The Board of Directors of the African Development Bank (AfDB) has approved a $15m equity participation in Africa Capital Works Fund.
The investment will finance Sub Saharan Africa’s mid-market companies in strategically selected sectors that offer the potential to be transformed into local and regional industry champions, over a longer than usual ownership period.
Launched by the independent alternative asset manager, Capitalworks Group, is a $300m fund, targeting institutional and professional investors across the continent. The Fund, led by Joint Managing Partners, Beth Mandel and Nana Sao, will invest in financial services, agriculture, healthcare and manufacturing by deploying longer termed equity.
The general shallowness of African capital markets and the high cost of debt finance mean that Private Equity plays a central role in helping to unlock and grow the potential of individual companies and ecosystems. Furthermore, mid-sized African enterprises struggle to raise the long-term capital they need to grow through the multiple phases of value creation to achieve enterprise growth and jobs. The AfDB recognizes the significant imbalance between the supply of and demand for long-term capital in the rapidly growing and developing Sub-Sahara Africa economies and the mid-market companies within them and share ACWs’ thesis that longer-term capital offers a better way to address this imbalance.
The investment in Africa capital Works offers significant potential for development impact and helps advance the strategic agenda of the Bank’s High 5 priorities with regards to Industrialize Africa, Integrate Africa, Feed Africa and Improve the quality of life for the people of Africa. More specifically, the investment will support; the promotion of financial inclusion through offering affordable and improved financial services for the unbanked; gender and social benefits arising from support to smallholder farmers; private sector development through improved access to finance for mid-cap businesses; as well as enhance regional trade by investing in regional companies thereby facilitating their growth across countries and regions.
Africa Capital Works strategy is well aligned with the Bank’s Ten-Year Strategy (2013-2022) as it contributes directly to achieving the Bank’s inclusive growth vision. It promotes the Bank’s Private Sector Development Strategy (2013-2017) by developing growth oriented enterprises as well as the Bank’s Financial Sector Development Policy and Strategy (2014–2019) whose priority is to increase access to finance to the underserved and to deepen the financial market.