Thursday, July 29, 2010

US-based Emerging Capital Partners raised $613m for Africa

Buy-out group’s $613m fund for Africa

By Martin Arnold in London - Published: July 25 2010 , The Financial Times

Investors’ growing interest in African private equity will be underlined on Monday when US-based Emerging Capital Partners announces that it has raised $613m for a fund targeting deals from the Maghreb to the Cape of Good Hope.

The fund confirms Washington-based ECP, which has six offices in Africa, as the continent’s biggest private equity investor with $1.8bn of capital raised.

“The fundraising market is difficult, but fundamentally emerging markets is one space where there is still interest from investors and Africa was less affected by the financial crisis than most places,” said Hurley Doddy, co-founder and chief executive of ECP.

Founded in 2000, ECP has invested in some of the continent’s most celebrated private equity successes, including the Starcomms and Celtel telecommunication operators.

Its new fund has already invested in four deals, including Thunnus Overseas Group, a tuna processing group based in the Ivory Coast and Madagascar; Financial Bank, a Togo-based lender; and NSIA, a West African life assurance and banking group.

Its latest deal, in September 2009, was to invest in Wananchi, which operates the Zuku cable television and broadband internet service in Kenya.

Mr Doddy said there was a big opportunity to “capture the growth of Africa’s middle classes.”

The number of African households earning $5,000 or more is forecast to grow from 59m in 2000 to 106m in 2014, according to McKinsey.

Fears of a prolonged slowdown in the US and Europe and the impact of the credit crisis on “mega buy-outs” in the west, have prompted some investors to look for opportunities in more exotic locations.

More than a third of institutional investors in private equity is putting money into Africa, against 4 per cent four years ago, according to the Emerging Markets Private Equity Association. Investors in ECP’s new fund include the World Bank’s International Financial Corporation, CDC in the UK and the Overseas Private Investment Corporation in the US. But Mr Doddy said the fund had more backing from African institutions.

Matthew Hunt, head of South Suez, an African fund-of-funds that has invested in ECP for the first time, said: “Africa is mis-priced because it is misunderstood, so it has cheaper growth than other emerging markets due to a big gap between perception and reality.”