African banking fund shuts down

Investors in an African private equity fund focused on privatising local banks have opted to pull the plug on the vehicle three years after its launch.

Africa International Financial Holdings (AIFH), a private equity fund sponsored by Cambridge, Massachussets-based WPA and dedicated to investing in the commercial banking sector of sub-Saharan Africa, is to be dissolved.

Incorporated in Mauritius by WPA, AIFH launched in 2003 with the aim of acquiring control positions in six to eight large, multi-branch commercial banks in sub-Saharan Africa.

I think the lesson is that private equity funds in sub-Sahara Africa need to be more flexible and more opportunistic than our governance structure allowed us to be.

Wendy Peter Abt, president, WPA

FirstRand, a Sandton, South Africa-based financial services company, said in a statement that it had, along with the five other shareholders of AIFH, voted to dissolve the $96 million (€80 million) private equity fund.

Other investors in the fund include the European Investment Bank, the International Finance Corporation, Netherlands Development Finance Company and Kreditanstalt für Wiederaufbau.

FirstRand announced a $30 million commitment to AIFH in March 2005. Since then, said FirstRand, “no transactions have been entered into and the outlook for privatisations of retail banks in Africa has weakened substantially”.

WPA said that during the 33 months since the fund’s formation, only three bank privatisations were closed in Africa. As WPA already served as privatisation or restructuring advisor on all three prior to AIFH’s launch, it was precluded from bidding. Out of 30 other potential bank privatisations identified by AIFH, none were concluded over the time period.

Wendy Peter Abt, president of WPA, told PEO that “much to everyone’s surprise, the stream of transactions in bank privatisation and restructuring really dried up. I think the lesson is that private equity funds in sub-Sahara Africa need to be more flexible and more opportunistic than our governance structure allowed us to be”.

Abt: deal pipeline dried up

Abt said that all capital was being returned to investors but that all parties remain committed to investment in financial services in the region. “The agenda we were focused on hasn’t been accomplished and we need to find ways to go back with a broader fund or do individual transactions with investors that have expressed an interest,” she said. “But I think it will be at least a month before we figure out how to come back in to play.”