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Development impact through private equity in Africa
March 24, 2009KLM Club Africa, Amstelveen
Yvonne Bakkum, Director Private Equity
Private equity in Africa – March 2009
FMO, the Dutch Development BankOur vision is that a thriving private sector will lead to lasting economic and social development, which will empower people to employ their skills and improve their quality of life.
• Established in 1970
• Dutch State owned 51% and major banks 42%
• AAA rating from Standard & Poor’s
• Total committed portfolio EUR 4.2 bln (by year end 2008)
• Focus sectors: financial sector, renewable energy, low income housing
Private equity in Africa – March 2009
Our global network
As a committed and experienced emerging markets investor FMO has developed a broad network of partners across the globe, including a strong presence in Africa.
Partners include:Other Development Finance Institutions such as IFC, DEG and ProparcoCommercial banks such as Rabobank, Deutsche Bank (Capital Markets products) and Citigroup (risk sharing)Global investment firms with similar ‘mindset’: Aga Khan Foundation, TBI Other partners in specific areas such as Microfinance, and Private Equity Funds
Private equity in Africa – March 2009
FMO’s strategy in Africa:“Banking the Unbankable”
- Africa is full of opportunities
- But lacks parties that can transform opportunity into bankable projects
- FMO supports or creates parties that can…
- In Financial Sector, especially PE funds; Housing, Energy, and Mining .
- Venture Capital from government funds (LDC, AEF, MASSIF) is crucial
Private equity in Africa – March 2009
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200
400
600
800
1.000
1.200
1.400
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
AFRICA ASIA EUROPE LATIN AMERICA GLOBAL
FMO’s committed portfolio 1998 - 2008
Africa now 28% of total portfolio
FMO’s client countries in AfricaPrivate equity in Africa – March 2009
South22%
East 24%
North5%Various
20%
West29%
Private equity in Africa – March 2009
Private equity in Africa - snapshots
1994: FMO’s first African private equity initiative in Tunesia
1996: FMO initiates first of several small SME funds in West-Africa
2000: African Venture Capital Association (AVCA) established
2003: still few private equity funds outside South-Africa
2007: fund raising for Sub-Saharan African PE funds tripled in 2 yrs, to $ 2.3 bln
2008: African funds raise record high volume of $ 3.2 bln, trend is pan-African
2009: African private equity exits and investments ongoing but slower pace
2010: fund managers expect investment opportunities at reasonable valuations
Private equity in Africa – March 2009
FMO’s private equity network in Africa
Private Equity Funds (now 28) for African companies, including: Tuninvest Finance Group, 4 funds for North Africa region AfricInvest Capital Partners, 3 funds Pan African. Aureos Africa Fund (pan-African), Aureos East-Africa Fidelity Capital Partners, 2 funds for Ghana, Liberia en Sierra Leone Central Africa Investment for Cameroon, Chad, Congo DRC GroFin , SME finance in Kenya, Uganda, Tanzania, Rwanda KIBO Fund, Mauritius - operational in southern Africa countries
Direct equity investments (now 25), often together with funds: Financial sector (banks, leasing companies, microfinance, insurance) SME / small corporates in various sectors including energy
African Venture Capital Association
Private equity in Africa – March 2009
Development impact through private equity
Private sector development-Return on investment to local shareholders-Introduction of international best practice management systems-Technology and knowledge transfer
Employment creation => poverty reduction-FMO research shows 30 new jobs per USD 1 mln invested-Improve “employability” through training
Improving corporate governance-Financial transparency, IFRS accounting-Independent board members
Implementing environmental & social standards-Work towards World Bank/IFC performance standards in agreed action plans-ESG is a business case!
Private equity in Africa – March 2009
Case studies
Case study: Celtel
The Opportunity:
• Pan-African mobile telephony operator started in 1998, needed capital to meet
huge demand of underserved telecom market in Africa
FMO’s role:
• Invested scarce risk capital from LDC Fund together with other DFIs in 2001
• Provided local currency financing to various Celtel operating companies
Private equity in Africa – March 2009
Celtel was acquired by MTC in May 2005 for $3.45 billion, and currently operates in 15 countries in Sub Sahara Africa
Today’s situation:
• Celtel sold to MTC Kuwait (today ZAIN) in 2005
• This “Infrastructure deal of the year” showed FDI in Africa pays off!
• Celtel is a profitable company operating in 15 African countries
• More than 26 million customers
• More than 98% of workforce and management is African
• FMO continues (local currency) lending to various Celtel companies
Private equity in Africa – March 2009
Case study: Bank of Africa Group
The Opportunity:
• African-owned SME banking group with ambition to expand in Africa
FMO’s role:
• Invested risk capital in African Financial Holding, the group’s holding company
• Shareholder in various local BoA banks, incl. BoA Madagascar and BoA-Kenya
• Promoted improvement of corporate governance
• Initiated discussions to seek strong banking partner for further growth
Private equity in Africa – March 2009
Today’s situation:
• Large Moroccan banking group BMCE acquired significant stake in 2008
• BoA Group active in 12 countries in French and English speaking Africa
• FMO still involved as active shareholder at request of BoA and its new owner
• Many DFIs are interested in funding BoA group entities
Private equity in Africa – March 2009
Case study: Maghreb Leasing, Algeria
The Opportunity:
• Algeria, where SME’s have no access to financing
FMO’s role
• Involve Tunisie Leasing
• Founding shareholder together with our partner Tuninvest
• First long term local currency financing
• E&S, corporate governance and risk management through Board involvement
Private equity in Africa – March 2009
Today’s situation:
• Profitable since 1,5 year of operations
• High growth
• Capacity Development to extend product portfolio
Private equity in Africa – March 2009
Conclusion
• Africa is a growing and interesting market for private equity investments
• Local partners are key to successful investing
• FMO is seen as an innovative and creative DFI by clients and peers
• We are dedicated to the African opportunity, and aim to catalyse others
• Since 2008: Africa largest region in FMO overall and private equity portfolio!
Serious reforms, governance improvements, fight against corruption and return of well-educated Africans continue to improve investment climate. Africa is not immune for global crisis, but investors widely believe Africa offers good opportunities for sustainable profits.
Private equity in Africa – March 2009
Questions & Comments
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