EAC Private Equity Update for December 2011
Thursday, 15 December 2011
Emerging Africa Capital set up new USD100m fund for East Africa, Aureos Healthcare close their new healthcare fund and complete a third investment in Kenya, Citadel Capital are looking at investing in power generation in Uganda.



A Second USD100m Fund for East Africa
Kenya-based investment advisory firm Emerging Africa Capital (EmAc) will raise a USD100m private equity fund, Business Daily reports. The fund will target deals in ICT, fast-moving consumer goods and renewable energy in the larger eastern Africa region, including South Sudan and the DRC, with a strong deal pipeline already in place. Investors from the UK and South Africa have already made commitments to the fund, with a USD70m anchor investment coming from the UK. Additional commitments are expected to come from East Africa and possibly China. EmAc expects to close the fund in June 2012 ahead of an official launch in September 2012.

A number of East Africa-focused funds have been set up in recent years, including the much publicised USD100m Catalyst Fund I – currently the largest in the region – and Ascent Capital’s new USD60m venture. Strong regional economic growth and integration driven by solid consumer demand, a thriving ICT sector, agricultural opportunities, oil and natural gas deposits, and connections to emerging markets in Sudan and the DRC have all drawn increasing number of investors to the region.


Aureos Africa Health Fund Closes on USD105m
Aureos has reached a final close of USD105.4m for its Africa Health Fund, slightly exceeding its USD100m target as expected. The fund drew investment largely from development finance institutions including the IFC, African Development Bank (AfDB), German DEG, Norfund, Proparco and the Development Bank of Southern Africa (DBSA). Support also came from a Dutch bank, the Bill & Melinda Gates Foundation and the Elma Foundation, an American organisation focused on funding for health and education for poor children in Africa.
 
The Africa Health Fund has made four investments so far, three of them in Kenya:
  • Nairobi Women’s Hospital, Kenya
  • C&J Medicare Hospital, Ghana
  • The Avenue Group, Kenya
  • Revital Healthcare EPZ

The fund is currently finalising or conducting due diligence on 20 potential healthcare investments across Africa.


Another Kenyan Deal for Aureos Health
Marking its third investment in Kenyan healthcare, the Aureos Africa Health Fund has committed USD2.75m to Revital Healthcare EPZ Limited. Revital is based in Mombasa and manufactures single use auto disable (AD) hypodermic syringes and other disposable medical equipment. AD syringes are particularly helpful for combating the spread of HIV because their auto disable function guarantees single use.
 
The growth capital provided to Revital will help the company expand production capacity to serve East, Central and Southern Africa.
 
In November 2011, Aureos invested in Kenyan hospital and health insurance company Avenue Group. The firm also holds a stake in Kenya’s Nairobi Women’s Hospital. The Africa Health Fund has raised USD75.4m to date and is expected to close on its USD100m target soon.


Citadel to Tackle Tough Ugandan Power Market
Citadel Capital may invest USD150m to USD200m in power projects in Uganda through its Egyptian power and natural gas company, Taqa Arabia, Reuters reports. The firm hopes to invest in three power plants for a total added capacity of 100 MW. Citadel’s plans come at a tumultuous time for the power sector in Uganda. Just last week, riots erupted outside of the capital city, Kampala, the latest in a series of citizen protests over 24-hour power cuts that have shut down businesses and disrupted basic social services.
 
Ugandans are pointing fingers at the government and the state power utility, Umeme, which is owned by private equity firm Actis. Uganda has long struggled to provide consistent, affordable electricity, but the recent crisis was deepened by the closure of two thermal plants as power producers protested against unpaid government subsidies. Umeme has also been accused of failing to invest in a working distribution network.
 
Demand is certainly high for more capacity, but problems facing a new investor like Citadel are rife. The firm will have to contend with Umeme’s inefficiency – something Actis has not yet been able to overcome since taking over the utility in 2009 – as well as government corruption and public outrage. Thermal power generation is subsidised, but with rising fuel prices, the Ugandan government finds itself less and less able to pay for these subsidies. Removing them, however, would not only be wildly unpopular, but also affect the already high inflation rate. Plenty of power projects have stalled and failed in Uganda in the past. That said, Citadel is no stranger to difficult infrastructure investing. The firm has dealt with similar issues in getting its Rift Valley Railways investment off the ground in Kenya and Uganda. Perhaps it will find similar success in the power sector.



Republished from our sister publication www.africa-assets.com, an online platform for all news, data and information on private equity and venture capital in sub-Saharan Africa



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