CDC Group, the UK government-backed, emerging-markets fund of funds, has committed $50m to African Capital Alliance’s Private Equity Fund III (CAPE III) as part of its new focus on investing in the world’s poorest countries.
CAPE III aims to make minority and majority investments between USD30 million and USD50 million in mid-sized Nigerian companies with growth potential. Up to 25% of investments will also be in other West African countries and the Gulf of Guinea region.
The fund will back companies that operate in industries which will benefit from regulatory changes in Nigeria, such as electric power. Around half of Nigeria’s population does not have access to electricity, but recent reform in the sector is said to be providing an opening for new entrants to the market.
“As the global downturn bites, companies are finding it increasingly difficult to get access to the finance that is central to their development,” says Jean-Marc Savi de Tove, CDC’s Africa portfolio director. “CAPE III’s capital injection into promising businesses in Nigeria and its neighbours will allow for stronger capital structures and also help investee companies obtain debt financing from banks – another important driver of economic growth. With fiscal, banking and transparency reforms, the opportunities for putting private capital to work have never been brighter in Nigeria’s history. We have invested with ACA since they launched their first fund, CAPE I, in 1998, which proved successful in providing capital to small and medium sized enterprises. The team has a strong track record of working with entrepreneurs and management teams to build value in companies, which ultimately drives economic growth.”
CDC is a UK government-owned development finance institution with net assets of GBP 2.3 billion (Euro 2.7 billion). Under the fund of fund’s new investment policy, which came into effect in January, three quarters of new investments will be in the world’s lowest income countries, which have an annual gross national income per head of under USD905.
ACA is an independent private investment firm formed to promote private-sector led investments in Africa.
D.C.