Irish rock star and former Boomtown Rats front man Bob Geldof has raised nearly $200 million for an Africa-focused private equity fund, Reuters has reported.
In September 2010, it was widely reported that Geldof, who has gained a reputation for his vocal advocacy for debt relief to Africa, was looking to raise a $1 billion private equity fund for investments in the region.
The fund, called 8 Miles (the distance between the southern tip of Europe and northern Africa) will make investments in financial services and telecommunications, but will nurture a bias for agribusiness and manufacturing, as Geldof told Reuters:
“Currently 80 per cent of exports from Africa are unprocessed raw materials. There’s your opportunity: they need manufacturing.”
Private equity on the continent is experiencing an unprecedented injection of external capital. According to an April 2011 report by the Emerging Markets Private Equity Association (EMPEA), private equity inflows into sub-Saharan Africa stood at about $151 million in 2002, but grew to $1.5 billion in 2010.
A few years ago, the idea of investing in an Africa-focused private equity fund would have been considered dicey. African fund managers experienced difficulty in convincing global limited partners (LPs) to invest in the region. LPs at the time were often skeptical about Africa- not because of its lack of opportunities or potential for growth, but as a result of the realities of political, economic and social instabilities that pervaded the region.
But as socio-economic stability sets into various parts of the continent, private equity is experiencing a record boom, driven primarily by Africans. Earlier this year, Helios Investment Partners, an African-focused private equity firm, closed its second fund, sized at $900 million. The fund is one of the largest in African private equity, and it was mobilized by Nigerian proprietors Tope Lawani and Babatunde Soyeye, both former staff of Texas Pacific Group. In 2007, Pamodzi Investments raised a $1.3 billion fund, the largest in Africa at the time. Other African-based firms like African Alliance Capital, Satya Capital and Citadel Capital among others are at the vanguard of the region’s private equity revolution.
But foreign firms are scrambling for their own share of the African private equity market. In March, American buyout firm Carlyle Group announced the launch of a $750 million African-focused fund. Last month, Singapore state investor Temasek Holdings joined forces with South Africa’s Oppenheimer family to launch a $300 million private equity fund for targeted investments in agribusiness and consumer goods. In March, London-based Asset manager Duet Group also teamed up with Standard Bank to launch a $100 million African fund.
The new scramble for African private equity is logical. According to a 2010 McKinsey report Lions on the move, the rate of return on foreign investment in Africa is higher than in any other developing region. Which explains why it appears that everyone wants a piece of the action.