Kenya leads E Africa in private equity funding


Rift Valley Railways central locomotive workshop in Nairobi. The largest amount of capital injected in East Africa in 2011 went to Citadel Capital’s RVR.

Kenya last year attracted the highest amount of private equity funding for infrastructure in East Africa, with the country getting more than half the number of the deals, a survey carried out by consultancy Deloitte shows.

The results of the survey which was done in November last year with the help of Africa Assets—a Kenya-based research and consulting firm, covering private equity and venture capital—was based on responses from 33 companies that have received money and are implementing projects.

“The largest amount of capital deployed in East Africa in 2011 went through two investment rounds to Citadel Capital’s RVR,” said Deloitte a report released on Tuesday summarising the sectors’ performance last year and outlook for this year.

Cairo-based Citadel Capital began implementing a sustainable business and investment plan at Rift Valley Railways (RVR) that includes a five-year capital expenditure programme to rehabilitate infrastructure and rolling stock that will cost approximately Sh24.4 billion ($287 million).

The private equity fund owns Africa Railways which has a 51 per cent stake in RVR which holds a 25-year concession to operate 2,352 kilometres of track linking Mombasa to Kampala.

Infrastructure projects in the region received approximately Sh8.67 billion ($102 million) in three deals while telecommunication projects received approximately Sh5.02 billion ($59 million) in two deals, financial services Sh1.36 billion ($16 million) in three deals and health care Sh680 million ($8 million) in five deals.

“As the sub-regional economic hub, Kenya claimed the majority of deals both in number and value,” said the consulting firm adding that no deals were reported in the wider east African countries of Burundi, Ethiopia or South Sudan.

Private equity funds raise money from qualified investors looking for high return projects for financing through debt and equity for a period of time before they exit using methods that include selling to a strategic investor or through the sale of shares at stock exchanges.

In January last year, Resolution Health received an investment worth approximately Sh204 million ($2.4 million) from the African Development Corporation while Catalyst Principal Partners invested an undisclosed amount of money in Chemi and Cotex Industries in Tanzania in February.

Leapfrog Investments in April last year invested approximately Sh1.2 billion ($14 million) in Apollo Investment Ltd which includes APA Insurance, Apollo Life Assurance Ltd and Apollo Asset Management.

Acumen Fund which invests in social projects last year announced plans to double its assets under management in East Africa to Sh2.1 billion over the next two years and in partnership with Root Capital invested Sh176 million into a Ugandan Cotton Ginnery, Gulu Agricultural Development Company.

Fanisi Venture Capital invested an undisclosed amount in Hillcrest International Schools in July while TBL Mirror Fund invested approximately Sh127.5 million ($1.5 million) in software company Cellulant.

Almost 80 per cent of the respondents said that they expect private equity funds to increase their investments in the region this year as it has a very low private equity penetration level although there is strong confidence in the region’s economic growth.

The consulting firm said that most of the respondents indicated a strong investment focus across consumer-driven industries.

“Everyone is focusing on new investments and not everyone is trying to find the same deals,” said Alexander Van Schie, director corporate finance services Deloitte.

Deloitte said that 35 per cent of those who responded said that they expect the regions’ performance to be better than that of South Africa.

This contrasted with 29 who expect the region to perform about the same and 4 per cent who expect it to do worse.

Most of the private equity funds are planning to put their money into financial services followed by agriculture and agribusinesses and health care and pharmaceuticals.

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Note: The results are not exact but very close to the actual.