The International Finance Corporation (IFC) has committed more than $2 billion to more than 100 funds in Africa to boost small businesses and other sector growth.
The bank said in a statement that IFC’s private equity funds strategy focuses on providing growth capital to funds with the highest likelihood of financial and developmental success.
It said it is investing in Uhuru Growth Fund I, a fund managed by Uhuru Investment Partners (Uhuru), a middle-market private equity firm in West Africa.
IFC’s support includes an equity investment of up to $10 million from IFC’s capital and an additional $10 million from the Blended Finance Facility of the International Development Association’s Private Sector Window, which helps de-risk investments in low-income countries.
According to the bank, the fund will provide growth capital to the region’s small and medium-sized enterprises (SMEs), including women-led businesses. Access to equity funding is scarce in the region, representing just 6 percent of the total funding raised across Africa from 2017 to last year.
The fund invests exclusively in low-income countries, focusing on high-growth companies offering consumer and financial services in Nigeria, Ghana, and Côte d’Ivoire.
The fund will also invest in businesses in Senegal, Mali and Burkina Faso. At least 25 per cent of the companies the fund invests in will be owned or led by women.
IFC will work with the fund to develop and implement environmental and social standards and improve gender diversity at the fund and the companies it invests in.
In addition to providing equity capital, Uhuru will help companies improve operations, secure banking relationships, and expand domestically, as well as across the region’s Anglophone and Francophone economies.
“IFC’s support has been crucial for a first-time fund like ours to reach our fundraising target in a challenging environment. Entrepreneurs in our markets need partners that understand their challenges and can provide not just the capital, but the support to enable their businesses to thrive, be impactful and, ultimately, succeed. We look forward to partnering with passionate local entrepreneurs to grow their business and to create sustainable value for our investors and all other stakeholders,” said Managing Partner, Uhuru, Yemi Osindero.
Private equity activity in Africa remains one of the lowest in the world, representing 2.6 per cent of the total volume of private equity financing dedicated to emerging markets. Other than Nigeria, most countries in West Africa have nascent or non-existent private equity markets. Fundraising for private equity in West Africa dropped to $134 million in 2021 from $234 million in 2018. IFC’s investment in Uhuru could demonstrate that investing in underdeveloped private markets like West Africa, often perceived as higher risk, can generate returns to investors with sufficient deal flow and exit potential. West Africa has a large, young population, rapid urbanisation, and relative currency stability.