Government-owned institution CDC has committed $20 million to private equity firm SilverStreet Capital’s first fund, targeting $300 million, in a move the governmental institution believes will build up the fledgling private equity industry on the continent.
The fund has collected close to $120 million since its launch in January. SilverStreet expects to hold a final close in January 2012, according to a source close to the firm.
The fund is dedicated to the agri-business sector in Zambia, Tanzania, Malawi, Mozambique and Uganda, the firm said in a statement. It will invest in primary agriculture such as farms that produce crops like vegetables, sugar and coffee as well as processing and marketing of this produce and businesses making agricultural equipment.
CDC has been investing in African private equity for almost 20 years, according to Catherine Swanepoel, CDC’s investment manager for Africa. It currently has £1 billion (€1.1 billion; $1.5 billion) worth of private equity investments in Africa, and plans to invest another £1.2 billion over the next two years.
CDC’s $20 million commitment to Silverlands will help develop the private equity infrastructure in these countries by supporting emerging managers who will eventually be able to offer investors track record evidence of their success. Lack of experienced fund managers in the region with solid investment histories is one of the key hindrances to attracting investors to Africa, according to the firm.
CDC is keen to demonstrate positive return figures from investments, growing the private equity industry in Africa and the region. Swanepoel stressed that “we want this to be successful and have looked carefully at all the factors”. Further issues in the region are the small number of good-quality funds available as well as misconceptions about political and economic stability that LPs largely want to avoid.
There are very few agri-business funds in the region, and Silverlands has a substantial target considering the market. Private equity firm Phatisa has a $200 million fund, and both funds have received large contributions from the US finance development institution OPIC.