The African Development Bank supporting private equity investments in Africa
The African Development Bank was an associate sponsor of the 13th Annual Conference of the Africa Venture Capital Association (AVCA) that took place in Addis Ababa, Ethiopia, April 25-27, 2016. The AVCA annual conference is the largest African private equity (PE) gathering globally. More than 400 participants representing the industry attended the conference, including African private equity and venture capital firms, institutional investors, foundations, international development institutions and global professional services firms.
This year’s conference focused on the theme “Championing Private Investment in Africa”, in line with AVCA’s efforts to contribute to the development and expansion of private equity investing in Africa through sharing of experiences, knowledge and relevant data.
The three-day gathering was designed to provide a unique opportunity for networking and sharing information such as trends and lessons learned, as well as debating on approaches and best practices to address PE investment opportunities and challenges on the continent. The main topics debated at the event included: (i) The State of Private Equity in Africa, (ii) Powering Africa’s Infrastructure, Energy and Renewable Sectors, (iii) Beyond the Bottom Line: Investing Sustainably in Africa, and (iv) Successful PE Exits: Developing Capital Markets and Other Exit Routes in Africa.
The Bank’s sponsorship of the AVCA event is part of its efforts to contribute to the development of the PE market through partnerships, which facilitate the consolidation and dissemination of information, best practices and benchmarking of Africa PE performance with the rest of the world. This is in turn expected to contribute to better understanding of the market and attract additional and new capital (local & international) to the market. As an associate sponsor, an exhibition stand was given to the Bank to showcase its products and services in the equity sector in particular as well as its private sector activities in general. The Bank was also given the opportunity at the gala dinner to deliver a speech highlighting its support to AVCA and projected a film about the Bank’s activities in private equity.
In her statement at the gala dinner, Amira Elmissiry, Chief Equity and Catalytic Investment Officer, underscored the Bank’s support to AVCA and stated that “as a major investor in Equity Funds in Africa, we are proud to say that in the last few years AVCA’s annual meetings have been and will continue to be the foremost event for the Bank and its business in this space.”. There has been a paradigm shift towards the Bank’s portfolio construction, focusing on alignment to the Bank’s High 5s agenda.
Stella Kilonzo, Manager in charge of Financial Markets in the Bank, presented the AfDB’s activities in the panel “Successful PE Exits: Developing Capital Markets and Other Exit Routes in Africa” and emphasized the Bank’s convening power to impact on the African agenda in driving Africa’s financial sector development. Of the Bank’s US $1.1 billion committed portfolio of equity investments, 64% is in the divestment stage. AfDB understands that successful exits are a function of sound investment and portfolio management policies and solid financial sector ecosystem built into the investment’s long-term strategy.
During the session “Powering Africa’s Infrastructure, Energy and Renewable Sectors”, Alassane Ba, Acting CEO, Africa 50, emphasized the importance of infrastructure development in Africa and stated that “in the value chain of infrastructure finance, the time spent to prepare suitable documentations to prove the bankability of projects is the longest. This segment is the least financed given its high risk profile. Therefore the role of the DFIs [development finance institutions] is to shorten the project development cycle from seven years in average to three years and to de-risk the financing of the projects. This is the raison d’être of Africa50.”
The African Development Bank is one of the largest private equity investors in Africa with the most diversified portfolio, knowledge of the markets and potential impact on improved governance in the targeted countries for investment. From the feedback of the participants, the Bank’s and other DFIs’ role in promoting PE on the continent was emphasized as critical to providing comfort to other private and commercial investors as well as to the development of a critical mass of local and regional fund managers and PE fund management capacity on the continent.
Being the two major players in the private equity industry on the continent, dedicated solely to Africa, the AfDB and AVCA are working together to ensure the activities, lessons learned and best practices are disseminated to the African and international communities. As a result of the Bank’s sponsorship and active participation in the event, it is expected that a strong signal is being sent to the industry worldwide on the meaningful positive results observed in the market. The Bank strongly favours private equity investment as the basis of growth and continues to strengthen its partnership with AVCA as the complement institution to reach its triple bottom line objective: profit, people, planet – commercially viable financing for inclusive and green growth.