African Capital Markets News » Private Equity

Investors flock to $613 millon ECP Africa Fund III

Tom Minney — Tue, 27 Jul 2010 22:09:18 +0000

International private equity firm Emerging Capital Partners (www.ecpinvestments.com), on 25 July announced the final closing of its ECP Africa Fund III PCC (Africa Fund III), with total commitments of over $613 million. It is one of the largest funds ever raised for investment across Africa and is the 7th fund managed by ECP, bringing the firm’s total capital raised to more than $1.8 billion, with more than $1 billion invested to date.
An article in the Financial Times (www.ft.com) suggests that the size and success of the fund indicates growing interest from investors into Africa. Some fund managers have reported increased inquiries, especially after all the media coverage of Africa as a business destination around the World Cup. However, most investors seem to need an experienced partner who will help them through the hurdles such as liquidity and market risk.
Africa Fund III includes over $450 million from return investors such as the African Development Bank, the International Finance Corporation, the Overseas Private Investment Corporation and CDC, the United Kingdom government development finance institution. The remainder came from new investors, including pan-African fund-of-funds manager, South Suez (www.southsuez.com).
Africa Fund III will seek controlling stakes or influential minority positions in high-growth companies through equity and quasi-equity investments, including convertible debt, in line with the firm’s usual strategy. It aims to invest in leading companies and will focus on under-penetrated markets where factors such as industry consolidation, positive macroeconomic trends, liberalization and improved regulations offer opportunities for above-market returns. It will also look for companies expanding regionally in various sectors such as telecommunications, natural resources, financial services, agriculture, transportation and utility businesses.
ECP is based in Washington but focuses on Africa. It has 10 years of experience investing in Africa through 7 successful funds, with investments in more than 50 companies spread across 40 countries. The investment strategy aims to deliver consistently above-market returns by focusing on economies uncorrelated to the U.S. and other developed nations. The ECP team operates from offices in Washington, D.C., Abidjan, Casablanca, Douala, Johannesburg, Lagos, Paris and Tunis.
The company says that Africa’s growth is not so likely to be affected by ongoing uncertainty in global credit markets, because most African governments, companies and individuals did not take on. It adds that debt forgiveness plans have seen external debt plunge as a proportion of economic output in Africa, improving credit worthiness. A press release quotes Vincent Le Guennou, co-chief executive officer of ECP, saying: “Investors can see development models that were successful in India, Brazil and Mexico and project that growth onto Africa. Many see Africa as the next place that’s going to boom as local companies adopt efficient management practices, financial discipline and governance standards.”
Hurley Doddy, co-chief executive officer of ECP, says in the press release: “The positive response we’ve received from investors for Africa Fund III demonstrates the growing appreciation of the tremendous investment opportunity that exists across the African continent. Our team has the optimal combination of local market knowledge, operational prowess and financial expertise to provide investors with diversification and competitive returns by sourcing attractive investment opportunities and expanding our portfolio company businesses into regional and global markets.” The FT quotes him as saying that the middle class in Africa is growing fast.
ECP has already started investing capital from Africa Fund III, with four investments totaling over $180 million:
• Financial Bank, which provides banking in 6 countries in Central and West Africa
• Wananchi Group, a pay television and high-speed internet provider in East Africa
• Groupe NSIA, an insurance company in West and Central Africa
• Thunnus Overseas Group in Madagascar and Cote d’Ivoire which provides 25% of the canned tuna in France.
The press release quotes Matthew Hunt, Director of South Suez, as saying: “With its long track record of successful investing in Africa and established presence via 6 regional offices, ECP is a first choice for us when looking at investing on the continent”. The FT quotes him: “Africa is mis-priced because it is misunderstood, so it has cheaper growth than other emerging markets due to a big gap between perception and reality.”
ECP argues that economic growth is widely spread across Africa, creating investment opportunities across sectors and in countries outside traditional commercial hubs. New technologies such as mobile telephony and the emergence of a middle class have shown that Africa is not simply a “resource play,” as many foreign investors once considered it.

Citadel Capital announces cement deals in Sudan and Egypt

Tom Minney — Thu, 15 Jul 2010 11:27:17 +0000

Leading African private equity house Citadel Capital (www.citadelcapital.com) has this week announced 2 cement deals. Citadel was recently named “African Business of the Year” at a gala awards ceremony organized by “African Business” magazine. It is based in Cairo and listed on the Egyptian Stock Exchange (ticker CCAP.CA). It has been expanding into Africa and, according to a press release, has US$ 8.3 billion in investments covering 15 industries and spanning 14 countries.
On 15 July Citadel announced that ASEC Engineering and Management, a portfolio company of its investment platform company ASEC Holding, has signed a 3-year renewable contract to provide technical management services to Alsalam Cement Production Company (ACPC) to manage a cement plant near Atbara, Sudan.
The Atbara plant produces clinker, which is then ground with gypsum to make cement. The plant has a production capacity of approximately 2,000 tons of clinker per day. ASEC Engineering will receive a fixed fee for every ton of clinker produced in return for a guaranteed minimum annual production and a pledge to reduce the plant’s consumption of electrical power and fuel. ACPC was established in 2003 and is owned by the Ahmad Osman Abdulsalam Group. The plant near Atbara is currently ACPC’s sole operation, although it is in initial planning stages for the construction of a second plant.
According to a press release ASEC Engineering Chief Executive Officer Mohamed Galal Yakout says: “We look forward to developing a strategy that optimizes the efficiency of Alsalam’s production process.”
ASEC Engineering has long provided market-leading management and consultancy services in Egypt, where in 2009 the company managed 7 plants with a total production capacity of about 15 million tons per annum (MTPA), or more than 30% of total cement production capacity in the country. In 2010, the company has already delivered 3 major cement plant consultancy projects. In addition to its expansion into Sudan, ASEC Engineering played a vital role in the turnaround of the Zahana cement plant in Algeria and is currently exploring opportunities in other regional markets.
In related news, ASEC Engineering will also be responsible for the technical management of ASEC Cement’s nearby Takamol plant, which is in advanced stages of operational testing. Scheduled to open later this month, the plant will have a production capacity of 1.45 MTPA of clinker and 1.6 MTPA of cement, reducing Sudan’s national cement deficit of 3 MTPA by more than half.
Another subsidiary of ASEC Holding, called ASEC for Manufacturing and Industrial Projects (ARESCO), announced on 12 July that it has signed a US$ 130 million contract to construct a new cement plant for the Building Materials Industry Company (BMIC) in the Upper Egyptian governorate of Assiut. ARESCO is a turnkey contractor serving the cement, energy, petrochemicals, petroleum and general industrial sectors. According to the prss release, ARESCO has “state-of-the-art engineering, steel fabrication and construction units that fabricate quality products including boilers, cement mills, preheaters, tanks, condensers and pressure vessels. With over 4,000 employees, ARESCO is a rapidly growing business that has undertaken turnkey projects in Egypt, Iraq, Jordan, Qatar, Sudan, Algeria and Libya.”
ARESCO is to provide all the civil, electrical and mechanical works for the 1.5 MTPA cement plant, which is projected to be complete in 22 months. The company will also carry out all steel fabrication as well as testing and commissioning for BMIC on a turnkey lump sum basis.
Tarek Salah, a Managing Director at Citadel Capital, says in the press release: “The integration of ARESCO’s in-house design and manufacturing capabilities — which include its own workshops and fleet of cranes — have made the company a strong competitor in both the cement and general industrial sectors.”
Citadel Capital is also a lead investor in Rift Valley Railways which holds a 25-year concession to operate the Kenya-Uganda railway.

Jacana makes first investment, into Kenya’s InReturn Capital

Tom Minney — Wed, 07 Jul 2010 11:53:18 +0000

A UK-based investment and advisory firm concentrating on African venture capital managers has announced its first investment. Jacana Venture Partnership (www.jacana.org) on 29 June announced that it will invest in InReturn Capital (www.inreturncapital.com), a Kenya-based firm investing in East African small and medium enterprises.
Jacana’s aim is that by promoting a thriving venture capital industry in Africa it will enable small- and medium-sized enterprises (SMEs) to grow and help millions out of poverty through economic development and job creation. Jacana’s unique offering of capital and expertise will enable InReturn to reach its goals more rapidly. Access to finance is a major obstacle to the growth of African businesses.
According to Jacana’s mission statement, SMEs are a crucial driver of economic development in Sub-Saharan Africa. Every $1 invested in an SME generates an additional $10 in the local community and $1 of SME finance creates 3 times more jobs than an equivalent investment in microfinance.
International investors are increasingly interested in Africa but find it hard to choose SME fund managers in the target country since they often lack track records. Jacana mitigates this risk for investors by selecting high-quality teams and providing intensive support to local fund managers through a network of expert mentors – highly experienced private equity and venture capital professionals who can provide hands-on support to local teams. Stephen Dawson, Jacana’s Chairman, has over 30 years’ experience in UK private equity and is already actively involved with InReturn’s deal team in Nairobi.
Jacana selected InReturn as its first local partner because of its strong team and deal pipeline, after an extensive market review. InReturn’s East Africa Fund (target size $20 million) invests in SMEs in East Africa. The capital invested in InReturn’s business will support the expansion of the team into Tanzania and Uganda.
InReturn contributes to the profitability, sustainability and growth of the companies that it invests in through the active participation of its local investment team of 5 Kenyan and European professionals. InReturn East Africa Fund maintains a network of investors in Western Europe and has extensive financial and management experience.
Anthony Gichini, Managing Partner for InReturn Capital in Nairobi, said “Jacana’s investment of capital and expertise will help us to accelerate our business, and deliver returns to our investors as well as development impact in East Africa. Tanzania and Uganda are important markets for InReturn and we see significant opportunities to expand our team into these countries as we build our business together with Jacana”.
Jacana’s expertise, provided through its network of private equity expert mentors, will help InReturn to execute high-quality transactions and raise additional capital from international investors, using Jacana’s extensive contacts in the industry. Together, Jacana and InReturn aim to deliver attractive financial returns to investors in the fund, grow the private equity industry in Africa and thereby support the sustainable development of SMEs, leading to significant job creation in Africa.
Simon Merchant, CEO and co-founder of Jacana, commented in a press release: “This is the first step in growing our network of African partners, supported by international private equity experts. We are delighted to be working in close partnership with InReturn and look forward to supporting this excellent team in making successful SME investments in East Africa.”
Jacana aims to select the capital managers with highest potential growth for inclusion in the partnership network and then to work closely with them to create an attractive investment opportunity for international investors. Jacana is talking to several candidates for its next investment.

PE firm Citadel Capital wins “African Business” title

Tom Minney — Wed, 30 Jun 2010 12:29:22 +0000

Private equity firm Citadel Capital has won the title of “African Business of the Year” at a gala awards ceremony organized by “African Business” magazine (www.africasia.com/africanbusiness) in London on 21 June. Other finalists included South Africa’s De Beers, Kenya’s Safaricom, pan-African bank Ecobank and Kenya’s Bidco Oil Refineries.
Citadel (www.citadelcapital.com) is based in Cairo and listed on the Egyptian Stock Exchange (ticker CCAP.CA). It has been expanding into Africa.
According to a press release, the company has US$ 8.3 billion in investments covering 15 industries and spanning 14 countries through (see Strategy below). It is independently ranked by Private Equity International (www.peimedia.com) as the continent’s largest private equity firm in terms of assets under management (2005-2010). Since its founding in 2004, Citadel has generated US$ 2.5 billion in cash returns for shareholders and co-investors on investments of US$ 650 million.
Citadel Capital Chairman and Founder Dr. Ahmed Heikal says: “It is truly an honour to have been chosen as African Business of the Year from such a distinguished group of nominees. Founded little more than 5 years ago with an initial investment of just US$400,000, we are very proud of the growth that we have achieved. Citadel Capital continues to pursue investment opportunities throughout the continent that will allow us to transform promising national companies into regional champions.”
The 2010 African Business Awards were organized by IC Publications (publishers of Africa Business) and the Commonwealth Business Council. They provide a platform to celebrate excellence and best practices in African business, recognizing those who have driven Africa’s rapidly transforming economy. This year’s awards ceremony included more than 500 attendees including African ministers, senior government and business officials and diplomats.
The African Business of the Year award is given annually to a company that has demonstrated outstanding financial performance and significant development of new market segments, together with “innovative working techniques and employment of staff from the communities in which it operates.” Winners must have high standards of good corporate citizenship and have contributed significantly to changing the perceptions of Africa in global markets.
“Citadel Capital seeks out national companies with the potential to become regional champions, then deploys the human and monetary capital needed to make that transformation happen,” said Citadel Capital Managing Director and Co-Founder Hisham El-Khazindar. “Over the past 12 months, the firm has closed a significant number of transactions in what we believe will be an excellent vintage year for private equity investing.”
In reaching its decision, the awards committee took note of several recent developments by Citadel, including
• acquiring a controlling stake in Rift Valley Railways of Kenya and Uganda,
• building an environmentally friendly river transportation network stretching from the Mediterranean port of Alexandria to southern Sudan,
• the construction of Sudan’s most technologically advanced and environmentally friendly cement plant,
• the acquisition of the nuclei of a solid waste management platform, and
• substantial fundraising progress on its MENA and Africa Joint Investment Funds.
Omar Ben Yedder, Associate Group Publisher of African Business magazine, the organiser of the event, said: “The Awards are even more significant this year, as it takes place during the World Cup season, and thus resonates with the new optimism of Africa as a continent capable of realising the opportunities that abound there.”
The African Business of the Year award follows Citadel Capital’s earlier 2010 achievements, including Infrastructure Investor magazine’s African Infrastructure Deal of the Year and recognition by emeaFinance as Africa’s Best Private Equity House.
Strategy (from the company website) :
“Citadel Capital’s strategy is to acquire or create national companies that can serve as platforms for regional expansion in specific industries. For each deal, the firm raises an Opportunity-Specific Fund (OSF) to control a single platform investment. To date, Citadel Capital has raised 18 OSFs that control Platform Companies in 15 industries with investments worth more than US$ 8.3 billion. The firm has long pursued an incremental approach to investment that is serving it well during the current economic climate.
Citadel Capital is a control investor and is majority owned by its senior management and staff. It is also a principal investor in its own transactions, with equity of more than US$ 735 million committed to its own deals. While the firm is primarily focused on opportunities in the Middle East and Africa, it has a strong interest in proximal African nations. Going forward, Citadel Capital plans to open offices in South Sudan and Ethiopia to support its growing investment presence in those regions.
The firm focuses on opportunities supported by two primary themes:
Natural Advantages: Opportunities that arise from the Middle East and Africa region’s numerous advantages, including lower labor, raw material and energy costs, as well as its favorable geographic location and climate.
Inefficiencies: Markets that have suffered from a lack of private investment, where the existing participants lack the necessary scale and sophistication to compete effectively, or where state control and subsidies have left a legacy of inefficiencies.
Among the industries on which the firm currently focuses are cement, mining, energy, food transportation and logistics and metallurgy.
Depending on the investment cycle, Citadel Capital is flexible in regards to the entry point it uses to pursue deals and is open to consolidation plays / industry roll-ups, leveraged buyouts, distressed deals and even greenfield investments.”

Consensus Business Group launches $92 million “clean tech” fund for Southern Africa

Tom Minney — Thu, 17 Jun 2010 21:44:56 +0000

South Africa’s first, specialised, private equity clean technology fund, Evolution One Fund, has reached its final closing after raising R700 million (US$92 million) from local and foreign investors, including development finance institutions, a family office and sovereign wealth funds. This capital is to be invested into equity in clean technology projects and enterprises including new energy and environment focused technologies in South Africa and across the Southern African Development Community. Evolution One will concentrate on long-term equity and equity-related investment based on active management and adding value after investing.

The fund will prioritise investments in expansion capital but will consider earlier-stage environmental infrastructure projects when there is clear evidence of early revenue streams and profitability. The fund will also invest into proven technology or projects that clearly demonstrate market adoption. The minimum investment size is R10 million ($1.3 million) and its maximum investment is R100 million into any one project or technology.

Consensus Business Group (www.consensusbusiness.com), the London-based advisor to The Tchenguiz Family Trust, has played a leading role in establishing and advising the fund. Consensus owns or manages 300,000 UK residential units and £4 billion of commercial properties, as well as extensive “clean tech” investments. As founding cornerstone investor, Consensus has secured the participation of 7 other leading international organisations.

Vincent Tchenguiz, Chairman of Consensus said: “We have extensive experience and a long track record in global clean technology investing and this has given our partners the confidence to join with us in setting up Evolution One in South Africa. We are delighted to have successfully achieved final closing of this ground-breaking fund.

“Evolution One Fund is the first dedicated clean technology private equity fund to be established for Africa and its value proposition is to bring Consensus’s active financial modelling and specialist insights together with expertise to projects and technology enterprises in South Africa and the SADC region. In addition, the investment capital of this network of leading investment institutions inherently leverages access to specialised knowledge and skills in the broader global clean technology sector.

“The Fund is advised by a fund management team comprising 9 principals and analysts who collectively bring their unique breadth and depth of commercial, financial and sustainability credentials. This is combined with strong black empowerment credentials and the ability to structure broad-based black economic empowerment transactions.”

Consensus is joined in the Evolution One partnership by IFC, a member of the World Bank Group; the Finnish Fund for Industrial Cooperation (Finnfund); the Swiss Investment Fund for Emerging Markets (SIFEM); fund of funds the Global Energy Efficiency and Renewable Energy Fund (GEEREF- www.eif.org), a compartment of the European Investment Fund; the African Development Bank (AfDB); the Norwegian Investment Fund for Developing Countries (Norfund); and the Industrial Development Corporation of South Africa (IDC).

The local South African fund advisor is Inspired Evolution Investment Management (IEIM – www.inspiredevolution.co.za), which aims to support and guide target invested companies and provide long-term capital growth. The Evolution One fund is a 10-year fund is committed to investing into clean technologies in the new energy and environmental sectors, including cleaner energy generation such as wind and solar energy, and energy efficiency, cleaner production and more efficient manufacturing processes, air quality and emissions control, water quality and resource management, waste management, agribusiness, natural products and materials and related services for sustainable buildings.

Michael Brooks, CEO of IEIM, says the fund management team has already appraised numerous deal opportunities and within weeks would announce details of the first 3 investments to be undertaken by the fund: “In the past 2 years we have seen significant positive shifts in the commercial thinking underpinning the roll out of clean technology projects and enterprises, both within the public and private sectors.

“The South African government’s recent adoption and implementation of the Renewable Energy Feed-in Tariffs and Co-Generation Feed-in Tariffs are evidence of the state’s support for regulatory drivers to underpin the development at scale of commercially viable renewable energy projects here and in our neighbouring countries. We are currently actively engaging with a range of promoters of clean technology enterprises and with developers of renewable energy projects.”

The first close of the fund was announced in July 2008 when $54 million had been raised from the initial 4 investors: IFC, Castleway Properties (owned by Tchenguiz Family Trust), SIFEM and FinnFund.

Adlevo announced first closing on African technology fund

Tom Minney — Mon, 14 Jun 2010 07:22:31 +0000

Adlevo Capital Managers (www.adlevocapital.com) announced on 10 June that it has completed the first closing of Adlevo Capital Africa LLC fund with capital commitments of US$52 million. The fund will make expansion capital investments into companies with technology-enabled business models across sub-Saharan Africa.
The fund has received capital commitments from development finance institutions and private institutional investors based in Europe, South Africa and the US. Adlevo Capital plans to hold additional closings for the fund over the next nine months with a final closing in the first quarter of 2011.
Yemi Lalude, founder and Managing Partner of Adlevo Capital, says in a press release: “We are very pleased to have attracted investments from several of the most successful Africa fund investors who, like us, see the growing scope for compelling technology-enabled company investments and believe that investments in this area will also provide positive social development outcomes. The Adlevo Capital team has developed a pipeline of attractive investment opportunities and is looking forward to commencing investments and working with the management teams of its portfolio companies.”
Adlevo Capital, a Mauritius-based fund manager, is the first private equity firm focused on investments into technology-enabled companies across multiple African countries. It aims to capitalize on growing investment opportunities in the technology-enabled service segments of multiple industry sectors in sub-Saharan Africa.
Its founders have a combination of private equity and operational IT experience in Africa and the United States. Through this and an extensive network of relationships, as well as offices in Lagos and Johannesburg, it aims to add significant value to portfolio companies.
In October 2008, the European Investment Bank (www.eib.org) announced it would be lead investor, committing $20 million. EIB said CDC Group (www.cdcgroup.com), the UK government-owned fund of funds, would join as the other lead investor with a commitment of $15 million.
At the time, in a press release Plutarchos Sakellaris, EIB Vice President responsible for lending operations in the African, Caribbean and Pacific regions said: “This is a landmark project for the EIB and for the African technology sector. We are confident that Adlevo’s experienced management will build a portfolio of investments which provide strategic support for technology companies. Moreover, we hope that this operation will act as a catalyst to develop private equity and foreign direct investment in the region.”

Africa Sustainable Investment Forum launched

Tom Minney — Sun, 13 Jun 2010 08:56:02 +0000

A top line-up of speakers from the financial community launched the Africa Sustainable Investment Forum (AfricaSIF- http://www.africasif.org) on 9 June at the Johannesburg Stock Exchange (www.jse.co.za).
Speaking at the launch, AfricaSIF co-founder Graham Sinclair said it is a strategic new step in facilitating investment in Africa that purposefully integrates environmental, social and governance (ESG) factors: “Africa needs capital, but it does not benefit from capital that does not develop our continent sustainably. AfricaSIF aims to attract new capital in new ways to Africa and help to grow sustainable investment on the continent by taking a long-term interest in Africa’s economic development.
“2010 is set to be a landmark year for Africa. With the world’s eyes on the FIFA World Cup kicking off in SA in just two days’ time, massive infrastructure development is taking place and the knock-on effects for the economy and business are immense. Africa has about the same number of potential consumers as India or China. After 40 years of sub-par growth, Africa’s GDP grew at 5% for five straight years from 2002, putting Africa back on the global investment radar.”
AfricaSIF describes itself on its website as “a network, knowledgebase and advocate for sustainable investment in Africa. We are currently developing an independent, pan-African not-for-profit network of investment practitioners promoting sustainable development on the continent by attracting investment in the public, private and philanthropy sectors across asset classes, countries and stakeholders from the platform at africasif.org.”
Speakers at the launch included Jay Naidoo (Chair of both Development Bank of South Africa and Global Alliance for Improved Nutrition), Judge Mervyn King (Chair of the Global Reporting Initiative and King Commission), Simon Harford (Partner: Africa, Actis), Tim Turner (African Development Bank Director), Corli le Roux (Legal Counsel for the JSE), Wanjiru Kirima (Chairperson of the Principal Officers’ Association) and JP Fourie (South African Venture Capital Association).
“AfricaSIF is a pioneering network which believes in the triple bottom line of people, profit and planet,” said Simon Harford, whose company Actis has over 60 years’ experience of private equity in Africa. “AfricaSIF’s work lays the foundations upon which strong, long-term and sustainable businesses are built.”
“This initiative launched at the JSE will create a network of best practice on ESG factors in investment for the continent,” said AfDB’s Tim Turner.
Sinclair adds that analysis in March 2009 indicates approximately $6.9 trillion, including $300 billion in emerging markets was invested integrating ESG factors, but wonders how much of this is in Africa. “AfricaSIF will provide services and opportunities for our members to work together to align investment profitability with social and environmental responsibility in Africa. We are also working on the first ever report on the state of sustainable investment in Africa, scheduled for release in December 2010,” he says.
AfricaSIF was hosted at Africa’s largest stock exchange to emphasise the practical nature of AfricaSIF, a network as a meeting place for the whole investment value chain, attracting capital to sustainable businesses across asset classes.
“The over 400 members of Principal Officers Association are asset owners that are increasingly driving alignment of their fund managers and service providers toward the sustainable investment theme. AfricaSIF is a new element of the investment ecosystem that will play a vital catalytic role across Africa in accelerating this process,” said Wanjiru Kirima, chairperson of the Principal Officers’ Association and AfricaSIF co-founder.
“Our members are actively seeking opportunities to deploy investment in clean tech and other sustainability themes in Africa”, said SAVCA’s JP Fourie. “We look forward to working with and in the AfricaSIF network”.
Further launch events are scheduled to take place in Cape Town end June, Lagos, Nairobi, Cairo/Tunis, Geneva, London, Paris, New York and Boston. The first annual AfricaSIF conference, ESG Africa, is in partnership with global ESG specialist journal Responsible Investor (www.responsible-investor.com) and other partners, and scheduled for December 2010.
With thanks to African investor (http://www.ainewswire.com).

CDC steps up investments in African funds

Tom Minney — Sat, 05 Jun 2010 22:05:59 +0000

The UK’s development finance organisation CDC Group PLC (www.cdcgroup.com) says that 2009 marked the start of CDC’s new, 5-year investment policy which will see it make at least 75% of new investments in low income countries (average Gross National Income per capital of less than $905) and 50% in sub-Saharan Africa.
On 20 April it announced results for the latest calendar year, and reported it with made a return of £207 million ($299 mln) and invested £359m in businesses in developing countries.
CDC is a fund of funds with net assets of £2.5 billon ($3.6 bln), owned by the UK government. It uses its own balance sheet to invest in private equity funds focused on the emerging markets of South Asia and sub-Saharan Africa. By the end of 2009, its capital had been invested in 794 companies located in 71 countries. These companies directly employ at least 750,000 people and pay local taxes of more than US$3bn a year.
Activities for the year in Africa include:
• Invested £219m in businesses, making it the biggest private equity investor in sub- Saharan Africa;
• Grew the value of its portfolio of African businesses to £731m;
• Made £142m of commitments to new funds; and
• Backed 5 new Africa-focused funds, including the first ever private equity fund in Sierra
• Leone.
Richard Laing, Chief Executive of CDC, said: “These are positive results which show that, despite the tough conditions caused by the global downturn, the companies in which CDC has a stake are performing well. We are now invested in 134 funds with 65 fund managers, with over £1.5 billion of commitments still available to be drawn down by these funds for new investments in the world’s developing economies. Our profits will be recycled into these new investments.”
CDC has a 60-year history of putting capital to work in the world’s poorest countries, often in challenging environments.
CDC’s mission is to foster growth in sustainable businesses thereby helping to raise living standards in developing countries. It does this by providing capital for investment in sustainable and responsibly managed private sector businesses.
According to Mr Laing: “CDC’s activities make a real difference. During the last five years we have invested over £1.5 billion and our capital now backs nearly 800 sustainable private sector businesses. These support the lives of over 3 million people and pay at least $3 billion of taxes each year to their own governments. This powerfully demonstrates the strong developmental effect of the private sector improving people’s lives in the poorest countries of the world.”

China-Africa fund starts to raise further $2 billion

Tom Minney — Sun, 30 May 2010 14:30:05 +0000

The China-Africa Development Fund (http://www.cadfund.com) has started to raise its second round of capital, aiming to raise $2 billion over three years, according to a report in China Daily (http://english.sina.com). The report cites Li Dongya, managing director for operations and management at the CAD Fund, which is China’s largest private equity (PE) fund focused on African investments.
The report quotes Li as saying: “The capital-raising plan will be open to qualified entities that have interest in making investments in Africa.” The capital raised would be used for infrastructure construction, agriculture, manufacturing and electricity projects.
The fund was started with $1 billion from China Development Bank Corp in 2007, after President Hu Jintao promised to set it up in 2006 at a Beijing Summit on China-Africa Cooperation. It aims to expand to $5 billion overall and has opened offices in Johannesburg and this year in Addis Ababa (see our previous report on the fund). CAD Fund has facilitated projects in Africa, including a sheet glass manufacturer and a cement factory in Ethiopia, a thermal power station in Ghana, iron ore in Liberia and industrial parks in Egypt.
Li apparently said: “We have decided to invest around $800 million in 30 projects in Africa, and the initial $1 billion is likely to be used up by the end of this year,” Li said. He added that the fund’s invested $140 million in 2009 alone (China’s total investment in Africa was $1.3 billion in 2009). CAD Fund makes direct capital investments and facilitates investments by other domestic companies’ investments, totalling more than 30% of China’s combined investments in Africa last year.
The fund does not hold controlling stakes in any project and limits its holdings between 10%-50%. Li said: “Our mission is to encourage domestic companies to invest in Africa and introduce China’s experience during its progress under the reform and opening up policies to the African companies, and also explore new markets for domestic companies in African nations,” he said.
The government-backed PE fund is targeting double-digit returns on its investments (ROI).
“We are a market-oriented fund, but cannot realize profits from each project quickly, given the continent’s unexpected difficulties for foreign investors and the lagging infrastructure facilities,” Li said, adding that the ROI targets are likely to be met over the next few years.
“We are in discussions with over 100 projects currently, and will focus more on agriculture, manufacturing, and infrastructure construction like electricity and harbours in the next phase after the manufacturing sector now,” Li said.
China and Africa rose 76% to $27.8 billion during the first quarter of this year compared with the same period last year, says China Daily, citing figures from the Ministry of Commerce. The high point for China-Africa trade was $106.8 billion in 2008, followed by a slump in 2009 due to the global financial crisis.

Progress of the $5bn equity China-Africa Development Fund

Tom Minney — Tue, 04 May 2010 18:16:24 +0000

The flagship of Chinese equity investment into Africa, the $1 billion China-Africa Development Fund, opened a branch in Addis Ababa on 30 March. The first branch in Johannesburg was opened in March 2009 and a third office is planned for Lusaka. Initial financing came from the China Development Bank (CDB) and is set to grow to $5 billion.
Heading the new office is Wang Yong, who was Managing Director of CADF’s Eastern Africa Investment Department in Beijing. One target is better cooperation with the African Union, also based in Addis. In March, CADF Chairman Zhao Jianping met officials from the African Union Commission and its New Partnership for Africa’s Development programme, the UN Economic Commission on Africa and the African Development Bank. The AU and the China-Africa Fund are working on a memorandum of understanding that could lead to joint projects in the transport, telecommunications, tourism, agriculture and manufacturing. The Fund was set up after a 2006 China-Africa cooperation forum and launched in June 2007.
According to its website (www.cadfund.com), the Fund “will abide by the principle of sincerity, friendship, equality, mutual support and joint development as well as make efforts to support and expand the investment of Chinese enterprises in Africa, and promote mutual benefit of China and Africa and beyond”. It often invests alongside Chinese ventures wanting to go into Africa and aims to take a minority stake. It claims to work on market principles rather than driven by political and other objectives. Investments can range from $5 mln to $50 mln per project and the aim is to exit after 5-8 years.
The Fund had more than 100 projects under study in 2008. According to a report in Africa-Asia Confidential (www.africa-asia-confidential.com), the Fund is the “go-to financier for troubled Chinese companies and for manufacturing firms seeking to set up operations in Africa”.
CDB is controlled by the State Council, China’s highest decision-making body, and the CADF is treated with the secrecy expected from top-level institutions, says the magazine. By the end of 2009, the Fund had invested nearly $700 mln in over 30 projects, leading to a total investment of about $3 bln by Chinese enterprises.
Follow this link for the magazine’s report on the Fund’s quick moves to show results and get invested, as well as some of the implementation problems. Projects include the Shenzhen Energy 500 megawatt thermal power project in Ghana; the China Union iron ore deal in Liberia, rehabilitating the Bong Mine; the Angel Yeast $51 million project in Egypt which values the Fund’s high-level backing, useful for winning permits, perhaps more than its $2 million investment. CADF has prospected Angola, Ethiopia, Ghana, Kenya, Liberia, Mauritius,Mozambique, Sudan, Zimbabwe and others.