The growing private equity landscape in East Africa is set for the entry of a new player as interest among investors in the region grows.
Catalyst Principal Partners, which targets raising $100 million for investment exclusively into the region, is putting final touches for its official launch, slated for this quarter.
“We are setting up structures as required by government and building a full complement of knowledge,” Catalyst Principal’s chief executive Paul Kavuma told The EastAfrican.
The fund has recruited a skeleton staff, mostly drawn from the diaspora. Last week it announced a supervisory panel chaired by Vincent Rague, who has about 25 years experience in private equity and also sits on the firm’s investment committee.
The other members of the panel, whose role is providing strategic advice and facilitating contacts, are former East African Breweries Ltd group managing director Gerald Mahinda, international entrepreneur Robert Devereux, and Paul McDonald, an operations, marketing and strategic planning expert.
It targets dynamic companies in consumer-driven sectors, such as financial services, retail and manufacturing that are in need of investment for expansion, improving performance, moving into other countries in the region and setting up institutions such as boards.
“We expect to make our first investment before the end of the year,” Mr Kavuma said. Investments will range from $5 million to $15 million.
Even before its formals launch, the fund is said to be close to meeting its fund target with commitments notably from the German Development Finance Institution and the African Development Bank.
Already, the African Development Bank is committing $15 million to Catalyst Fund I. Managed by Catalyst Principal Partners, the fund is targeting commitments totaling $100 million and will invest in mid-sized companies across East Africa.
Mr Kavuma said that the rest of the funds have been raised from other investors scattered across the world and it aims at making the first close at $65 million.
About a decade ago, there were only one or two players in the market but today dozens of funds are making investments in the region.
Mr Rague explained that the new found interest in the continent indicates that the future is in Africa since it is more resilient to shocks than anywhere else in the world as demonstrated during the financial crisis.
“Though some say that this was because we are detached from the rest of the world, I think our resilience is because we have come of age. In the first few years after independence, we were naïve and experimenting. We did not know how the rest of the world works,” he added.
This has changed and the continent now boasts more stability in majority of the countries with much less conflicts being reported. Besides, there are initiatives to hasten integration and harmonise tax laws between countries, cross list and integrate businesses.
It is a mix of these factors that is fanning investor interest leading to the sprouting of private equity funds such as Catalyst Principal Partners, a local subsidiary of a company based in Mauritius.
Experienced private equity specialists are also coming back home, to work in these funds. Investors are comfortable putting their money in outfits that have professionals with a proven track record.
Mr Rague argues that for this development in private equity to be sustained in future, there has to be demonstrated performance.
Then there is the need for enabling regulatory framework to drive development of this nascent but growing industry even further, according to Mr Kavuma.
This would see pension funds, insurance companies and high networth individuals put their money in private equity funds, as is the case in the developed world.
“The regulator is supportive and we are confident that this is changing,” Mr Kavuma said. He said that there is a need for legislation that gives fund managers the discretion to diversify investments into different asset classes, including private equity.
“Private equity outperforms capital markets across other markets,” Mr Kavuma said.
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