Private equity firm Abraaj Group announced on Monday that it has closed its $990 million sub-Saharan Africa fund. It is the third such fund for the firm and shows investors have a lot of faith for the emerging markets.
The firm announced its fund has been able to attract plenty of investment, with 64% of the funding coming from European and North American investors. Furthermore, around 76% of the committed capital came from institutional investors, pension funds and sovereign wealth funds.
Abraaj’s founder and group chief executive, Arif Naqvi, commented the closing of the fund by stating, “The strong demand for this new fund reflects increasing investor appreciation for the powerful growth story unfolding across Africa.” The third fund is only a bit smaller to the previous fund Abraaj closed just last month. That fund managed to raise $1.3 billion, which is the largest amount raised for direct deals in the region.
Focusing on the Key Sectors
The private equity firm will continue to focus on the key sectors of consumer goods and services. The sectors are driven by the growth of middle class and the urbanisation of the region. According to Naqvi, “Abraaj’s longstanding presence on the ground, with seasoned local investment teams in four key sub-Saharan cities, coupled with our unique global experience of value creation in growth markets, puts us in a unique position to identify high-potential partner companies that can become regional champions in their industries.”
So far, the firm has deployed around $3 billion in the African continent, with sub-Saharan region alone attracting over 67 investments. 30 of these have seen Abraaj make full or partial exits already. The firm is likely to continue to use different strategies when investing in the region’s companies. It has previously used a combination of organic expansion, strategic repositioning, consolidations and add-on acquisitions.
Continued Trust for the Region
Abraaj’s ability to raise nearly $1 billion in funds highlights how the continent is still a lucrative opportunity for investors. Although previously investment flows have been focused on South Africa and Nigeria, the region’s other nations are starting to attract more focus. Abraaj, for instance, has previously also focused on the markets in Ghana, Côte d’Ivoire and Kenya.
Just last week, Kenyan private equity firm, Fanisi Capital, announced its investment deal in European Foods Africa Limited. The $2.1 million investment comes at a time when the country’s food sector is experiencing growth. The increased consumer demand is largely driven by the growing middle class, with similar growth taking place across the region.
Although the current fund is aimed at sub-Saharan Africa, the region as a whole continues to provide opportunities for private equity. North Africa, which has been riddled with conflict in the past few years, has also seen some more positivity in recent months in terms of fundraising. For instance, Abraaj’s North Africa fund recently exceeded its target of $250 million. It remains to be seen whether 2015 can be a record-breaking year for Africa.