Unleashing Africa's Economic Lions: How Wall Street's Private Credit Playbook is Rewriting the Continent's Growth Story.

Africa's Next Growth Engine: Unleashing SMEs Through Private Credit

For decades, Africa's economic potential has been an open secret – a narrative of soaring population growth, urbanization, and an increasingly educated workforce. Yet this promise has remained unfulfilled, hampered by a chronic SME financing gap estimated at over $330 billion.

Traditional lenders, bound by Basel regulations and unfamiliar with local markets, have overlooked Africa's small and medium enterprises. The result? A systemic starvation of capital for the very engines that could catalyze Africa's economic transformation.

It's time for a new paradigm – one that looks beyond the constraints of conventional finance and draws inspiration from the innovation forges of Wall Street. The rise of private credit, fueled by investors' insatiable hunt for yield, has spawned direct lending strategies of remarkable sophistication.

Goldman Sachs' recent $21 billion direct lending fund is emblematic of this global phenomenon. By leveraging robust structuring capabilities, disciplined risk management, and deep sector expertise, these strategies can offer bespoke credit facilities tailored for overlooked market niches.

For Africa's SMEs, neglected by traditional banks, this paradigm shift presents an unprecedented opportunity. Companies that were once deemed "unbankable" due to their size, unconventional business models, or perceived risks, can now access growth capital through custom-structured direct loans – from revenue-linked facilities for agritech ventures, to intellectual property-backed debt for health innovators.

This tailored approach transcends the one-size-fits-all limitations of traditional lending. With expertise honed in frontier markets, direct lenders can underwrite risks that elude generalist institutions, while structuring downside protections and covenants aligned with each sector's unique dynamics.

At Black Lion Group, we've recognized this epochal shift's implications for Africa. After a decade in alternative investments on the continent, we're doubling down with the launch of Black Lion African Credit Opportunities (BLACO) – a $1 billion direct lending platform debuting in Q3 2024.

Our sector-specialized tranches – spanning technology, healthcare, agribusiness, infrastructure, and beyond – draw upon Black Lion's pan-African presence, on-ground origination networks, and a multidisciplinary bench of sector experts we call our "PhD Network." This allows us to deliver Wall Street-grade financial engineering while preserving vital local intelligence.

Moreover, by partnering with development finance institutions like the African Development Bank and leveraging strategic de-risking tools, we're enhancing institutional investors' participation in a historically overlooked market.

BLACO isn't just an investment vehicle; it's a testament to Africa's imminent economic renaissance. Through local currency loans that mitigate foreign exchange risks, innovative revenue-based financing models that sync with business cycles, and strategic partnerships that enrich our portfolio companies, we're transcending the extractive paradigm that has long defined the continent's relationship with global capital.

This isn't altruism; it's enlightened capitalism – recognizing Africa's vast, undervalued SME sector as, quite simply, one of the world's most compelling credit opportunities. Our tailored covenants, rigorous due diligence, and data-driven risk analytics ensure that lending discipline isn't compromised in pursuit of development impact.

As institutional investors pivot from an overcrowded universe of U.S. mid-market loans, Africa beckons with vast, virgin territory – a $1.6 trillion SME landscape that can redefine global risk-adjusted returns. BLACO is more than a fund launch; it's the forging of a new symbiosis between African entrepreneurship and international capital.

What Goldman Sachs has done for America's industrial heartland, we aim to catalyze across the sweeping arc from Cairo to Cape Town. Direct lending isn't just a financial strategy for us; it's an instrument of economic renaissance, channeling global liquidity into the very ventures that will transform Africa's entrepreneurial promise into lasting prosperity.

In the decade ahead, the intersection of cutting-edge credit innovation and Africa's demographic dynamism will be the locus of unprecedented wealth creation. At Black Lion Group, we're not spectators in this unfolding narrative; we're co-authors, armed with the tools of Wall Street and the wisdom of the Savannah.

The African century isn't beckoning; it's already here. And with BLACO, we're equipping its undisputed protagonists – the continent's resourceful SMEs – with the growth catalyst they've been denied for far too long.

Randy K. A. Sogan

Executive Chairman

Black Lion Group