Hema Parmar
PRIVATE equity firm Vital Capital Investments is planning a $500 million (R6 billion) investment fund that will focus on African industries overlooked by competitors.
Vital Capital Fund II was weighing opportunities in Mozambique, Tanzania, Rwanda, Angola, Ethiopia, Uganda, Cameroon, Ghana and the Ivory Coast, managing partner Eytan Stibbe said.
The company’s second Africa-focused fund will make as many as 20 investments in industries such as agriculture, water, education, affordable housing, health care and clean energy. “People consider those areas that we’re active in as higher risk and there are less entities involved,” Stibbe said.
“It’s more difficult to attract foreign, Western sources of money to these sectors to do affordable housing in rural, even urban Africa. We found that as a big need, so we decided to create Vital as a platform for Western money to be invested in Africa.”
Buyout firms raised $4.1bn to invest in the continent last year, 24 percent more than a year earlier, according to Ernst & Young’s Private Equity Round-up for Africa 2015 report.
David Bonderman’s TPG Capital said last week that it planned to invest in health care, consumer and financial services businesses in Africa with Satya Capital, while Abraaj Group raised almost $1bn for a third African fund earlier this year and said investor demand was “substantially higher”.
Vital Capital is rated among the top 10 funds for impact performance by the Global Impact Investing Rating System, which has ranked the results of 80 funds. Impact investment funds aim to generate social or environmental benefit as well as a financial return.
Vital Capital Fund II had a hard cap of $700m, the ceiling beyond which no more investments would be accepted, with a first close expected by the end of this year, said David van Adelsberg, an adviser to the investment vehicle.
Vital Capital was in discussion with a range of institutional investors and development finance bodies including the Africa Development Bank and the Overseas Private Investment Corporation, said Stibbe.
Vital Capital closed its first fund in July 2012, having raised $350m of its $500m target, from almost 20 investors.
“We wanted to move quickly and thought $350m was a very good base as a first fund,” Van Adelsberg said.
About 68 percent of Vital Capital Fund I has been deployed. The fund has committed to 12 projects, including $92m to Kora Housing, which builds affordable homes in Angola. – Bloomberg