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The Board of Directors of the African Development Bank (AfDB) approved on Wednesday, July 8, 2015, an equity investment of €20 million to the AfricInvest Fund III. Among the well-established and impactful African private equity funds, AfricInvest is one of the longest standing and successful funds. AfricInvest Fund III is targeting €200 million to invest in midcap companies to transform them into regional champions.
Being a successor fund to AfricInvest Funds I and II, this Fund received continued support from its previous investors, mostly development finance institutions (DFIs), including the African Development Bank. It capitalizes on the Fund Manager’s previous experience and a strong track record, stemming from the strength of its management team and its well-established local presence across the continent.
The equity investment of the African Development Bank comes as part of the second closing, along with the participation of other DFIs and some private investors. Benefitting from the experience, lessons learnt and enhanced platform from previous funds, AfricInvest Fund III is expected to yield increased financial returns in high growth sectors such as manufacturing, agribusiness, financial services, healthcare, energy and consumer goods across Africa.
AfricInvest Fund III will provide scarce risk capital to high-potential mid-sized companies in Sub-Saharan Africa, thereby enabling them to become dominant national and regional market leaders. It is well recognized that mid-sized companies are backbones of commercial and industrial structure, accounting for over 95% of the private companies in Sub-Saharan Africa. Yet, the mid-market niche is generally unattended by larger-ticket funds and micro-focused funds. AfricInvest fills the gap. These companies typically show weak capacity to manage business succession and expansion. AfricInvest brings its expertise to enhance corporate governance, marketing strategy and skills transfer.
Through its investments in well-identified transactions, AfricInvest Fund III will generate significant positive development results for household benefits and tax revenues through job creation and multiplier effect. It will lead to increased regional integration by supporting multinational expansion of the investee companies. It will also generate positive gender and social effects by creating economic opportunities for women, developing social infrastructure and investing in fragile states.
By investing in this Fund, the African Development Bank complements its existing initiatives to support the development of private sector and financial markets in the continent. As one of its priority objectives, the African Development Bank supports investments that contribute to inclusive growth on the continent, here through financial intermediation by providing funds to capital constrained midcap sector, and through positive development impact.