The Aureos Africa Fund is busy with its mission – it says it is the largest fund ever to focus on investing in small to mid-sized businesses across Africa. The website www.africancapitalmarketsnews.com reports that earlier this month it announced that it had closed its fund-raising after gathering US$381.1 million. The fund has already invested approximately $120 mln in 10 companies operating in a variety of sectors and regions.
It is managed by Aureos Capital (www.aureos.com), which specializes in investing in mid-sized businesses across the emerging markets and says that it was supported by a broad range of institutional investors attracting institutions from the US and Europe as well as Africa.
Sev Vettivetpillai, CEO of Aureos Advisers Ltd comments (in a company announcement): "Considering the weak fundraising environment for private equity over the last two years we are delighted with the strong interest shown by investors."
"Many institutional investors are becoming aware that they have little or no exposure to what is becoming an increasingly robust and vibrant part of the global economy. As with many other emerging markets, African economies have grown steadily throughout the global downturn and unlike the western economies they have not had to saddle themselves with large public sector deficits to achieve that out-performance.
"Governments in Africa are now wedded to prudent fiscal and monetary policies, and legislative reforms continue to make Africa a far more welcoming environment both for foreign direct investment and for local entrepreneurs."
The International Monetary Fund (www.imf.org) forecasts average real per capita GDP growth of 4% for Africa in 2010 compared to an average of just 1.1% for advanced economies.
The Aureos Africa Fund targets initial investments of up to US$10 million with a focus on businesses that have strong potential to expand on a pan-African basis within two to three years via "buy and build" strategies and/or through carefully executed organic growth. The focus is on returns generated from growth as opposed to leveraging and financial engineering.
According to Davinder Sikand, Regional Managing Partner of Aureos Africa: "Our strong performance in Africa has been based on adding value to our investments by offering day-to-day and strategic help to the businesses we invest in. We have a very strong local presence and that is an essential ingredient in today's world of emerging market private equity.
"Small and medium-sized business are becoming increasingly important players in domestic and regional markets across Africa - they are a key driver of the continent's economic growth."
Aureos has funds under management of approximately US$1.2 billion and a geographical footprint covering over 50 emerging markets in Asia, Africa and Latin America, through the establishment of 16 regional private equity funds.
Investors in Aureos funds include institutional investors, bilateral and multilateral development finance institutions and high net worth individuals.
Investments made already include:
• A market leader in milk production in East Africa with one of the largest and most modern milk-processing facilities in the region.
• A leading Nigerian biscuit manufacturers with an established distribution network.
• A well capitalized and rapidly growing insurance company headquartered in Nigeria.
• One of the largest cement companies in Senegal, considered to be the most technically advanced and environmentally efficient cement company in West Africa.
• A fast-growing information and communication technology company in West Africa.
• A leading provider of building management & security software and business software in Southern Africa.
• A leading provider of business software and technology solutions with offices in Kenya, Uganda and Rwanda.
• A diversified manufacturing company includes industrial contracting and South Africas largest ship repair company.
• A West African residential property developer and real estate management company.
• A leading leasing company in Nigeria with a subsidiary in Ghana.
In conclusion, Davinder notes that the Funds pan-African structure helps to diversify the economic and political risks that have historically been associated with investing in Africa.