CDC Group, the UK’s development finance institution, has invested $40m in Africa Capitalworks (ACW), an investment company that will provide permanent equity capital to growing mid-market companies across sub-Saharan Africa.
Murray Grant, CDC’s Managing Director for Intermediate Equity, said: “Many mid-sized African businesses struggle to raise the long-term capital they need to grow into the type of national and regional champions that bring growth and jobs.”
“We’re backing Africa Capitalworks because they’ve shown that they can grow businesses over the long term and do it in a way that’s different to traditional private equity. We believe the longer holding period will enable businesses to grow and create jobs through multiple phases of value creation,” he said.
ACW was launched by the Capitalworks Group, an independent alternative asset manager, which aims to raise $300m to invest across the continent.
CDC has been joined as a cornerstone investor by South Africa’s Public Investment Corporation SOC Limited on behalf of its client, the South African Government Employees Pension Fund, Africa’s largest pension fund.
ACW’s management team is led by experienced investors, Beth Mandel and Nana Sao, and Capitalworks Group has considerable experience in successfully growing businesses, such as CiplaQCIL, a pharmaceutical manufacturing company in Uganda, and Rhodes Food Group in South Africa.
The ACW team takes a hands-on role in its portfolio companies, having representation on the boards of directors, playing a key role in significant decisions and helping access markets, finance and technology and building business networks.
ACW will take a generalist approach but may favour a few core sectors including healthcare, manufacturing and financial services. The new approach to investing in permanent equity vehicles complements CDC’s existing strategy of fund investing in Africa.
Africa Capitalworks’ Joint Managing Partners, Beth Mandel and Nana Sao said: “Africa Capitalworks has been purpose-built for SSA to deploy capital in a manner that achieves true partnership, high impact and high returns. CDC has played a critical role in the development of Africa Capitalworks, and we are delighted with their early and substantial support.”
This is CDC’s second investment in a longer-term capital vehicle, following its announcement in August of a $20m commitment to Solon, a Sierra Leone-based holding company.
It represents a commitment to find new ways to meet the different financing needs of the African businesses than can create jobs and deliver long-term growth.