Ascent Africa, an East Africa-focused private equity firm with a strong focus on agri-processing and allied services, has held a $50 million first close for its debut fund, dubbed ‘Rift Valley’ and is close to making its first investment in Ethiopia.
Targeting a final close on $70 million by February 2015, the Rift Valley fund will, in addition to agri-related investments, target other consumer-driven sectors such as fast moving consumer goods, health services, financial and general services and manufacturing, according to David Owino, partner at Ascent. He added the fund could hold a final close as early as December. The investment size will be between $1 million and $9 million per company.
The fund attracted commitments from 24 investors, two of which were Kenyan pension funds. Kenya Power and Lighting Company pension fund committed $4 million according to investment data from Africa Assets. Another undisclosed pension fund committed $1 million. The remainder of capital came from family offices from Europe and Asia. The minimum commitment accepted is $500,000.
As a first-time fund, fundraising has been a challenging process at times, Owino told Agri Investor. “There were some investors who precluded [first-time] funds like ours from their interest. We don’t have a placement agent, so we’ve utilised our personal industry contacts and approached the investors directly. We also sought the counsel of development finance institutions,” he said.
Ahead of the final close, the firm has narrowed its focus to family offices and DFIs in Europe. Ascent is also considering approaching European pension funds for investment, but not as a priority. “[European] pension funds often don’t fully understand the market in Africa,” said Owino.
The firm plans to make between eight and 12 investments across Ethiopia, Kenya and Uganda.
“Though we are not sector-specific, we target opportunities in the value added agri-processing sector because we are keen on sectors that will thrive with the growth of local economies,” said Owino. “[This sector] provides more control over the value chain and gives the local players more power on pricing, [as opposed to primary agriculture].”
The fund’s first investment is expected to close in Ethiopia in the next few weeks and Ascent is also having advanced talks about opportunities in Kenya and Uganda.
Africa’s appeal as an investment destination is picking up pace, although it is a slow process to get many international investors comfortable with the region, as several fund managers operating across Africa have told Agri Investor.
But Owino is optimistic.
“There is a lot of interest [in African investment],” he said. “Africa’s potential is now starting to sprout, people are starting to notice. The per capita income may be low but growth in the continent’s economies, the relatively young population and the bulging middle class present an attractive story.”