African firm gears up for fundraising push

Jacana Partners, a private equity group co-founded by ECI non-executive chairman Stephen Dawson, will join a growing number of firms looking to raise capital for Africa next year.

Jacana Partners, which invests in African SMEs to deliver both social and financial returns, will hit the fundraising trail next year. 

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Stephen Dawson

The fundraising will be the latest in a steady stream as interest in African private equity grows. Proprietary Private Equity International data shows fundraising totals for Africa-only funds have climbed steadily over the last five years, rising from $1.2 billion in 2008 to $2.2 billion last year. Although minute compared to developed and even most other emerging markets, the rising totals give cause for cautious optimism.

Indeed, there have been several sizeable funds raised in recent years, including Helios Investors II, which garnered $900 million by the time it closed last year, and the $1.3 billion Pamodzi Resources Fund I raised in 2007.

There are 46 funds currently being raised to target Africa, according to PEI data. The largest is Absa Capital Private Equity II which is targeting $1.7 billion, followed by BTG Pactual’s Africa Fund ($1 billion) and Ethos Private Equity Fund VI ($750 million). 8 Miles, a private equity group co-founded by musician Bob Geldof, is also still raising its $450 million vehicle.

Jacana, however, aims to target a segment of the African market that remains significantly under-invested, according to co-founder Stephen Dawson

The firm, founded in 2008 by Dawson and chief executive Simon Merchant, aims to address the funding gap that exists in Africa between microfinance or angel investors, and larger buyouts. Small to medium-sized enterprises, Dawson tells Private Equity International, seldom have access to the capital they need to grow.

“Larger companies in Africa can generally raise capital anywhere. There’s also a thriving micro-finance sector for start-ups. But in the $500,000 to $5 million range, there’s virtually nothing. SMEs need support, and that’s where we come in,” he said.

Dawson, who also founded venture philanthropy organisation The Impetus Trust in the UK, stressed Jacana aims to deliver social as well as financial returns as a means to foster economic development in Africa. 

Jacana at present manages two Africa-focused funds. The first is a $32 million vehicle managed in partnership with Accra-based Fidelity Capital Partners, the second, an $11 million fund managed in partnership with Nairobi-based InReturn Capital.

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Simon Merchant

Jacana plans to merge with those partner managers over the course of the next 12 months and raise a new fund under the Jacana brand next year. The fund will likely target in the region of $50 million.

To date, the firm has invested about $20 million in 18 companies in six African countries, Dawson said, creating more than 1,300 jobs in the process. As well as teams in Accra, Nairobi and London, it calls on experienced executives globally to work on a pro bono basis from time to time.

The firm measures its development impact using a variety of metrics dependent on the asset, ranging from employment growth (and jobs retained) to revenue growth and taxes paid to the local economy. It also places great emphasis on corporate social responsibility and environmental and social governance. Dawson cited the example of an investment in a quarry, where the firm had insisted on improved working conditions and safety precautions that other similar quarries lacked.

“Looking forward, we’re interested in Ethiopia,” Dawson said. “Our approach will be to recruit a couple of local Ethiopians with relevant experience, who can work alongside our team in Nairobi initially to get further relevant experience, before re-locating them back to Ethiopia at a later date.”