In developed markets, investors pay a premium for predictability. In emerging TMT markets, predictability is scarce. Most investors view regulatory flux, infrastructure gaps, and operational friction as "risks" to be priced in. At EXXING, we take a contrarian view: Complexity is an asset class.
The Alpha in Friction
Standard valuation models (DCF, Multiples) often fail in high-growth African markets because they heavily discount for "country risk" or "execution risk." This creates a Value Gap.
The "Complexity Arbitrage" framework posits that specific types of complexity create barriers to entry that, once navigated, become formidable competitive moats. The harder it is to build, the harder it is to displace.
The 3 Dimensions of Complexity Arbitrage
- Regulatory Complexity:
Navigating grey zones in licensing or spectrum allocation isn't just compliance; it's market design. First-movers who help shape the regulatory framework often secure long-term advantages.
- Operational Complexity:
Building fiber in dense urban centers or remote rural areas requires "boots on the ground" know-how that global giants lack. This operational friction protects local incumbents.
- Financial Complexity:
Structuring deals with currency controls, cross-border tax implications, and mixed public-private capital stacks requires sophisticated engineering (The Financier).
Case in Point: The "Nation Builder" Effect
Consider a national broadband project. A pure financial investor sees low ARPU and high capex. A "Nation Builder" strategist sees the sovereign guarantee, the ancillary digital services ecosystem, and the long-term infrastructure monopoly.
By applying our Integrated Value Creation model, we help investors see past the initial friction to the long-term annuity value of these assets. We don't just manage the complexity; we monetize it.
Conclusion
To win in African TMT, you must stop looking for "clean" deals. They don't exist, or they are overpriced. The real Alpha lies in the "messy" deals where your ability to execute (The Operator) and influence (The Nation Builder) allows you to arbitrage the complexity premium.