In this photo taken Wednesday, Nov. 23, 2016, Kenyan laborers work to finish the construction of an existing bridge that goes across a corner of Nairobi National Park in Nairobi, Kenya. (AP Photo/Ben Curtis) The rapid collapse of Spencon, a 40-year-old construction giant in East Africa, a few years after it was taken over by a private equity firm, has left thousands jobless and is the subject of several court cases across the world.
An investigation by the BBC’s Africa Eye released on 6 April, 2020, detailed the collapse of Spencon , an infrastructure giant that had operations in multiple countries.
Founded by Jitendra C. Patel, known informally by the initials of his first two names JC, and two of his friends in 1979, Spencon had expanded operations to seven African countries, and had over 200 complete projects by 2007.
By the time it took on Emerging Capital Partners (ECP) as an investor, it was valued at $100mn.
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In the global economic boom that preceded the 2008 financial crisis, Spencon’s founders set out to go bigger, planning to go public in Nairobi. Several of Kenya’s biggest companies, including Equity Bank and Safaricom, also listed around the same time. Vision of Spencon
“Spencon had a vision of becoming one of the largest infrastructure firms in Africa by 2020 after listing in the Nairobi Stock Exchange with a possible cross listing in the Joburg and London Stock exchanges,” JC’s son, Pragnesh Patel, told The Africa Report from Panama, “That was the principle reason, we believed, why ECP, along with FMO of Netherlands and DEG of Germany, invested $22m in Spencon.”
At the time, private equity investments were not properly understood in the region, and could be easily confused for the “hands-off” lending models of government development aid institutions.
“The trajectory of Spencon’s growth since inception in 1979 till 2009 [after ECP’s conversion, i.e. for 30 years] grew at a steady rate of approx 15% per annum,” says Pragnesh.
“Post ECP taking control in 2009, the turnover and profit start dropping [for the first time in Spencon’s history] and the debt also started mounting.”
“ECP accepted to convert its loan and become a shareholder of Spencon but only on condition that the previous majority shareholders make certain commitments to ECP,” the fund said in a statement.While it now had a minority stake, it came with a board […]