Business
Africa: Private Equity – New Cash for Expanding Businesses
The overall numbers are impressive, although a bit volatile. Private equity investment in sub-Saharan Africa jumped from US$741 million in 2003 to US$3 billion last year, with ups and downs in between, according to the Emerging Markets Private Equity Association.
All sizes
Private equity placements come in all sizes. The biggest in East Africa last year was a US$287 million deal by Egypt’s Citadel Capital to invest in Rift Valley Railways, which operates the railroad from Kenya’s Mombasa seaport to Uganda. The AfDB, whose private equity portfolio stands at US$1.1 billion, regularly invests in independent funds that make equity placements in Africa. These funds have invested in 294 companies, of which 54 topped US$15 million and 163 were under US$1 million.
Infrastructure, banking, mining, oil and gas, and other commodities generally attract the heavy hitters. At the other end of the spectrum, venture capital focuses on less mature companies, which are generally small and often headed by a charismatic entrepreneur.
One such company is Cheetah Palm Oil, a start-up in Ghana founded by the well-known economist George Ayittey. Cheetah has backing from Golden Mean Capital. Instead of buying land and growing crops, it will work with a producers’ cooperative to help market products internationally and to ensure that farmers get fair prices, microcredit and agricultural extension services. The project has the potential to encompass 50,000 small growers with farms covering 75,000 hectares of land.
This is not your genteel, Silicon Valley-style venture capital. “You have to rally resources around the entrepreneur and build infrastructure,” says Mr. Jeromin, whose firm is solidly in the venture capital realm. “It takes a heck of a lot of time.”
Venture capital remains a small subset of all private equity operations in Africa, partly because it is so labor-intensive. “There are a lot of people who do not want to get their hands dirty,” Mr. Jeromin complains.
