Africa-dedicated non-public fairness agency raises $900m funding

Obtain free African financial system updates

We’ll ship you a myFT Every day Digest electronic mail rounding up the most recent African financial system information each morning.

Africa-focused non-public fairness agency Development Partners International has raised $900m in its third spherical of funding, closing a deal that may give an necessary enhance to an funding ecosystem exhausting hit by Covid-19.

DPI’s African Growth Companions III Fund exceeded its goal of $800m and has secured an additional $250m to co-invest in particular corporations.

Runa Alam, co-founder and chief govt of DPI, stated the fundraising confirmed that traders recognised there was cash to be made on the continent in investments that additionally had social affect.

“Our technique is to put money into corporations which might be benefiting from an rising center class,” she stated, arguing that about 300m of Africa’s 1.3bn folks met this broad definition.

Whereas she acknowledged that the financial aftershocks from the pandemic had virtually actually dented center class incomes in Africa, fast digitalisation meant that corporations have been discovering new methods to attach with shoppers. Some have been providing “worth” propositions for the much less well-off, she stated.

“We haven’t seen progress in our corporations coming down,” she stated, referring to income at companies starting from a pan-African generic drug producer to a Nigerian fast-food chain and a personal west African college providing distance-learning.

Abi Mustapha-Maduakor, chief govt of the African Non-public Fairness and Enterprise Capital Affiliation (AVCA), stated: “It’s actually nice to see when giant fund managers are in a position to shut. There are alternatives, significantly in tech-enabled companies.”

She admitted that the business had been struggling to lift recent cash in a troublesome financial atmosphere and at a time when face-to-face conferences between potential traders and new companies had been tough.

Non-public fairness funds investing in Africa raised $1.2bn in 2020, down from $3.9bn in 2019, in keeping with AVCA. Its report for the primary half of 2021, resulting from be printed this week, will present a reasonably flat begin to the 12 months with about $500m in ultimate closes.

KKR and Carlyle, which as soon as had large plans for Africa, have scaled again, citing the small variety of funding alternatives of the best measurement.

Souleymane Ba, accomplice at Helios Investments, which has invested $4bn in African corporations since 2004, stated: “The market is lively however it’s a must to be very specialist and only a few common companions in Africa have the expertise and the observe file.”

Hendrik du Toit, chief govt at Ninety One, an Anglo-South African asset supervisor, stated investor curiosity in Africa was restricted. “Sadly most African policymakers haven’t delivered on the promising ‘Africa Rising’ narrative that did the rounds 10 to fifteen years in the past,” he stated.

Alam stated this view was too destructive. Not one of the 23 corporations DPI had invested in over 14 years had failed and DPI had persistently been a high quartile performer, she stated.

“We give good returns in {dollars},” she added. “Regardless of all of the gloom and doom on the market about Africa, our macro thesis nonetheless holds. There are 1.3bn folks, the youngest demographic on this planet, which signifies that, whereas different areas can have fewer folks, Africa continues to be rising. It’s a continent that can’t be ignored.”

The $900m invested within the DPI fund got here from pension and sovereign wealth funds, improvement finance establishments, insurance coverage corporations, asset managers, and affect traders, with about half from Europe, a 3rd from the US and the remaining from the Center East and Africa.

Along with current traders in DPI, which has $2.8bn in belongings underneath administration, some 25 new restricted companions (LPs) had invested no less than $5m every, Alam stated.

Earlier DPI investments embrace Eaton Towers, an African telecoms masts enterprise that was offered to American Towers for $1.85bn, and Mansard, a Nigerian insurer, which was purchased by Axa.