Temasek and TPG back Africa deals, IFC, EIB and FMO mull fund commitments, Job changes at Actis, Apis and FinDev, and more...

Last week in brief...March 22nd, 2021

Some pretty big names writing pretty big checks made news in Africa's private capital markets since we last posted two weeks ago. Temasek, Singapore's sovereign wealth fund, made its largest commitment to a specialist impact investment manager to date, agreeing a couple of weeks ago to put $500 million to work with LeapFrog Investments. As well as anchoring new private equity funds, part of the capital will be used to buy an undisclosed minority stake in LeapFrog, providing the fund management firm with growth capital to expand its team and investment capabilities in Africa and Asia. Temasek will also have a representative joining LeapFrog's board as part of the agreement.

The commitment bumps the amount of capital received by LeapFrog for its funds from global institutional investors to over $2 billion since the impact investment firm opened its doors in 2007. In terms of impact, LeapFrog reports that the businesses held in the portfolios of the firm's four private equity funds have been growing at a rate of 30% every year, with their combined services reaching 212 million consumers and providing them with access to healthcare and financial products. In all, their portfolio company payrolls now top 130,000 employees, all of whom are directly employed by the businesses they work for.

TPG's Rise Fund backs mobile money

In last week's issue of Africa Capital Digest, we covered TPG's deal to buy a piece of Airtel Money, Airtel Africa's mobile money business. The investment is being made via a new entity set up by The Rise Fund, the global alternative investment giant's large impact fund. The amount being invested by the fund is $200 million, which values the Airtel subsidiary at $2.65 billion on a cash and debt-free basis. The stake held by the fund is in Airtel Mobile Commerce, a newly created entity under which Airtel will shift all its Airtel Money operations on the continent. These operations delivered $110 million in revenue at a 48.7% EBITDA margin for the last reported quarter, a significant jump on the same period in the prior year.

The deal is subject to regulatory approvals. Once those have been granted, a TPG representative will be joining the new entity's board of directors. Airtel is talking to other investors about additional potential investments in the Airtel Mobile Commerce but intends to retain control of the business and not let its holding slip below 75%. The money from these investments will be used to pay down debt in time for a potential listing of the mobile money business at some point in the next 4 years.

With Series C, Flutterwave attains unicorn status

A Series C round gave rise to a so-called "unicorn" two weeks ago. Flutterwave raised $170 million at a valuation in excess of $1 billion in a round led by two New York-based growth investors - Avenir Growth Capital and Tiger Global Management. The firm's proprietary technology enables its customers to build customizable payment applications through its API. By partnering with Pan-African banks, Flutterwave's solution provides these client companies with the underlying technology and necessary integration for them to accept and make payments in local currency via local debit cards, bank accounts, and mobile wallets.

With this latest round, Flutterwave has now raised a total of $225 million. Launched by Olubenga Agboola in 2016, the startup held an oversubscribed Series A round in October 2018 followed by a healthy series B round in January last year. The new capital will be used for expansion, both in existing as well as new markets. Flutterwave also plans to develop new products similar to the recently-launched Flutterwave Mobile, an app that complements the firm's existing offering and accelerates eCommerce growth, thereby increasing overall usage of the company's infrastructure.

DFIs mull fund investments

Three development finance institutions indicated that they were considering commitments to Africa-focused private equity funds that are currently in fundraising mode. It seems to us likely that these investments will be approved as the institutions had either backed the fund's predecessor or the investment team in the past.

International Finance Corporation is mulling backing for two funds; the larger of the two commitments would be to Convergence Partners Digital Infrastructure Fund which is the South African private equity firm's third fund, and, if it makes its final goal of $250 million, the fund manager's largest to date. For the second of the two, IFC's potential $15 million investment in Amethis's second MENA fund would be $10 million lower than the DFI's commitment to Convergence's latest fund. Paris-headquartered Amethis is ultimately looking to raise as much as $180 million for the fund, which will make growth capital investments in SMEs in the MENA region, particularly those in Morocco and Egypt.

Meanwhile, FMO is reviewing a potential investment in BluePeak Private Capital's first fund which is looking to raise a total of $200 million for credit or “credit-like” investments in SMEs across the continent. The Dutch development bank is considering a $20 million commitment to the fund, which was founded in late 2019 by two former senior executives from Gulf Capital's credit investment team. It is their collective experience and track record that was part of the attraction to FMO possibly becoming an LP. We'll know in the next few weeks.

The European Investment Bank is thinking about re-upping with Ezdehar Management's second fund, having backed the Cairo-based private equity firm's first fund with $15 million in 2017. The amount being considered this time around is the same despite the fact that, at $150 million, the latest fund is aiming to raise 50% more than its predecessor.

New faces at FinDev Canada and Apis

FinDev Canada has a new CEO. She is Lori Kerr and she will step into the role in June. The position became vacant late last year when the young Canadian DFI's first-ever CEO, Paul Lamontagne, stepped down after three years at the helm. Kerr is a more than 20-year veteran in the development sector and will move to FinDev from the World Bank's Global Infrastructure Facility.

And finally, in an interesting move, three investment professionals focused on financial services sector investments at Actis are transferring to Apis Partners. Led by Hossam Abou Moussa who becomes a Partner at Apis, the team will be sourcing and executing future deals for Apis’s funds while continuing to advise on some existing financial services investments in Actis’s portfolio. Between them, they've invested over $1 billion in 25 financial businesses for Actis, adding significant bench depth to Apis's position as one of the leading emerging markets investors in the sector.

That's it for this week. As always, you can review these and other stories by clicking through to this week's preview edition of the newsletter.

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