UK Government-owned CDC Group has placed the African infrastructure market firmly in the spotlight following a weighty commitment to Actis' latest infrastructure fund, which is presently seeking other investors. CDC committed $750 million (€511 million) to the emerging markets manager's second infrastructure fund, as well as seeding it with African energy assets valued at $167 million. As well as Africa, the fund also has a mandate to invest in Asia and Brazil.
The growth of infrastructure investment in Africa has been driven by the first $1 billion-plus funds being raised by managers such as Pan-African Infrastructure Development Fund and IL&FS Managers & ADIC Infrastructure. Funds such as these have been encouraged by the ongoing increase in private sector initiatives on the continent.
Alasdair Maclay, a director at Actis, says: “Competition has hotted up for investments, which is good for Africa. It is also pretty good for those of us operating there, although it will have an impact on returns with an increasing number of new funds driving up prices.”
Despite the continent's size, Maclay says the main driver of deal flow for Actis in an African context will be South Africa, Egypt and Nigeria.
In Nigeria, infrastructure investment is driven in part by the booming oil and gas industry and also by huge growth in consumer demand for power and other infrastructure, which in turn is driven by earnings growth from oil and gas, says Maclay.
South Africa, by contrast, has yet to take off as an infrastructure investment location, but Maclay believes it's only a matter of time. “It is a vibrant economy and the only market in Africa for buyouts, but traditionally there haven't been many private sector infrastructure deals there. [In the energy sector] they've come to the stage where a state-run monopoly has failed to deliver and will, I believe, turn to the private sector.” Egypt's market will be driven by a large-scale government privatisation programme, he adds.
The outlook for infrastructure investment in Africa looks promising. However, due to the long-term nature of such investments and political risk within the region, it will be a long time before investment momentum reaches the levels it has already reached in the likes of India and China.
The Actis fund will be invested over 15 years, given the long-term nature of creating infrastructure assets in emerging markets.
PATRICOF SAYS MICROFINANCE IS FLAWED
Alan Patricof, Apax Partners co-founder and managing director of US venture capital firm Greycroft Partners, has said microfinance is too small-scale to provide Africa with the businesses it needs. In microfinance, the average loan is approximately $200 with high interest rates and high administrative costs, said Patricof. They are designed for high-turnover businesses with limited growth potential, such as vendor stalls. Instead, investors should foster small and medium sized enterprises, which would lead to a “multiplier effect on employment” in the continent, helping fill the continent's “missing middle” which is currently insignificant on the continent due to its massive inequalities of wealth.
AUREOS LAUNCHES $400M FUND
Emerging market private equity firm Aureos Capital has launched a $400 million (€272.9 million) African fundraising effort, according to a statement. Aureos' fundraising plans for Africa were first reported by sister website PrivateEquityOnline.com in August last year. Aureos currently has a $50 million South Africa fund, a $40 million East Africa fund and a $50 million West Africa fund. Now the firm is replacing its multi-regional approach to the continent in favour of one unified fund similar to its regional competitors Actis and Emerging Capital Partners (ECP). Aureos chief executive Sev Vettivetpillai said in a statement Africa's recent GDP growth of between 5.3 to 5.6 percent combined with its population being the second largest worldwide had made investors aware of the continent's potential.
ECP COMPLETES FOURTH MINING INVESTMENT
Africa-focussed Emerging Capital Partners has paid $15.2 million (€10.2 million) for a 16 percent stake in Central African Gold, which owns and operates gold mines in Ghana and Zimbabwe, as well as exploration properties in Mali and Botswana. ECP is now the largest single shareholder in the company. The acquisition is ECP's fourth in the African mining sector. Central African Gold will use most of ECP's investment to finance the final phases of restarting production at its Ghana mine, Bibiani, which it bought from Anglo Ashanti in November 2006 for $40 million.
OCH-ZIFF TEAMS UP WITH SEXWALE
Och-Ziff Capital Management Group is the latest alternative asset manager looking to enhance returns from Africa's natural resources and infrastructure needs – and it has partnered with a prominent African businessman to do so. The publicly traded hedge fund manager has created a joint venture, African Management, with two Africa-focussed investment firms, Palladino Holdings and Mvelaphanda Holdings (Mvela). Mvela co-founder Mosima Gabriel Sexwale, known as Tokyo, is a multimillionaire, a former apartheid activist and was a political prisoner alongside Nelson Mandela. No financial details have been disclosed regarding African Management's size or investment targets.
ETHOS SELLS CATERING COMPANY AFTER EIGHT YEARS
South African buyout firm Ethos Private Equity has sold its 53.8 percent stake in Tsebo Outsourcing Group to financial services company Absa Capital after eight years for an undisclosed sum. Absa has acquired a 49.9 percent stake, Tsebo's management has increased its stake to 20 percent, while existing shareholder Nozala Investments and incoming investor Lereko Investments will each take a 15 percent stake. Early on in the investment Ethos disposed of a non-core onflight catering business, but the sale was rendered problematic as it was agreed just before the September 11 terrorist attacks. The ensuing problems in the aviation industry delayed the closing of the deal.
ACTIS BANK LAUNCHES RWANDA'S FIRST COMMERCIAL BOND
Actis-owned Banque Commerciale du Rwanda has launched a RF5 billion ($9.3 million) five-year note with a 9 percent yield on the Rwandan Stock Exchange. Actis took an 80 percent stake in the bank in 2004. The bank has since built its assets under management up to $214 million. The stock exchange was founded this year.