17 January 2007
US banking giant Citigroup and UK government-backed CDC Group have together committed US$200-million to Citigroup’s first dedicated African private equity fund, the CVCI Africa Fund.
CDC Group will commit an initial $100-million to the fund, with Citigroup Venture Capital International (CVCI) – which will manage the fund – matching CDC’s investments dollar for dollar.
“The fund will provide growth capital to larger companies across Africa and will invest alongside CVCI’s managed emerging market private equity funds,” CDC said in a statement on Monday.
CDC is a British government-owned fund of funds with assets of £1.6-billion that targets businesses in poorer countries, with an emphasis on Africa and South Asia.
According to CDC, its commitment to the CVCI Africa Fund will bring its total investments in Africa to over $830-million since 2004.
Investors eye Africa
The move comes as companies across Africa attract increasing attention from both local and international private equity investors.
The African Venture Capital Association said recently that it expected a dramatic increase in the amount of private equity capital invested on the continent since 2004, when deals worth more than $1.3-billion were done.
Sunil Nair, CVCI’s MD for Central and Eastern Europe, Middle East and Africa, said the new fund would “seek to capitalise on the growth of African economies, evidenced by high GDP growth.
“The investment environment is increasingly attractive given rising political and macroeconomic stability, growing disposable income and economic reform which will particularly benefit sectors such as mining, oil and gas, financial services, infrastructure, transportation and consumer goods,” Nair said in the CDC statement.
“We believe that Africa is a high potential market where we can generate attractive returns,” said CVCI head Dipak Rastogi.
Individual amounts of between $20-million and $60-million would be invested in companies in both sub-Saharan and North Africa, CDC said.
CDC chief executive Richard Laing said investment areas would include infrastructure, natural resources, energy, telecommunications and general manufacturing.
Private equity activity in SA
The boom in private equity activity worldwide has been mirrored lately in South Africa, where a number of large corporations – among them Shoprite, Edcon, Alexander Forbes, Consol Glass and Primedia – have attracted bids from private equity players.
And according to Business Report, the governments of Ghana, Nigeria and South Africa have intervened to help develop the private equity asset class.
“The South African government has established the National Empowerment Fund, which is targeting the black SME sector with investments from R100 000 to R50-million,” Business Report noted.