OPIC backs Africa

Expanding its investment reach into less traditional emerging markets, the US-based Overseas Private Investment Corporation has committed to financing private investment funds targeting Africa. By Judy Kuan

While most institutional investors are eyeing the BRIC economies, the Overseas Private Investment Corporation (OPIC), a US government agency promoting investment in developing markets, is looking to expand its presence in less prominent emerging markets.

The target? Africa. OPIC is building up its activities in the region by engaging in two Africa-focused investment initiatives before the end of this year. Indeed, OPIC’s interest in Africa is not all that surprising, given the recent rise in investment viability for a number of the region’s economies.

Africa has been drawing greater attention from international investors, particularly since the completion of the largest exit in Africa’s private equity history through the $3.36 billion (€2.78 billion) trade sale of pan-African cellular phone business Celtel International to MTC, the Middle East-based mobile operator. The success of the Celtel investment – and the high returns reaped by Celtel investors International Finance Corporation (IFC) and Actis Capital – has demonstrated Africa does possess sizeable investment opportunities, especially in the form of regional rollups.

In its first major African investment initiative this year, OPIC approved $75 million (€62 million) in financing for the creation of a private equity fund targeting the Middle East and North Africa. The fund, to be managed by an affiliate of Washington, DC-based EMP Global, has a target capitalisation of $225 million (€187 million) and is expected to invest in sectors including the region’s growing telecommunications, consumer retail, food processing, media, and energy sectors.

Most recently, OPIC announced that it will issue a call for proposals to select management for new OPIC-backed private equity funds in Africa. The fund managers chosen in the upcoming selection process will be responsible for the formation and management of one or more investment funds dedicated to investing in African private companies in Africa’s housing, healthcare and financial services industries. OPIC plans to issue the call for proposals next month and has set a deadline of December 15 for candidates to submit proposals. Fund managers interested in receiving OPIC backing for the new Africa investment funds should keep in mind that OPIC tends to veer away from investing in first-time fund managers.

OPIC’s interest in Africa is not new, and in fact, the agency has historically allocated a greater part of its direct investment portfolio to Africa than many of its multilateral counterparts, including the IFC. The agency has been active in Africa since 1991, and has thus far financed six Africa-specific direct investment funds. The total capitalisation of these funds is approximately $1.1 billion (€915 million), for which OPIC contributed just under $400 million.

It will be interesting – and indicative of the agency’s commitment to the region – to see how much OPIC decides to allocate to the new round of African funds.