Pioneering private equity group CDC (www.cdcgroup.com), 100% owned by the UK Government’s Department for International Development, has recorded a paper loss of £72 million ($111.6m) across its £2.6 billion portfolio for 2011, according to results released yesterday. It is the second loss since 2000, the previous one was in 2008 at the height of the global financial crisis.
According to a results press release : “.. difficult financial market conditions in many developing countries meant that CDC showed a valuation loss of £72m in 2011 (compared to a valuation increase of £269m in 2010). Despite this loss, valuations for companies in CDC’s portfolio still outshone the MSCI benchmark by 19% in 2011 (and by 25% over a rolling five-year basis).” Last year CDC announced a high-level new business plan, with a geographic remit focused on sub-Saharan Africa and South Asia
According to Diana Noble, CDC’s Chief Executive: “Long-term finance is the lifeblood of businesses in developing countries across Africa and South Asia. Without the economic growth that these businesses play a part in generating long-term development and poverty reduction will be undermined.
“That’s why I’m pleased that CDC’s capital is reaching more businesses than ever before. Some of these businesses would not exist without CDC’s capital. For others, our investment brings growth, new jobs and improved environmental, social and governance standards.
“By reaching over 1,000 investee companies in 2011, our capital is having a positive impact in some of the hardest places – and all at no cost to the UK taxpayer.”
In 2011, CDC backed 1,126 private sector businesses in 74 developing countries (up from 930 in 2010). It made £364m of new investments in businesses in 2011 (down from £420 in 2010) including 12 new fund commitments totalling £188m (down from £231m in 2010), of which 6 were made to first-time fund managers. This demonstrates CDC’s continued work to build investment capacity in poor countries by backing new investment teams. Since 2004, CDC has made 136 fund commitments, of which 69 were to first-time teams. Portfolio companies paid at least US$3.5bn in business taxes (up from US$3.1bn in 2010);
In Africa CDC:
• invested £149m in businesses in Africa;
• grew the value of its portfolio of African businesses to £858m;
• made new commitments of US$176m to funds focused on Africa; and
• backed 6 Africa-focused funds, including a new first-time fund investing in agribusiness in
East and Southern Africa and the first commitment to a sub-Saharan African microfinance fund.
Historically CDC has invested through a fund-of-funds model, but over the past year the group has begun to provide debt and direct investment to businesses in sub-Saharan Africa and South Asia. Businesses backed by CDC capital in 2011 also increased their development impact by employing more people – they supported 976,000 jobs (up from 796,000 in 2010). The portfolio is up from a value of £1bn when CDC was previously restructured in 2004.
Noble said: “In 2012, I want CDC to build upon what we achieved last year and reach even more companies with long-term, responsible investment. Whether it’s investing in companies that create hundreds of jobs in the Indian pharmaceutical sector, bring wireless communications to remote villages in Mali, DRC and Togo or support the upgrading of the electricity supply in Cote d’Ivoire, CDC will continue to support the entrepreneurs and ideas that have the biggest development impact, bringing jobs and infrastructure to poor countries.”