The first $1bn-plus Africa-focused private equity fund has been raised by Helios Investment Partners, a London-based group founded almost a decade ago by a pair of Nigerian-born dealmakers. The record size of the fund signals the growing appetite for a continent that until a few years ago had been largely ignored by global investors.
Africa still attracts a tiny proportion of the world’s private equity money, even compared with other emerging regions, notably Asia and Latin America. But interest has increased recently, buoyed by strong economic growth. After stagnating for two decades, African gross domestic product per capita has surged almost 40 per cent since 2002, fuelled by high commodity prices, the rise of a small consumer class, and cheap Chinese loans. The strong growth has encouraged regional and international private equity groups. US buyout group Carlyle last year launched a nearly $700m fund to invest in the region, while US rivals KKR and Blackstone have also struck regional deals. Dealmaking among companies in the sub-Saharan region has been strong during the past year as investors bet on growth. Recent transactions include an alliance between brewer SABMiller and Coca-Cola; the entry of French insurer Axa in Nigeria and a large merger in the retail sector in South Africa.
Helios plans to wrap up fundraising for its latest vehicle at $1.1bn — the maximum that it promised it would take from investors. About 60 per cent of the new fund has come from existing investors. It is the third fund that Helios has raised since it was established in 2007. Tope Lawani, Helios co-founder, said in an interview with the Financial Times that the size of the capital rising and the participation of pension funds and sovereign wealth funds was a sign that “private equity in Africa is maturing”. Until now, wealthy families and entrepreneurs have been quicker than institutional investors such as pension funds to see the appeal of Africa. Although more institutional investors are pouring money into private equity funds for Africa, some remain worried about their exit strategy as capital markets in the region — particularly stock exchanges — are still in their infancy, with the exception of South Africa and, to a lesser extent, Morocco, Nigeria and Kenya. Buyout groups raised $3.3bn for Africa funds in 2013, the latest year with full data, compared with a peak of $4.7bn in 2007, according to estimates by EY, the consultancy.
The arrival of new investors to Africa coincides, however, with economic trouble in the region as commodities prices tumble and countries brace for the impact on capital flows of an anticipated increase in US interest rates. Mr Lawani said that in the near term many African countries were going to suffer an “adverse impact” on their currencies as capital flew back to the US. “We are witnessing sharply lower commodities prices and it is reasonable to expect African currencies to lose value against the dollar,” he said. But he claimed that the downturn would turn into an opportunity for investors holding large amounts of US dollars, such as Helios. “It is an excellent time to invest: asset values are going to come down,” he said. Helios held the previous record for the biggest private equity fund in Africa, which it raised in 2011, at $908m. Earlier this year, Edmond de Rothschild amassed $530m for its first buyout fund focused on deals in the continent. In 2012, Sir Bob Geldof, the musician and campaigner for aid to Africa, raised $200m for his 8 Miles fund focused on the continent. Source: FT