The Carlyle Group has closed its maiden private equity fund targeting sub-Saharan Africa at $698m, 40 per cent above target, underscoring the growing appeal of investing on the continent.
Africa attracts a tiny proportion of the world’s private equity money, but interest has grown in the region of 1bn people, buoyed by oil and gas discoveries and a growing consumer class. Although many smaller funds have launched in the past decade, targeting single countries or sub-regions, Carlyle is one of the first global alternative asset managers to launch a dedicated sub-Saharan African fund.
Marlon Chigwende, managing director and co-head of Carlyle’s sub-Saharan Africa advisory team, told the Financial Times that half the funding came from first-time investors in Africa, including 10 per cent from Africa itself.
Even so, private equity fundraising in Africa has yet to draw equal with its 2007 peak year, when the African Private Equity and Venture Capital Association estimated private equity houses raised $4.7bn, compared with $3.3bn last year.
Many investors see opportunities in investing in notoriously private family businesses keen to expand beyond their domestic markets.
Carlyle says it will try to gain exposure to Africa’s emerging middle class, targeting consumer, logistics, financial services and telecommunications sectors.
“[Investing in Africa] is much better than it has been historically,” said Mr Chigwende. “If you look at the quality of the growth, the emerging middle class has made it a stabler and broader base . . . A lot of the growth if you go back 16 years started off in the extraction industry, but over the last 10 years it’s flipped – two-thirds of the growth is now consumer-driven and that’s more sustainable.”
The fund, which launched in early 2012 when emerging markets and natural resources were more in favour than they are today, has made two investments. It has backed Tanzanian agriculture trading company, Export Trading Group, and soon after invested in a trucking and logistics company in Mozambique, where new gas finds are likely to propel the coastal country’s growth.
East Africa has historically been overlooked by private equity funds because of its smaller, fragmented and less developed markets, but is beginning to draw in big hitters. Last year, Kenya signed 12 private equity deals – more than the established markets in Nigeria and South Africa, according to a survey from Deloitte and Africa Assets last month. East Africa leads the field compared with other regions, with 26 deals, although the deal sizes are generally much smaller. Pan-African private equity fund ECP invested in a regional coffee shop chain, while Catalyst has backed Tanzanian toothpaste and tea manufacturers.
Donald Kaberuka, president of the African Development Bank, one of the cornerstone investors in Carlyle’s fund, described Africa as “a new global growth pole”. Data are increasingly catching up with such big claims: Africa’s most populous country, Nigeria, this month released GDP figures based on improved data that increased the size of its economy to $509bn, an 89 per cent rise and so overtook South Africa.
This week Temasek, Singapore’s state investment company, closed its first Nigeria deal, investing $150m in an oil and gas group, five months after it spent $1.3bn to acquire stakes in gasfields in Tanzania.
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