Last week in brief… Tech deals were the flavor of the week in Africa's private capital investment world last week. There were three private equity transactions reported, for established companies and a startup.
Google, Convergence Partners, the IFC and Mitsui & Company are teaming up to commit up to $100 million to CSquared, a broadband infrastructure company building wholesale metro fibre optic networks on the continent. The company, which emerged in 2013 following the combination of several of Google’s Project Link initiatives to build high-speed, world-class fibreoptic networks in Africa’s cities, has already laid over 800km of fibre in Kampala and Entebbe and more than 840km of fibre in the Ghanaian cities of Accra, Tema and Kumasi.
The move's been prompted by the belief that combining capital and technical know how to deploy and operate the existing and planned networks will both quicken network deployment and keep costs contained. The IFC estimates that the continent needs at least another 500,000km of fibre laid.
In another tech deal, Synergy Capital is making its tenth investment for its $100 million private equity fund by acquiring the Nigerian and Ghanaian subsidiaries of Dimension Data, an information technology services company based in Johannesburg. Terms of the deal were not reported.
The new assets, which will be re-branded Cloud Exchange Limited following a brief transitional period, will provide IT systems integration services to large corporations and government entities across West Africa. Despite leaving Dimension Data’s fold, Cloud Exchange will remain the company’s exclusive partner in both Nigeria and Ghana, providing technical partner services and technology and support to the renamed entity.
A startup was the third and final beneficiary of a capital infusion last week. CarZar, the second-hand car online market place backed by Silvertree Capital, has received an additional $1.5 million in expansion capital from Vostok New Ventures, a NASDAQ Stockholm-listed venture capital company. The fresh capital will be used to boost the startup’s marketing and recruitment initiatives.
In fund raising news, XSML Capital announced it has held the final close the Africa Rivers Fund, hitting its target of $50 million with commitments from a mix of development finance institutions and a foundation. Three of the investors who participated in XSML’s first fund, the Central Africa SME Fund, have re-upped for this second investment vehicle.
The fund will follow much the same strategy as its $19 million predecessor fund, backing well-managed, growing small and medium businesses in the Democratic Republic of Congo, Uganda, Congo and eventually Burundi with debt, equity or mezzanine capital in deals ranging from $100,000 to $5 million in size.
In other fund news, the IFC’s board is expected to meet in mid-to-late June to review a potential €10 million commitment to Investisseurs & Partenaires Afrique Entrepreneurs Fund II, a planned €80 million, 10-year fund that will target impact investment opportunities in small and medium businesses across all regions in sub-Saharan Africa
According to the firm’s website, IPAE II to make between 35 and 45 investments over the course of its life, typically within the €300,000 to €3 million range. Hold periods will average five to six years, and aims to deliver investors a net IRR of between 8% and 12%.
There were a couple of portfolio company-related deals announced as well last week. Wananchi Group, the Kenyan communication's group which counts Emerging Capital Partners among its investors, is selling its business services unit to Synergy Communications, a South African firm which is backed by Convergence Partners. One rationale for the sale is to help Wananchi Group to focus its efforts on developing new products and services for Zuku, its consumer and retail services business.
The other portfolio-related deal has a North African component. Neptune Energy, an oil and gas platform backed by The Carlyle Group and CVC Partners, has agreed to acquire a majority stake in ENGIE E&P International for $3.9 billion. While mainly focused on North West Europe, ENGIE E&P has operations in North Africa and South East Asia, including the Touat Gas development which is underway in Algeria. ENGIE E&P will retain a substantial interest alongside Neptune the Touat project.
In perspectives this week, we have a contributed article from Augentius, the fund administration specialist, which looks at at some of the market factors driving the need for changes in fund and fee structures as well as some of the methods being adopted to help navigate an increasingly complex fund terrain. Meanwhile, writing an article in Real Clear World, Aubrey Hruby examines the state of the continent’s relationship with China and how the reality differs from common perceptions.
And finally, three recent sector industry reports which we feel would be of interest in Africa's investors are covered this week. In the first, Africa Finance Corporation and the Boston Consulting Group published a report on the best practices for infrastructure financing on the continent gleaned from 10-years' worth of experience.
In the second, Dalberg provides an analysis of the energy sectors in four countries—India, Nigeria, Senegal and Uganda—and finds that while off-grid solutions are supported by their governments, key policy gaps and challenges serve to impede the rapid growth of the sector.
And in the third, Caerus Capital examines the outlook and opportunities for investment in private education in Africa and how policy makers can incorporate private sector investment in establishing their education systems.
As always, you can review these and other stories by clicking through to this week’s complete issue of Africa Capital Digest.
Allan Cunningham is a senior media executive who has spent the last 15 years of his career working for some of the world’s most respected M&A and Private Equity media companies including Dow Jones’s publications Private Equity Analyst and VentureWire and most recently, The Deal. He has built a number of successful digital and event content businesses, both subscription and sponsor-supported, delivering information and content-marketing services to clients in the M&A and broader deal ecosystem. He recently struck out on his own and launched Rowayton Press, a multi-platform media company focused on the private capital opportunities in emerging and frontier markets. Mr. Cunningham holds a Bachelors degree from Liverpool John Moores University in the UK.