Private equity Abraaj to invest Sh92bn in Kenya, four other countries

Private equity firm Abraaj Group says Kenya is among five African markets where it will invest its new Sh92 billion war chest.

Abraaj announced plans to invest in local companies after closing the Abraaj Africa Fund III (AAF III) which raised $990 million (Sh92.3 billion) from European, North American and African institutional investors.

“AAF III 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,” said the firm in a statement.

“These sectors include consumer goods and services, consumer finance, and resource and infrastructure services in the core geographies of Nigeria, Ghana, Côte d’Ivoire, South Africa and Kenya.”

Abraaj Group chief executive Arif Naqvi said investors in the fund were looking for exposure in the sub-Saharan market due to the growing middle class and fast rate of urbanisation.

“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,” Mr Naqvi said in the statement. The private equity firm has a Nairobi-based office enabling it scout for deals more efficiently.

Avenue Hospital, Nairobi Women’s Hospital, UAP Group, ARM and Brookside Dairy are some of the companies it has invested in.

Pick-up in fund raising

The private equity industry has witnessed a pick-up in fund raising and investment in the last few years.

Helios raised close to Sh100 billion in January and like Abraaj, the new fund included Kenya as a region where it will invest.

In 2014 Ascent Capital raised $50 million (Sh4.6 billion) while Dutch-based DOB established a fully-fledged Nairobi office. Industry players say the number of companies meeting the threshold to attract investment exceeds available funds and this is catalsying the fund raising.

“East Africa is clearly an interesting destination and we are seeing more opportunity than we are able to serve,” Fanisi Capital managing partner Ayisi Makatiani told the Business Daily.

Fanisi recently invested Sh193.2 million in European Foods Africa Limited (EFAL), a Nairobi-based food processor.

The funding will strengthen the company’s operational systems and ensure stability. The financing was in the form of both debt and equity but the breakdown was not provided.