advertisement

Capital Markets

Kenyan PE fund buys shares in Rwandan quarry

Fusion Capital Limited Group Chief Executive Officer Luke Kinoti (left) with former Assistant Minister for Industrialization Ndiritu Muriithi (right) during the Fusion Capital Business Club Launch at the National Museum on September 19, 2012.
Fusion Capital Limited Group Chief Executive Officer Luke Kinoti (left) with former Assistant Minister for Industrialization Ndiritu Muriithi (right) during the Fusion Capital Business Club Launch at the National Museum on September 19, 2012. Photo/Diana Ngila  NATION MEDIA GROUP

Kenyan-based private equity firm, Fusion Capital, has bought a 46.5 per cent stake in Rusororo Aggregate Limited, a Rwandese quarry, in a deal that strategically positions the financier to benefit from Rwanda’s booming construction industry.

Rwanda’s construction industry has been growing at double digits in recent years, earning investors huge returns.

“In 2011, the construction sector grew by 23 per cent and this level of growth is expected to continue in the short to medium term driven mainly by infrastructure development,” said Fusion Capital in a statement.

Fusion Capital paid $2 million (Sh174 million) for the equity stake, which values the quarry at roughly $4.3 million (Sh373 million).

Fusion Group, which comprises of private equity and fund management units, has offices in Nairobi and London. It was founded in 2006 by Phil Goodwin, a UK-national, and Luke Kinoti, who is the chief executive.

A real estate report on East Africa by its associate company, Fusion Investment Management, said that urbanisation in Rwanda, diaspora remittances and a rapidly growing population with greater purchasing power are the biggest driver’s of the country’s property market.

“Growth in the construction sector is driven by a four per cent annual increase in urban population, a growing middle class, and investments from returning citizens,” said Fusion Investment Management.

The report, however, says that Rwanda’s construction industry is bedevilled by high transportation costs, poor infrastructure and a lack of financing options for mortgage borrowers.

The investment marks yet another big bet on the region’s real estate by the private equity fund.

Last month, Fusion Group announced plans to build a Sh1.25 billion office complex in Nairobi’s Upper Hill area.

In November last year, a Fusion-led consortium invested $16.5 million (Sh1.4 billion) in an office block dubbed Upper Scale Developments on Ngong’ Avenue, Upper Hill, which is projected to be completed in 2014.

For Rusororo, Fusion Capital’s capital injection will go towards upgrading its machinery, which in turn is expected to increase the quarry’s output to 100 cubic meters per hour.

“They have helped us every step of the way and this investment allows us to increase the output of our business eight-fold, so the benefit is enormous,” said the statement by Fusion Capital quoting an official from the Rwandese firm.

Fusion Capital indicated that Rusororo Aggregate has deposits that are valued at Sh3.6 billion.

“The company is strategically positioned owing to its ownership of multiple sites in the region valued at Rwf 27 billion (Sh3.6 billion),” said Fusion Capital.

The stoned deposits have a combined area of 3.5 million cubic meters, located between 18 and 28 kilometres from Kigali which makes it the biggest commercial quarry in the country.

Rusororo Aggregate becomes the second publicly announced investment by Fusion Capital in Rwanda this year.

Fusion Capital already has a feel of Rwanda’s real estate after having bagged a $16.9 million (Sh1.47 billion) contract to develop Kigali Heights, a shopping complex owned by the Kigali City Council in late January.

Fusion Capital had earlier said that it was reviewing Sh1 billion worth of private equity investment in the real estate, private cemetery and financial services sectors.

A typical Fusion Capital investment, either through debt or equity, varies from $30,000 (Sh2.6 million) in an SME to $20,000,000 (Sh1.74 billion) for a larger business.

In the past six months, Kigali has been the beneficiary of Kenyan-based private equity firms expanding into the neighbouring country.

Fanisi Capital invested Sh260 million in ProDev, a Kigali-based miller in May this year through a mix of both debt and equity.

Prior to the investment in ProDev, Fanisi Capital had injected between $1 to $3 million in Sophar, another Kigali-based firm involved in the distribution of drugs.

advertisement