The African Development Bank has approved a $20 million investment that will give it a 10 percent stake in Uhuru Growth Fund 1, a private equity fund focused on investing $5 million or more in high-growth businesses across West Africa.
The fund’s investments will be focused on companies in the consumer-facing and financial services sectors, with the aim being to help grow these businesses into regional champions, according to a press release.
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African companies face difficulties raising capital from local equity and debt markets. Just four African countries — Egypt, Morocco, Nigeria, and South Africa — have stock exchanges with a market capitalization of more than $50 billion, according to BCG.
Private equity is a solution for some companies, but most smaller companies with revenues less than $50 million struggle to attract investment, according to the press release.
Private equity fund Uhuru says it’s trying to help fill that void.
The funding is also intended to strengthen West Africa’s economies, create new high-quality jobs, and drive development.
Businesses in Nigeria, Ghana, Cote d’Ivoire, Senegal, Burkina Faso
Some of the factors that make West Africa an attractive destination for investment include the region’s large population, rapid urbanization and youthful demographics, sustained economic growth and political stability, according to Africanews.
The $20 million investment will give the AfDB 10 percent of the fund’s target capitalization of $200 million, according to the press release.
The African Development Bank Group or AfDB is a finance institution established to contribute to the economic development and social progress of African countries. The bank’s headquarters are in Abidjan, Ivory Coast.
As a financial institution, AfDB is less politicized than the other multilateral organizations in the region such as the African Union, according to Quartz.
Uhuru Partners Limited, the private equity firm that sponsors the fund, employs an experienced local team with strong networks in the region.
The fund’s executive and operational teams are based in Abidjan and Lagos, in order to effectively source investment opportunities in both francophone and anglophone economies in West Africa.
