Energy and natural resources sectors attract $833m in PE fund capital

Saturday February 15 2014

A titanium factory under construction in Kwale, Kenya. The mining sector in sub-Saharan Africa benefited from private equity funds. Photo/FILE

Private equity activity in the East African region has kicked off on a high note this year, with several new commitments by funds, setting the bloc up for more financing inflows in the coming months.

Fund managers said this asset class is increasingly offering investors growing exposure to the EAC economies outside the stockmarkets.

East Africa led the rest of sub-Saharan Africa last year in the number and value of deals by private equity funds, according to a survey done by Emerging Markets Private Equity Association (EMPEA). This highlights the shifting attention by private equity investors into the region.

READ: Publicly announced deals since the beginning of the year

Of the $1.6 billion invested in sub-Saharan Africa by private equity funds, about $769 million — nearly half of the total — was invested in East Africa. The amount was double the investment in the previous year. The region also accounted for 33 per cent of all private equity deals in sub-Saharan Africa.

The trend is likely to continue for the rest of the year with Pearl Capital Partners announcing commitment of $13.5 million for investing in agribusiness in the next two years in East Africa.


Standard Chartered Private Equity announced that it will invest between $150 million and $250 million in sub-Saharan Africa this year with special focus on East Africa and Nigeria.

Agri-Vie, the private equity fund focused on food and agribusiness investments in sub-Saharan Africa has announced a $5 million investment in Kariki Group, a specialist Kenyan flower exporting company.

Private equity players are also optimistic that the region will continue to offer new investment opportunities as more businesses open up for deals.

READ: Are there enough Equity deals in East Africa for the hunters?

“Private equity has matured, and there has been an increased level of activity, with more companies that may have been unwilling to do deals now open to the idea of having financial investors on board,” said Ayisi Makatiani, the managing partner of Fanisi Capital.

“We anticipate 2014 to be an active year for fundraising in the region,” said Robert van Zwieten, EMPEA’s chief executive.

Mike Kinuthia, the investment manager at Pearl Capital Partners in Uganda, told The EastAfrican that the firm is ready to invest into five to six more agri-businesses seeking $1 million to $3 million capital for expansion.

The money is to be invested through the firm’s African Agricultural Capital Fund established three years ago.

“We are actively looking for businesses to invest in across the region and we will be making further announcements soon,” said Mr Kinuthia.

However, Mr Kinuthia declined to mention the companies lined up for the funds, citing non-disclosure agreements with the businesses with which they are in discussions with. So far, the firm has invested 46 per cent of the $25 million African-American Community Fund (AACF) in Ugandan and Kenyan firms.

KK Fresh Produce Exporters Ltd in Uganda is the latest beneficiary of the Fund, having received $1.5 million to expand its cold chain facilities and support growth in exports.

KK exports fresh fruits and vegetables such as egg plant, hot pepper, bananas and groundnuts to the European market.

“With Pearl Capital’s injection, we expect to double the supply of our fresh fruits and vegetables exports and continue sourcing produce from Ugandan small holder farmers,” said KK Foods founder and CEO James Kanyije.

Currently, the firm exports 55 tonnes of fresh fruits and vegetables a week, translating into 11,440 tonnes per year.

In October 2013, Pearl Capital Partners and Voxtra, an impact investor, jointly invested $4 million in Biyinzika Enterprises Ltd, a Uganda-based poultry feeds processor.

READ: Pearl Capital invests in poultry feed processor

The money was invested through the two firms’ respective funds, the AACF and the Voxtra East Africa Agribusiness Fund to help the poultry enterprise build storage facilities.

The equity firm also plans to invest $8 million financing package to Pearl Dairy Farms Ltd, a Ugandan milk processor.

The financing package is expected to support Pearl Dairy in establishing a greenfield powdered milk processing plant in the Mbarara District, Southwest of Kampala, with a handling capacity of 240,000 litres of milk per day.

Peter Baird, the head of Standard Chartered Private Equity’s Africa team said the fund’s target is to invest $150 million-$250 million in sub-Saharan Africa this year. The Fund is eyeing the oil and gas, power and consumer goods sectors.

According to Mr Makatiani, the discovery of key natural resources has led to sectors such as oil, gas and mining receiving much more attention from fund managers.

Additional reporting by Steve Mbogo