable was moderated by Anthony Osae-Brown, Bureau Chief, Bloomberg. To view, please click here.
The CxO Roundtable Series Africa are being held by African Review in partnership with BVI Finance. The first, which focused on Southern Africa was held in July and the next focused on East Africa will be held on 28th October via Zoom.