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New Signs of Life in Fundraising in Africa

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November 3, 2014

Although the continent is going through difficult time with Ebola crisis, the investors in Africa are remaining positive. Sunday saw reports of the biggest fundraising effort since the start of the 2008 financial crisis, as IHS announced it has raised $2.6bn in equity and debt.

 

The Nigeria-based telecoms infrastructure group announced that is going to raise $2bn in equity. This is achieved through a consortium of European, Asian and African investors. In addition, the company will also opt for a loan facility of $600m.

 

Some of the equity raised comes from existing shareholders of the IHS. These include funds managed by Goldman Sachs, Wendel of France and Emerging Capital Partners, which is a private equity group.

 

According to the Financial Times, who reported the story on Sunday, IHS’s news are latest among a string of more positive developments in the continent’s economy. For example, the African Development Bank (AfDB) recently predicted Africa is able to attract nearly $85bn in foreign inflows this year, which is a record sum for the continent. Investors are increasingly interested in local securities markets, manufacturing and infrastructure projects.

 

Earlier this year foreign investors such as the private equity group Kohlberg Kravis Roberts (KKR) have announced big investments into Africa. In addition, Temesek, the state-owned group from Singapore, has highlighted its interest in the region.

 

Of course, the continent is also battling with difficulties at the moment. According to Issam Darwish, the chief executive of IHS, the Ebola crisis is not going to break the spirit of investors. In the Financial Times interview, he told, “Africa has its own risks, but with the kinds of returns that investors get (nowadays) from Europe and the US, Africa is a strong alternative on a risk-return basis”.

 

In regards of the raised funds, the company aims to use it for pursuing deals. IHS has been interested in buying mobile cellular towers from Bharti Airtel in India and the United Arab Emirates based Etisalat. It is expected that some of the funds will go towards paying for the recent $2bn acquisition of towers in South Africa.

 

The deal of 9,000 towers from MTN saw IHS to become to largest towers group in Africa, with sites in Nigeria, Rwanda and Cameroon among others.

 

The company hopes to develop its technology further and even look into improving existing infrastructure with solar power systems. Maintaining and operating these tower sites isn’t cheap, as the company needs to upkeep the facilities in often crime-prone areas.

 

Mr Darwish told the Financial Times that; “The contribution of our investors significantly strengthens our position and the ability to move into the next phase of growth and development with confidence. We are clear in our ambition to play a leading role in the creation of the widest, most efficient and reliable mobile networks in Africa.”

 

It is understood that the company is also considering an initial public offering (IPO) in the upcoming years. The investment is positive news for the continent and could help promote growth in the region. It remains to be seen whether more private equity will continue moving to the continent amidst the problems.

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