Interview: The State Of Private Equity In Ethiopia

Interview: The State Of Private Equity In Ethiopia

From HowWeMadeItInAfrica

In 2008 Schulze Global Investments (SGI), an American investment firm and family office, became the first international private equity firm to open an office in Ethiopia. In 2012, SGI launched the Ethiopia Growth and Transformation Fund I, and completed a $86.5m fundraising process in 2014. The firm, headquartered in Singapore, has a presence in six countries including China, Brazil, Mongolia and Georgia. Dinfin Mulupi speaks to Blen Abebe, vice president at SGI Ethiopia, about closing deals in the Horn of Africa, and why similar funds are eyeing the market.

SGI was the first private equity fund to launch in Ethiopia. What factors motivated this move?

SGI is focused on emerging markets and has a history of investing in high-risk, high-potential markets. The first investment outside of the US was done in China several years ago at a time when people weren’t quite comfortable with that country. But in the case of Ethiopia, the Schulze family has a special connection to the country as the family has three children adopted from Ethiopia. As a consequence they visited frequently and saw the transformation so decided to invest their money here. Schulze Global, as a family office, invested in three companies prior to the Fund: a coffee roasting company called Tarara, a cement factory and an international school. And as investment returns were quite good despite the risky environment, they decided to raise a fund solely focusing on Ethiopia.

In which sectors do you see the most potential?

We are open to various sectors including agriculture, manufacturing, education, healthcare, real estate, and tourism. We see great potential in all of these sectors, but particularly in the FMCG sector due to its attractiveness associated with the growing population and rising disposable incomes. FMCG is also very attractive due to Ethiopia’s retail market potential. However, as a foreign entity, we can’t participate in retail outlets as it is prohibited to foreigners in terms of the Ethiopian Investment Proclamation. For example, with our coffee business we just sell to wholesalers and then they sell it to retailers. We cannot open our own retail outlets. Many people ask why we haven’t opened a Tarara coffee shop chain. That would have been great, but as a foreign company by law we may not.

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