New fund to focus on investments in sub-Saharan Africa businesses

The ‘Abraaj Africa Fund III’, which will focus on growth in investments in sub-Saharan African businesses, received support from “a diverse range of global institutional investors, pension funds, sovereign wealth funds and development finance institutions”, the group said.

Abraaj’s founder and group chief executive officer Arif Naqvi said: “The strong demand for this new fund reflects increasing investor appreciation for the powerful growth story unfolding across Africa. It is a story driven by rapid urbanisation and favourable demographics that are fuelling consumption across multiple sectors from an expanding, young middle class.”

According to Abraaj, 64% of the capital committed to the fund has come from European and North American investors, with institutional investors, pension funds and sovereign wealth funds accounting for 76% of the committed capital. “Leading African institutions also subscribed for significant allocations… further demonstrating the attractiveness and maturity of the growing private equity opportunity in Africa.”

The fund “will focus on well-managed, mid-market leaders in sectors most likely to benefit from demand driven by the rapid expansion of a young, urban, middle class across sub-Saharan Africa”, Abraaj said. “These sectors include consumer goods and services, consumer finance, and resource and infrastructure services in the core geographies of Nigeria, Ghana, Cote d’Ivoire, South Africa and Kenya.”

Jason Rosychuk((LINK)) of Pinsent Masons, the law firm behind Out-Law.com, said: “Pioneering the growth and development of the private equity industry in Africa is a wonderful thing – with multiple investments in nine different sectors and a further fund at $990m, Abraaj should be commended yet again.”

Abraaj said that by partnering with companies able to “create value through a combination of organic expansion, add-on acquisitions, strategic repositioning and consolidation strategies”, the fund will help local African businesses “become regional champions”.

Abraaj said its involvement in the development of the private equity industry in Africa has already seen it deploy around $3 billion across the continent. In sub-Saharan Africa alone, Abraaj said it has made 67 investments in nine sectors “and successfully achieved 30 full and partial exits from these investments”.

Last April, alternative asset manager The Carlyle Group announced the final close of the 'Carlyle Sub-Saharan Africa Fund' at $698m, which exceeded its initial target of $500m by 40%. The African Development Bank Group invested $50m in that fund at an early stage.

According to a report published last July, African pension funds “can play a critical role” in the region’s private equity industry, mobilising an estimated $29bn and driving economic and infrastructure development.

The joint report by the Commonwealth, the Making Finance Work for Africa Partnership Secretariat and the Emerging Markets Private Equity Association, said that while regulatory guidelines in each country vary, recent reforms in some of Africa’s key markets “are beginning to make it possible for local institutional investors to participate in the asset class”.