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Africa-focused private equity firm Development Partners International raised $ 900 million in its third round of financing and entered into an agreement that will give a major boost to an investment ecosystem hit hard by Covid-19.
DPI’s African Development Partners III fund exceeded its $ 800 million target and secured an additional $ 250 million to invest together in specific companies.
Runa Alam, co-founder and CEO of DPI, said the fundraiser shows that investors are realizing that there is money to be made on the continent in investments that also have a social impact.
“Our strategy is to invest in companies that benefit from an emerging middle class,” she said, claiming that about 300 million of Africa’s 1.3 billion people meet this broad definition.
While acknowledging that the economic aftermath of the pandemic has nearly plagued middle-class incomes in Africa, rapid digitalisation has meant businesses are finding new ways to connect with consumers. Some offered ‘value’ suggestions for the less affluent, she said.
“We have not seen the growth of our companies slow down,” she said, referring to revenues at businesses ranging from a pan-African generic drugmaker to a Nigerian fast food chain and a private West African university offering distance education .
Abi Mustapha-Maduakor, CEO of the African Private Equity and Venture Capital Association (AVCA), said: ‘It’s great to see when big fund managers can close. There are opportunities, especially in companies with technology. ”
She acknowledged that the industry was struggling to raise new money in a difficult economic environment and at a time when personal encounters between potential investors and new businesses were difficult.
Private equity funds investing in Africa raised $ 1.2 billion in 2020, up from $ 3.9 billion in 2019, according to AVCA. His report for the first half of 2021, which will be published this week, will show a fairly flat start to the year with about $ 500 million at the end.
Souleymane Ba, partner at Helios Investments, which has invested $ 4 billion in African businesses since 2004, said: “The market is active, but you have to be very special and very few general partners in Africa have the experience and history.”
Hendrik du Toit, CEO of Ninety One, an Anglo-South African asset manager, said investor interest in Africa was limited. “Unfortunately, most Afrikaans policymakers did not deliver the promising ‘Africa Rising’ story that was done 10 to 15 years ago,” he said.
Alam said this view is too negative. None of the 23 companies that have invested in DPI in more than 14 years has failed and DPI has consistently been an excellent quartile performer, she said.
“We give good returns in dollars,” she added. ‘Despite all the gloom and mischief that exists over Africa, our macro-thesis still applies. There are 1.3 billion people, the latest demographic in the world, which means that Africa is still growing, while other regions will have fewer people. It is a continent that cannot be ignored. ”
The $ 900 million invested in the DPI fund comes from pension and sovereign wealth funds, development finance institutions, insurance companies, asset managers and impact investors, with about half from Europe, a third from the US and the rest from the Middle East and Africa.
In addition to existing investors in DPI, which has $ 2.8 billion in assets under management, about 25 new limited partners have invested at least $ 5 million each, Alam said.
Previous DPI investments include Eaton Towers, an African telecommunications industry sold to American Towers for $ 1.85 billion, and Mansard, a Nigerian insurer, bought by Axa.