Category: Press release

The PE investing guide is a tool to enable pension funds across East Africa assess and invest in private equity assets.

Nairobi, Tuesday 15^th October 2019: The East African Venture Capital Association (EAVCA) in partnership with Financial Sector Deepening Africa (FSD Africa) and International Finance Corporation (IFC) have launched an investment guide to enable regional pension schemes to invest in Private Equity (PE) Funds.

Named Private Equity Investment Guide, the objective of the tool is to deepen the understanding of private equity structures among pension fund managers and their trustees to unlock more investment into the asset class. The guide mainly covers three key areas – understanding the asset class and where it sits alongside other asset classes, why and how to invest in PE’s and an overview of the benefits and risks of investing in private equity.

The development of the guide was informed by a market study report that sought tvestigate the low uptake of investment by pension schemes. In Kenya for instance PE allocations by pension schemes total only 0.08% of total industry assets under management. From a regulatory perspective there are provisions allowing Pensions to invest in PE funds in East Africa (Kenya, Uganda Rwanda, Tanzania and Ethiopia).

Across developed markets the pension industry is the backbone of investments, supporting asset classes such as private equity with the patient capital to deploy in growing businesses. Speaking at the launch event, EAVCA’s Executive Director, Eva Warigia noted “We are excited to be part of the evolution in Africa’s private equity industry. EAVCA has decided to be proactive in supporting our local capital markets with the capacity building and investor education that empowers our local institutional investors.”

“Private equity is a catalyst that enables pension funds to access growth opportunities in the unlisted African companies” Added Ms. Warigia.

noted that private equity investments facilitate active participation in the growth sectors of the real economy by pension funds, generating returns to investors while contributing to the creation of jobs and improving access to basic services.

“However, there is need to up skill regulators, fund managers and pension trustees to foster a greater understanding of the benefits, risks and process of investing in PE funds.” Dr. Osano added.

“Pension Schemes are guided by their Investment Policy Statements (IPS), which provides guidance for Strategic Asset Allocation for Pension Schemes. To boost Trustees, ability to make informed decisions about investing in Private Equity, the investing guide provides more information on policies and procedures to assist with risk management of the asset class,” said IFC SME Ventures Senior Operations Officer, Samuel Akyianu added.

Alongside the PE Investment Guide, EAVCA also released a market rele ‘Private Equity Investing for Pension Funds in East Africa’ which notes some of the macro trends that have influenced uptake of PE assets in the region. The report cited the knowledge gap on both pension fund and regulatory side and the absence of regulatory oversight of the PE Fund Managers by local regulators as some of the key impediments for Pensions seeking to invest in PE Funds. The study surveyed 18 Pension Schemes from Kenya, Rwanda, Tanzania and Uganda alongside 15 PE General Partners from Ethiopia, Kenya and the United Kingdom as well as 3 Pension regulators in Kenya, Uganda and Tanzania.

Of the five Eastern African countries Rwanda has the highest provision for Pension Fund investment in PE funds at 20% followed by Uganda at 15% and Kenya at 10% while Tanzania and Ethiopia have no defined limits. Uganda has the highest rate of Pension Fund investment in PE funds at 2.2% followed by Kenya at 0.07% while no data is available for the other countries.

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Commitment expected to unlock over £500m in additional private sector finance

Nairobi, Friday 27^thSeptember 2019: FSD Africa today welcomes an additional commitment of £90m from UK aid to scale-up its development capital arm, FSD Africa Investments. The new commitment will enable FSD Africa Investments to invest in high-potential financial sector businesses across sub-Saharan Africa, unlocking over £500m in critical private sector finance for SMEs, businesses and entrepreneurs.

The new UK aid package, announced this evening by Secretary of State Alok Sharma at the UN General Assembly in New York, will channel much-needed patient capital into financial sector businesses operating in Africa – from financial technology firms to private funds in emerging asset classes and alternative finance companies.

With this new commitment, FSD Africa Investments aims to catalyse £500m of long-term finance for SMEs, entrepreneurs and businesses, and through co-investing, unlock Lf private sector investment and institutional capital into intermediaries investing in real economy sectors (including housing, health and education) and enabling improved access to financial services for 12.5 million people, 50% of whom will be women.

FSD Africa Investments invests in financial sector firms and funds that address some of the biggest challenges facing Africa’s financial markets. This week, FSD Africa finalised a £350,000 commitment to the People’s Pension Trust Ghana, a subsidiary of the pension fund administrator Peoples’ Pension Trust, to help design and scale innovative tailor-made pension products for underserved and low-income people across Ghana. Today, only 10% of people in Ghana have access to a pension scheme – when over 80% of the workforce is employed in the informal sector with no access to this vital safety net for later life. This initial investment will serve 500,000 Ghanaians with affordable pension services; if successful the products will be scaled to Rwanda and otries in the region.

FSD Africa Investments is designed to invest in high-potential financial sector firms that would otherwise be deemed too high-risk for commercial investment. Instead, FSD Africa Investments can take early stage risk and flexibly invest in financial sector businesses and funds. This investment provides innovative businesses with the capital they need to test and scale high-potential ideas. FSD Africa Investments uses a mix of tools to disburse capital – including loans, guarantees, and equity or quasi-equity.

FSD Africa Investments also helps unlock capital and finance from other players. An earlier £15.3m investment in the African Local Currency Bond Facility has unlocked £137m in finance from the private sector. This funding has helped local banks and financial institutions use local capital to fund small businesses on the continent.

International Development Secretary, Alok Sharma, said: “I am committed to mobilising the private sector to help African nations ma most of their enormous potential. This new UK aid package will reduce poverty by mobilising private sector investment in infrastructure, creating jobs and boosting access to finance. I have recently announced an Infrastructure Commission whose aim will be to boost investment in green, sustainable infrastructure.”

Mark Napier, Chief Executive Officer, FSD Africa, said:“Innovation in financial services is vital for the next generation of African entrepreneurs to get the capital they need to grow their businesses and for people to get access to the basic services we take for granted, like housing and healthcare. But innovation requires investment that is flexible and patient. This commitment to FSD Africa Investments is both generous and smart.  It directly addresses the unmet demand that financial innovators have for capital. But it also allows them to use that capital to unlock much larger amounts of long-term finance from their local markets.”

Anne-Marie Chidzero, Chief Investment Officer, FSD Africa Investments, said: “FSD Africa Investments builds on FSD Africa’s on-the-ground network and insights to invest in a way that directly addresses the most pressing challenges facing Africa’s financial markets. We have a unique investment mandate to take the early stage risk g in African financial intermediaries that could yield high economic and social impact but require patient capital to demonstrate commercial returns.”

FSD Africa Investments received an initial capital allocation of £30m from UK aid in 2017. To date, it has completed five transactions valued at £21.25m, with the last investment heading to financial close. Over £10m in transactions are at the advanced stages of due diligence.

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