Private Equity Investments
The African Development Bank recognizes the pivotal role that private equity investment can play to catalyze private sector development. Private equity investment allow reaching directly out centres of growth and job creation, building management skills, supporting entrepreneurship and improving environmental and social governance.
The African Development Bank Group uses Private Equity Funds to invest in a diverse range of African enterprises, in support of financial inclusion, agribusinesses, infrastructure building and healthcare facilities.
The African Development Bank, like other players, believes that active and growing private equity players on the continent will be a significant contributor to its economic and social development. The weighted-average risk rating was 3.73 at the end of 2014 compared to 3.58 at the end of 2013.” (source: AFDB Annual report pg 123)
The AfDB’s policy for equity investing of 1995 sets the parameters for the Bank’s operations. As follows the Bank may:
- use a variety of equity/quasi-equity instruments
- invest directly or indirectly
- invest in public or private equity
- make strategic investments
All our equity investments should fit within the AfDB institutional priorities such as sector and geographic diversification with a focus on low income countries and fragile states in support to the development of small and medium enterprises, inclusive and green growth, infrastructure and regional integration.
More specifically, the Bank as set some targets and objectives in terms of equity investment:
- Objective – build a diversified portfolio that balances the achievement of strong development outcomes with adequate financial returns.
- Volume of Equity – between 10 per cent and 20 per cent of annual non-sovereign approvals up to overall equity limit. Periodic investing with no attempt to “time the market”.
- Indirect Investments – close to 80 per cent of approvals focusing on private equity funds to overcome internal capacity limitations and build African private equity markets.
- Direct Investments – close to 20 per cent, with focus on strategic investments in financial institutions where Bank has expertise, gains outreach and builds the financial sector.