In African mid-market investing, operational alpha consistently outweighs financial engineering. Unlike developed markets, where leverage and multiple expansion often drive returns, value creation in Africa is primarily generated through execution, discipline, and professionalization.
Many profitable businesses operate with:
- Limited financial visibility
- Weak cost controls
- Informal procurement and pricing
- Founder-centric decision-making
These characteristics create structural inefficiencies that can be addressed through hands-on leadership rather than capital intensity. Improvements in working capital management, procurement discipline, pricing strategy, and governance often deliver immediate and sustainable performance gains.
Operational alpha also comes from institutionalization. Introducing basic management reporting, budgeting processes, and incentive alignment significantly enhances decision-making and accountability. Over time, this professionalization increases bankability, reduces risk, and expands strategic optionality.
For operator-led investors, operational alpha is not a one-time intervention but a continuous process. The most successful platforms focus on building strong second-line management, resilient systems, and scalable processes—laying the foundation for regional expansion or strategic exits.