IFC to invest Sh2bn in new SMEs fund

The fund will prioritise investments in countries where AfricInvest has physical presence including Algeria, Egypt, Kenya, Ivory Coast, Morocco, Mauritius, Nigeria and Tunisia.

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The International Finance Corporation (IFC) is set to invest €15 million (Sh2 billion) in a fund of private equity firm AfricInvest, taking an undisclosed stake in the venture.

IFC, via its SME Ventures Programme, will join a group of investors from whom AfricInvest Small Cap Management LLC will be raising a total of €180 million (Sh24 billion) for investments in several African nations.

“The fund is seeking to raise up to €180 million. IFC has proposed an equity investment of up to €15 million," IFC said in disclosures.

"The fund will make investments in (i) leading companies in their local markets with well-defined growth potential, attractive entry valuations, and strong management teams, (ii) operating in sectors where AfricInvest has prior experience including services (retail, IT, hospitality, logistics and distribution), manufacturing, FMCG, agribusiness, healthcare, and education," the global financier added.

The fund will prioritise investments in countries where AfricInvest has physical presence including Algeria, Egypt, Kenya, Ivory Coast, Morocco, Mauritius, Nigeria and Tunisia on an opportunistic basis, with no more than 50 percent of the fund being invested in North Africa.

It will target companies with an average revenue of below €50 million (Sh6.6 billion) and a maximum of 500 employees at the time of investment.

IFC will also offer advisory services to investee firms as well as any necessary support to AfricInvest. The global financier says the fund will help boost access to capital for small and medium-sized enterprises in the continent.

"The fund is expected to increase access to private equity capital and value creation for Small and Medium Enterprises in Africa, including countries with minimal PE investment and very large gaps in access to equity," IFC said.

"Beyond the project, IFC’s continued support to AfricInvest will send a signal of viability of SME-investing funds in the African PE market, contributing to strengthening the African PE market."

IFC's backing is expected to help AfricInvest raise the targeted amount in an environment that has made it harder for PE firms to raise capital due to high interest rates on competing asset classes such as corporate debt.

"IFC’s participation, along with other DFIs (development finance institutions), will enable the fund manager to achieve its first close target in a challenging fundraising context and will help mobilize further equity capital to achieve its final fundraising target," IFC said.

Tunis-based AfricInvest has made scores of investments in Kenya and other markets through multiple funds and joint ventures.

The PE firm's portfolio in Kenya includes substantial stakes in Prime Bank, Britam Holdings and I&M Group. AfricInvest's other portfolio companies in Africa include Tanzania's deposit-taking microfinance firm Entrepreneur Financial Center (EFC) and Ghana's International Community School.

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