Betting On Poorer Africans, Soros-Backed Leapfrog Raising $800M For Investments, Eyes Kenyan Insurers

Written by Dana Sanchez

A fund backed by U.S. billionaire and philanthropist George Soros plans to raise $800 million in its latest round, eyeing African insurance brokers and payment companies as demand grows among low-income consumers, Bloomberg reported.

Soros-backed LeapFrog Investments Ltd. is in talks with Kenyan insurance underwriters who seek fresh capital after new regulations imposed in Kenya require them to
increase their reserves to cover risks, according to Business Daily.

Karima Olokun-­Ola, a London partner with LeapFrog, visited Nairobi last week and spoke to some local insurance underwriters.

The LeapFrog fund is preparing to raise $800 million with Washington, D.C.-based Overseas Private Investment Corp contributing up to $200 million.

With headquarters in Mauritius, LeapFrog Investments is a private equity investment company in emerging market financial services, focusing on Africa and Asia. It has attracted more than $1 billion from global investors since 2007, including funds from original investors JP Morgan, Soros’ Open Society Foundations and Pierre Omidyar’s Omidyar Network. LeapFrog has investments in Ghana, Kenya, Nigeria, South Africa, Thailand, Indonesia and India.

The Overseas Private Investment Corporation (OPIC) is the U.S. government’s development finance institution. It mobilizes private capital for development and advances U.S. foreign policy and national security in the process. OPIC supports projects ranging from renewable energy and food, to tourism, technology, infrastructure, and microfinance.

“We are speaking to insurance companies, the ones that are looking for capital and those with sufficient capital but are looking to take advantage of consolidation and grow market share,” Olokun­Ola said, according to Business Daily.

Kenyan insurers and reinsurers will be required to almost double their capitalization, or more, in some cases. The government is phasing in increases to basic capital requirements by June 2018.  Businesses offering combined or composite services have also been hit hard by the new rules that require them to significantly increase capital reserves to enhance their ability to cover risk.

Kenya has 49 insurers, five re-insurers and almost 200 brokers in a country where about 3 percent of the population has insurance coverage, according to the Association of Kenya Insurers, Bloomberg reported:

The market is also overbanked, with 41 lenders serving 44 OPICmillion people, creating opportunities for mergers and takeovers because of new interest-rate caps that are squeezing profit margins, according to Nairobi-based Cytonn Investments Management Ltd., which oversees $716 million.

“The more prudent insurers will be fine,” Olokun-Ola said. “The ones that need to go and raise two to three times as much capital as they have now, they’re either going to be taken over or they’ll go out of business.”

LeapFrog is betting on poorer Africans, or “emerging consumers” because they outnumber the continent’s middle class about four to one, Bloomberg reported. Kenya’s new regulations will create buyout opportunities. Nigeria’s huge population and Ghana’s more sophisticated consumers make those markets attractive, Olokun-Ola said.

“We’re looking at payment companies because it’s becoming a popular tool that just offers much cheaper ways of doing business” across the continent, Olokun-Ola said.

Recent LeapFrog investments include $21.5 million to acquire a controlling stake in regional drugstore operator Goodlife Pharmacy, with 19 branches in
Kenya and Uganda. LeapFrog also bought a controlling stake worth $16.4 million in health insurance provider Resolution Insurance, Business Daily reported.