Botswana is among 15 countries that will benefit from the US$12.5 million (about P105 million) equity investment that the African Development Bank (AfDB) will make in Kibo Fund II. AfDB’s board of directors approved this investment last Friday.
“This contribution will allow the Fund to provide access to finance and capacity-building to an underserved market of outward-looking small and medium enterprises (SMEs) and mid-market African firms, particularly in low-income and fragile states within various sectors in Africa, thereby boosting income-generation and job-creation,” says a statement from the bank.
Launched in May 2008 with a committed capital of Ôé¼29m with Ciel Investment, FMO and DEG as its main sponsors, the Kibo Fund is a private equity fund whose main objective is to provide long-term capital appreciation to its investors through equity and equity-related investments in the target region. The latter consists of Eastern and Southern Africa countries as well as the islands of the Indian Ocean. Kibo II will target Madagascar, Mauritius, Seychelles, Kenya, Tanzania, Uganda, Rwanda, Zambia, Malawi, Namibia, Botswana, Mozambique, the Democratic Republic of Congo, Angola and Ethiopia.
The Fund will target opportunities in sub-segments of the financial services sector. In Tanzania, Zambia and Rwanda, it will go after commercial banking while its primary focus in Kenya, Botswana and Mauritius will be on provision of value-added financial services such as housing and consumer finance, leasing, bancassurance and investment services. The Fund’s portfolio of investments includes tourism and leisure, banking and financial services, BPO and telecoms, property, energy and natural resources.
Kibo Fund II will be managed by Kibo Capital Partners (KCP), a Mauritian fund manager and will target capital commitments between US $75 million and $80 million to invest in SMEs and mid-market companies, with annual revenues US $10 million to $40 million.
The AfDB statement says that investments will be diversified across industries and sectors and that the Fund will promote regional integration by supporting regionally expanding SMEs.
“The main expected development outcomes of this investment will stem from private sector development through alleviation of the financing constraint faced by SMEs, improved governance and business practices for these companies, thereby further job creation and inclusive growth in the region.
Moreover, additional benefits will arise from enhanced regional integration through strengthening of the regional operations of an African fund manager.”
The Fund operates on the rationale that as countries in the target region experience high rates of GDP growth, there is emerging a middle-income class that offers bountiful business opportunities.
“Whilst this growth was initially led by improving terms of trade and a noticeable improvement in the macro-economic environment, the benefits of this have been trickling down towards the consumer.
The ensuing rising discretionary income is translating into the ability to consume more goods and services. Domestic demand has thus been growing rapidly across the Target Region at well over 10 percent per annum. This pattern is further supported by two long terms trends in the Target Region, favourable demographics and increased urbanization,” the Kibo Fund says on its website.
Africa’s growth performance is indeed very strong – the strongest of AfDB’s analysis is accurate. Between 1996 and 2010, the continent’s average annual GDP growth amounted to about 5 percent and per capita GDP increased year by year by an average of 2.5 percent. By 2010, its per capita income exceeded its 1995 level by 46 percent. From 2002 to 2011, Africa’s annual average real GDP growth amounted to 5.3 percent, double the 1990s level.
AfDB conducts its business through national governments and in Botswana, its port of call is the ministry of finance and development planning. However, at press time the ministry’s spokesperson, Tshwaragano Mmereki, said that there has been no communication from the bank about Kibo Fund II.
