Catalyst Principal Partners exits investment in Goodlife Pharmacy

East Africa focused private equity firm Catalyst Principal Partners has announced its exit from pharmaceutical retailer Goodlife Pharmacy where it held a controlling stake.   Catalyst sold its stake to LeapFrog Investments, a private equity investment company focusing on investments for emerging consumers in Africa and Asia.   Catalyst, along with strategic partners Africa Chemist and Beauty Care and a seasoned management team, acquired a controlling stake in Mimosa Pharmacy in 2014, which it utilized as a platform to develop a leading branded pharmaceutical retail chain now re-branded to Goodlife Pharmacy.   Goodlife has grown to be the largest pharmaceutical retail chain across eastern Africa consolidating health, personal care and beauty care in its products and service offering. The healthcare retailer offers globally recognized and quality brands to local consumers at affordable prices. Goodlife also prides itself in being the first in the market to introduce consultation centers in all its locations and industry practices to alleviate the dispensing of substandard and counterfeit medication.   During the period of Catalyst’s investment, Goodlife grew its footprint from 6 stores primarily located in Nairobi and the coastal region of Kenya, to 19 convenient locations that extend into emerging urban centers in Kenya and Uganda.   Referring to the exit, Catalyst Managing Director Biniam Yohannes noted “Catalyst invested in a well-positioned local pharmacy chain that was benefiting from the rapidly growing healthcare, retail and consumer sectors. Catalyst worked with management and its co-investors to conceptualize, institutionalize and strengthen the company’s operations and to set strategic objectives to achieve rapid scaling to develop a differentiated health and beauty care retail offering to address an increasingly aspirational regional consumer. We are pleased with the success Goodlife has achieved over the past two years and are confident in the company’s trajectory to become a regional champion.”   In 2015, Goodlife received financing from the International Finance Corporation (IFC) to accelerate its expansion plans. Biju Mohandas, who heads IFC’s Health and Education practice said that “IFC has been part of Goodlife’s growth story alongside Catalyst and looks forward to working closely with the new investor, management and other shareholders in their continuing endeavor to provide good quality, affordable pharmaceutical products to the East African consumer.”   The exit by Catalyst from Goodlife is the first made under the PE firm’s inaugural fund, Catalyst Fund.

PE Firm Catalyst Principal Partners Acquires a Majority Stake in Tanzanian Pharmaceutical Manufacturer

Catalyst Principal Partners, a leading East African focused private equity firm, has acquired a controlling stake in Zenufa Laboratories Ltd. in Tanzania. Zenufa is one of the leading pharmaceutical manufacturers in Tanzania with its factory recognised by the Tanzania Food and Drug Administration (TFDA) as being fully compliant with Good Manufacturing Practices (cGMP) conforming with international guidelines and systems that ensure high standards in design, monitoring and control of manufacturing processes and facilities. Zenufa manufactures a wide range of over-the-counter (OTC) and prescription medicines for the Tanzanian market, with leading brands including  Zenadol, Zenkof, Zn-vital and Dr. Cold. Speaking of the acquisition, Martha Osier, Catalyst Investment Manager, stated that “the acquisition of Zenufa represents an exciting opportunity which will benefit from the strong fundamentals driving rising demand for quality, affordable healthcare products and services”. Martha added: “While the healthcare sector remains dominated by foreign imports representing majority of Tanzania’s medicine supply, as an established local pharmaceutical manufacturer, Zenufa is uniquely positioned to meet the rising healthcare needs of the population through offering affordable, quality medication manufactured to the highest international best practice standards.” Commenting on the investment strategy, Rajal Upadhyaya, Catalyst Managing Director, said “Zenufa represents a platform for growth across Eastern Africa, with opportunities for expanding its product range through development of cost-effective generic drugs formulations and for extending distribution channels nationwide and across the region.” Zenufa offers sustainable social impact by improving health outcomes and through employment of young highly skilled Tanzanian biotechnology graduates. The Company has also partnered with a number of organisations to locally develop affordable medicines for neglected diseases, with high impact in improving health standards in Tanzania. Rajal added: “With the government of Tanzania promoting local manufacturing, Zenufa also aims to actively support public health programs to improve accessibility in the provision of quality medicines to the population.” The acquisition of Zenufa is Catalyst’s fourth investment in Tanzania and second investment in the healthcare sector after acquiring Mimosa Pharmacy in 2014, later rebranded “Goodlife Pharmacy” that has emerging as the leading pharmacy retail chain that is rapidly rolling-out high quality outlets across the region.
About Zenufa Laboratories (www.zenufa.com)
Established in 2005, Zenufa Laboratories Limited is the second largest local pharmaceutical generics manufacturer in Tanzania.  Zenufa manufactures most essential drugs listed under the Essential Drugs list of the Ministry of Health, Tanzania in the form of tablets, capsules, oral liquids and dry syrups.  Zenufa’s manufacturing facility was the first facility in Tanzania to be certified as 100% cGMP compliant.  The facility is equipped with modern HVAC systems, zone concepts, beta-lactum area and effective water systems.

Pharmaceutical Society of Kenya Endorses Goodlife for Best Pharmacy Practice

4f20cc27dbc4009a013876fb307718c5_xl Pharmaceutical Society of Kenya (PSK) has endorsed Goodlife Pharmacy for best pharmacy pratice in the country. The recently completed Green Cross Audit showed that Goodlife Pharmacy excelled in Pharmacy Practice/Governance standards placing it at the top of its peers in the country. Goodlife is one of the companies that Catalyst Principal has invested in. With the mission of helping the nation look and feel good one person at a time, Goodlife is all about individual customer and patient care. Goodlife puts understanding individual needs in providing the right professional pharmacy healthcare solution at the core of our daily operations. Goodlife will be showcasing their Practice ‘Pharmacists Caring for You”  to celebrate World Pharmacist Day in conjunction with Pharmaceutical Society of Kenya at Medic East Africa to be held 27th-29th October at Oshwal Centre. posterMedic East Africa is the largest exhibition with a series of conferences in the region – by providing a platform for healthcare professionals to meet, connect and do business. This three day exhibition will provide a unique opportunity for international and regional suppliers, distributors and manufacturers to network and establish new business with medical laboratory professionals in East Africa. Says Dr. Sejal Shah, “Our main goal will be to create awareness of our professional services and also offer free blood pressure testing and blood glucose testing. Join us as we showcase our Best in Class Professional Pharmacy Practice.”   (Above Left: World Pharmacists Day Poster. Featured Image: Chief Pharmacist, Dr. Sejal Shah and Dr. Esther Karimi, C.E.O of PSK)

Catalyst Principal given green light to close Orbit shares deal

Nairobi-based private equity firm Catalyst Principal Partners has received the go-ahead to complete its investment in manufacturing firm Orbit Chemical Industries Ltd. Catalyst yesterday announced the Competition Authority of Kenya had approved the investment whose amount it did not disclose which will be used by Orbit to increase manufacturing capacity, regional operations and product range. The 500-employee firm operates from its Mlolongo factory in Athi River.Besides own products, the firm is a well-known large-scale contract manufacturer. It counts among its customers firms like Unilever Kenya, Bidco Oil Industries, Kapa Oil Industries Ltd, Reckitt Benkiser, Farmer’s Choice, Kenya Airways, Coca- Cola, New KCC and Del Monte Foods.
Although both parties have not disclosed the size of the deal, Catalyst’s typical investment ranges between $5 million (Sh500 million) and $20 million (Sh2 billion), either through equity, debt or a mixture of both. “We will be able to leverage the relationship (with Catalyst) to accelerate our growth plans, particularly in en- tering new markets in which Catalyst has a depth of experience as active investors across the region,” said Orbit chief executive, officer Sachen Chandaria. Orbit is a 43-year-old company that primarily supplies industrial chemicals to industrial, pharmaceutical, food and domestic products manufacturers. It makes soaps, petroleum jelly, hand gels, detergents, fertilisers, liquid detergent, washing powders and fertiliser, pesticides and herbicides.  
We will be able to leverage the relationship (with Catalyst) to accelerate our growth plans. Sachen Chandaria, CEO, ORBIT  
In April last year, NSE-listed Eveready East Africa announced that it would form a joint venture company of equal stakes with Orbit Chemicals with the aim of producing common goods, mainly in the personal care range. The joint venture is aimed at leveraging on Eveready’s distribution network and Orbit’s manufacturing expertise.
The investment in Orbit is the third for Catalyst in Kenya having invested in the pharmacy retail chain Goodlife, formerly known as Mimosa Pharmacy and in SME lender Jamii Bora Bank.
 
Catalyst invests in companies for between four and six years before exiting.
Across the region, the PE firm has made investments in Tanzania in personal healthcare manufacturer Chemi-Cotex Industries, logistics and heavy equipment renting company EFFCO and Chai Bora, a tea packer which also has operations in Kenya. In Ethiopia, Catalyst has invested in mineral water bottling company, Yes Brands. In Jamii Bora, Catalyst had by the end of last year raised its stake progressively to 11 per cent from the initial 4.4 per cent investment made in 2014, buying the additional shares through the over- the-counter market and consequently getting a seat on board. The Private Equity firm will, however, be diluted back to eight per cent in Jamii Bora following the entry of new investors Equator Capital Partners and Progression Capital Africa Ltd. The two firms will each get an eight per cent stake in the bank when their Sh1.2 billion convertible debt investment is converted into equity in September.
The above article appeared on Page 19 of the Business Daily newspaper, dated, Tuesday April 26th, 2016. it was written by Charles Mwaniki – cmwaniki@ke.nationmedia.com

Competition agency okays double buyout by drug companies

The Competition Authority of Kenya (CAK) has approved a multi-million shilling double acquisition by pharmaceutical firms, reflecting increased activity in the lucrative industry.   The regulator’s nod paves the way for acquisition of retail pharmacy brand Mimosa by Goodlife, which has embarked on an aggressive regional expansion plan. CAK said the transaction would not affect competition negatively and that the two companies’ combined sales of more than Sh500 million is below the regulatory threshold.   “In exercise of the powers conferred … the CAK excludes the proposed acquisition of the entire business of Mimosa by Goodlife from the provisions of (takeover rules),” the competition agency said in a statement.   The regulator also exempted Mimosa from its proposed acquisition of Eldochem Pharmacy’s branches at Nairobi’s Green Span Mall and Mombasa’s Nyali Centre, with Goodlife being the ultimate acquirer in this transaction too. This marks the continued takeovers by Goodlife which plans to have 80 pharmacy stores in the country by 2020. Goodlife, established in 2009, is a private equity fund backed by the International Finance Corporation (IFC), PE firm Catalyst Principal Partners and Mimosa founder Chris Getonga who was offered a minority stake in the company as part of his buyout by the institutional investors.   Other shareholders include Joshua Ruxin, David Zapol, Jeffrey McCormick, Tony McNally and Peter Barker who originated the Goodlife venture.   IFC in March lent Goodlife $4.5 million (Sh463 million) to help fund its growth in Kenya and the rest of East Africa over the medium term. “Goodlife will supply affordable, quality healthcare products in Kenya, where there are few nationwide chains, and an estimated 30 percent of drugs are counterfeit,” IFC said in a statement.   The international financier said population and income growth are driving increased demand for reliable healthcare products in Kenya where many of the country’s 6,000 small-scale pharmacies are unlicensed.   “Africa has among the highest medicine prices in the world and there are few branded, quality-controlled pharmacies in Kenya — a gap that Goodlife seeks to fill.” Goodlife chief executive Tony McNally said the firm would expand rapidly in East Africa, opening pharmacies at convenient locations in retail centres, petrol stations, and near health clinics.   Besides Mimosa and Eldochem, Goodlife also acquired the Dove brand of pharmacies in Kenya, expanding its presence in the country’s health and beauty sector. READ MORE

Meet the Boss: Kapila Ariyatilaka, MD, Chai Bora

‘Meet the Boss’ is a How we made it in Africa interview series where we pose 10 questions to business leaders across the continent.

"Be honest in your dealings. You will sleep well and will still make the money you require to live in this world," says Kapila Ariyatilaka.

“Be honest in your dealings. You will sleep well and will still make the money you require to live in this world,” says Kapila Ariyatilaka, managing director of Chai Bora.

What was your first job? As an accountant at professional services firm KPMG. I was only 20 at the time. What keeps you awake at night? I think about what part of the company I can improve to make Chai Bora better tomorrow than it is today. I think about the processes and regions where we can improve. Who has had the biggest impact on your career and why? My elder sister who is also a chartered accountant. I saw the corporate world through her and it inspired me to follow the same path. I was also fortunate to work at global healthcare company GlaxoSmithKline (GSK) in Sri Lanka. The company was performance driven. That culture was a huge inspiration for me to work in a team, and achieve as a team, as opposed to [being involved in office] politics and fighting within the company. What is the best professional advice you’ve ever received? Never try to judge anybody based on their colour, how they dress, ethnicity… When in their professional capacity all that matters is they do their job well. Performance is what matters. The top reasons why you have been successful in business? I don’t discriminate [against] anybody in the workplace. In my company you will accomplish your career goals. Everyone has the opportunity to grow regardless of gender, tribe, race, and religion. I learnt that culture when I was working with a US company. All that matters is that you do your job well. Where’s the best place to prepare for leadership? Business school or on the job? You need both professional and practical experience. But I believe first you have to be a good person to be a good leader. When a bunch of thugs get together they also have a leader. So being good as a human being is important. For instance, US billionaire and philanthropist Bill Gates dropped out of school but he is a good leader. I believe it stems from the fact that he is a good person. How do you relax? I don’t relax. I work all the time. My family lives in Kenya [and I work in Tanzania]. I try to visit them every weekend. So spending time with family and enjoying my whiskey is my relaxation. By what time in the morning do you like to be at your desk? The latest I normally arrive is 6:30am. Your favourite job interview question? I try to find out what their passion is. In most African countries, many young people don’t have jobs. So you find them willing to do anything. They will apply for a driver’s position yet their qualification is in accounting. Tomorrow the same person will quit if they are offered 50,000 Tanzanian shillings (about US$27) more to do a sales job. If the person I am interviewing is not passionate about the job, I would rather not hire them. Your message to Africa’s aspiring business leaders and entrepreneurs? Firstly, be a good person. Be honest in your dealings. You will sleep well and will still make the money you require to live in this world.  

Kapila Ariyatilaka is the managing director of Tanzanian tea producer Chai Bora. The company blends, packs and makes several tea and coffee brands including the popular luxury tea brand Chai Bora. It is owned by private equity firm Catalyst Principal Partners and has a presence in eastern and southern Africa.

Read more: http://www.howwemadeitinafrica.com/meet-the-boss-kapila-ariyatilaka-md-chai-bora/46976/

A sub-Saharan Scramble

Private-equity investors are getting hot for Africa. Businesses there need all the capital on offer, and more When Paul Kavuma began approaching private companies in Africa a decade ago to suggest investing in their businesses and improving the way they were run, he was often shown the door. “They were offended, asking if I thought they were broke,” says the founder of Catalyst Principal Partners, an east Africa-focused fund manager. Even when, after hours of explaining the merits of private equity, Mr Kavuma changed business owners’ minds, many still struggled with the idea that within a few years he would sell the stake he had bought. “When we exited, some people thought we had lost confidence in them, rather than that we’d finished what we’d come to do,” he says. Today, much has changed. African entrepreneurs now boast about being approached by one of the many private-equity investors scouring the continent for opportunities. And it is the financiers, or at least those from beyond Africa, who are having to adapt. Money managers on Wall Street and in the City of London are taking crash courses in Swahili and learning to find Ouagadougou on a map. A decade ago, African countries were among the beneficiaries of a broader boom in investment in emerging markets worldwide. The financial crisis of 2007-08 put paid to that. Now, many private-equity funds are making Africa a primary target, and record amounts are being raised to invest in businesses there (see chart 1). On January 12th Helios Partners, a London-based firm, said it had raised the first Africa fund worth more than $1 billion. Abraaj, a rival, is expected to follow suit soon.
In some respects it is no surprise that Africa has become such a popular destination for business investment. It certainly needs more capital—an extra $90 billion a year for infrastructure alone, the World Bank reckons. Consumer demand is growing, and industries are being liberalised. A few years ago people would ask “Why the hell are you in Africa?” says Robert van Zwieten of EMPEA, an industry body. Now they ask “Why the hell aren’t you?” Such signs of groupthink are worrying enough in themselves. And there are plenty of other reasons to be sceptical about the current enthusiasm for Africa. Beside the “frontier market” risks private-equity investors will face–bullets, corruption, disease–they often struggle to find deals big enough to interest them. Large funds usually want to buy businesses worth more than $100m, but last year there were only seven such deals, and about half the firms bought were worth less than $10m. Even when a potential deal is identified, family owners are often unwilling to relinquish control and incumbent managers are reluctant to make room for newcomers. Since banks still see Africa as full of risks, it is also difficult for private-equity firms to load a newly acquired business with debt, their usual technique for magnifying their returns. Another of their customary practices—selling a company after about five years of expanding it and improving its performance—is also hard. Local partners are often unwilling to sell, and undeveloped or non-existent local stockmarkets make it hard to unload a stake by means of a listing. The private-equity managers who have done well so far have had to put boots on the ground and exercise more care and patience than is typical in their industry. “There are not many $100m deals for sale, but plenty of $100m opportunities to bolt together,” says Hurley Doddy of ECP, a pan-African investor. Tope Lawani of Helios agrees that investors who complain about a paucity of big deals lack imagination. His fund pieced together Helios Towers, a big pan-African operator of mobile-telecoms masts, from smaller businesses. The private-equity managers who have done well so far have had to put boots on the ground and exercise more care and patience than is typical in their industry. “There are not many $100m deals for sale, but plenty of $100m opportunities to bolt together,” says Hurley Doddy of ECP, a pan-African investor. Tope Lawani of Helios agrees that investors who complain about a paucity of big deals lack imagination. His fund pieced together Helios Towers, a big pan-African operator of mobile-telecoms masts, from smaller businesses. One thing successful managers agree on is that investors should not expect to fly in, do a deal and fly out again. The funds that are doing well are those with a strong understanding of local conditions and good business connections in their target countries, such as Catalyst. It looks for midsized companies (worth $5m-20m) that cater to the emerging consumer in east Africa, such as ChemiCotex, a maker of toothpaste and other toiletries it bought in 2011. Much early investment went into businesses based on fixed assets, such as mobile-phone masts. Now retailers, packagers, restaurants and payment systems are sought after (see chart 2). In 2012 ECP invested in Nairobi Java House, a Kenyan coffee-house chain, and has since helped it to build Planet Yogurt, a group of frozen-yogurt outlets. In 2013 Helios bought 1,600 franchised Shell petrol stations across sub-Saharan Africa, not just to get into the fuel business but also to develop the convenience shops attached to the stations.
Some private-equity money is going into private health clinics and educational institutions such as universities. In much of the rich world, bringing the profit motive into public services is controversial; in Africa, where there is so much unmet need for such services, there is less of a taboo. In general, African entrepreneurs have begun to appreciate how private equity can help their businesses expand and, by improving such things as internal auditing and book-keeping, make them more robust. The rich world’s negative association of private equity with asset-stripping “vultures” does not apply here.
Often, those African firms bought by private equity had been relatively well-run by their founders, albeit in a rather seat-of-the-pants fashion. The incoming investors can often boost their performance by, for instance, improving the measurement and analysis of data. They can also provide cash to modernise businesses and make them more efficient. For example, investors in IHS Towers, another big operator of telecoms masts, found that it could cut the $3,000-4,000 average monthly cost of operating masts by almost one-third, by updating their diesel generators or replacing them with solar panels. The sort of business that investors are keenest on is one that is already a champion in its home market and has prospects of becoming a regional or global champion. Carlyle, an American private-equity firm with a $698m pot devoted to Africa, is buying a majority stake in South Africa’s largest tyre retailer, Tiger, and plans to expand it rapidly into neighbouring countries. Since such firms are not easy to find, and since it takes patience to expand them across a continent with so many languages, cultures and legal systems, private equity’s usual practice of selling after about five years may not always be best suited to Africa. Ahmed Heikal of Qalaa Holdings, an Egyptian firm, has concluded that it is not. His firm has abandoned the private-equity model and now follows a strategy of buy, improve and hold. When you finally come across a promising asset, why sell it prematurely, he asks? Mr Heikal says he is already doing well from his investment in Rift Valley Railways, a rail line from Kenya to Uganda. But he is more interested in its long-term potential to be one of the region’s main routes for transporting oil. His firm’s 15-20-year planning horizon means he is happy to sit and wait for this potential to be realised. Despite the recent flurry of fund-raising, only about 1% of global private equity goes to Africa. Even so, too much money is pouring into too few funds, chasing the few big deals on offer. Besides, with commodities tumbling, currencies stumbling and political unrest rumbling, Africa’s sunny growth projections have become more tempered. This is no bad thing, say some fund managers: it will scare off fair-weather investors and bring down the prices of overvalued businesses. Those brave enough to run the risks will need to roll up their sleeves and look for opportunities beyond those firms listed on their Bloomberg terminals. Those who know their Mali from their Malawi, and Mauritania from Mauritius, will be better placed to succeed in the scramble for African businesses than those who do not.   Read more: http://www.economist.com/news/business/21640327-private-equity-investors-are-getting-hot-africa-businesses-there-need-all-capital

Mimosa Pharmacy rebrands to Goodlife Pharmacy as it prepares for expansion

Kenyan pharmaceutical retail chain, Mimosa Pharmacy, is seeking a Sh405 million ($5 million) loan from the International Finance Corporation (IFC), as part of a Sh1.64 billion ($18.2 million) capital required to expand its drug retail business over the next five years. According to disclosure documents by the IFC, the loan will enable Mimosa Pharmacy to open new stores in Nairobi, as well as other major cities across East Africa. The company is expected to add more than 50 stores over the next five years, as it rebrands to Goodlife. The project is expected to create over 200 new direct jobs. It will also boost availability of healthcare products within Kenya. Private equity firm, Catalyst Principal Partners, and Mauritius-based pharmaceutical chain, Africa Chemist and Beauty Care (ACBC), recently bought a stake in Mimosa. The acquisition was made through a mix of equity and debt. Founder of Mimosa, Chris Getonga is the other shareholder in the pharmacy chain. IFC noted that growing the number of stores will encourage the pharmaceutical industry to create structured brands. The lender expects this to result in customers getting higher quality products and at a lower cost.   Read more

Regulatory reforms would unlock fresh funds for PE firms

Private equity firm Catalyst Principal Partners has just announced its second investment in a Kenyan firm — a stake in Jamii Bora Bank. The deal comes soon after Catalyst invested in drugs retail chain Mimosa Pharmacy. Mr Paul Kavuma, the Catalyst chief executive officer, spoke to the Business Daily on the PE landscape in East Africa and his firm’s investment plans.

The past 10 years have seen a steady growth of PE interest in East Africa. What is making the region, and Kenya in particular, so attractive?

East Africa is the fastest growing economic bloc in Africa and Kenya is the largest economy in the bloc. Growth rates are strong at over five per cent, and the expectation is that this will get even higher once Kenya is through with the implementation of constitutional changes and infrastructure development projects. East Africa has a sophisticated economy with a strong financial services sector, strong education and depth of management that is unparalleled in Africa. In Kenya, you also have a very developed entrepreneurial class that covers everything from SMEs to large corporations. These are ingredients that are going to make the region attractive to private equity despite any worries over security.

Many PEs have found it challenging to raise funds from the local market. Why?

In other markets around the world, the PE industry is predominantly financed by pension funds. In East Africa though, gestation period for PEs has been financed through international capital coming in and seeding the initial PE funds. Besides, in some cases, the regulatory environment has made it difficult to raise funds locally. Fund managers don’t have the full discretion to deploy capital into just any asset class they see fit. If they wish to deploy capital to PE, they have to come back to the trustees and seek their endorsement. The trustees often have to seek the Retirement Benefits Authority’s approval making the process a lot more complicated. Streamlining that process could see local fund managers deploy a lot more capital into PEs.

What can be done then to encourage local institutions to invest in the PE industry?

We are developing the asset class and demonstrating that we can create exceptional businesses and support their development across different sectors. The more we do this the more people are going to take an interest. One way to bring in pension funds is to encourage regulatory reforms that allow asset managers more discretion to choose asset classes they want to invest in. The trustees also need to become more familiar with the industry. If PEs were captured in the same framework as the other investment classes, we would see a lot more capital coming in, because the fund managers can already see the returns that they can get for their clients.

With six investments under its belt, where should we expect to see Catalyst in 2015 and onwards?

You will certainly see more investment in Kenya. We expect to deploy a substantial part of our capital in this market, even as we continue to invest in Uganda, Rwanda, Tanzania, DRC, Ethiopia and Zambia. We will continue to look at the industrial sector, education, technology and financial services, with broad focus on consumer goods, retail, healthcare, food and beverage, and personal care products, among others. We are also looking at logistics, distribution and inputs or heavy equipment provision to industry, because we expect the extractive industry to continue growing and local players need to take advantage of service provision to get into these new and emerging sectors.

What is your criterion for picking a company to invest in?

We should correct one thing, that although the business was established in 2009, we really only established the fund in early 2011. The nature of our investments demands that we don’t make a lot of investments. Catalyst can only really do an average of two investments a year, and with this fund we will probably make only 10 to 12 investments in total. That speaks to our selection process. It takes time because we like to understand the industry in depth, understand the capacity of a business, management, skills, experience, strategy and how we can help the business to achieve its strategic aspirations.

You will soon exhaust the $125 million fund you are currently using to invest. What are your plans in terms of raising new funds?

We will fundraise as soon as we reach the private equity cycle that allows us five to six years to invest a fund, and another three to four years to exit the fund. This means we will raise funds in the fifth or sixth year when the first fund is fully deployed.

How do you treat the capital you get back after exiting a business?

When we exit our investments, we return the capital to the people who invested in our fund, together with their returns. If they think we have done a good job in terms of investment and in the returns we bring in, they will then be encouraged to deploy additional capital in the new fund. We however also expect to see more capital coming in from new investors.

There is big money going into infrastructure and energy in Kenya at the moment, especially through public-private partnerships. Where does Catalyst fit in this equation?

There are PEs that are focused on these projects and are participating. Our fund has had a look at infrastructure but the challenge remains the time it takes to bring these projects to fruition – that is the process of negotiating and executing things like power purchase agreements.

PPP agreements take a lot of time. Only big funds with a lot of resources have room to offer more support in such areas. There is however an opportunity to try and streamline those processes to fit the realities of smaller funds. Our allocation for infrastructure is still relatively small, but we do have people within our group who have gained the experience of doing very large PPP projects across emerging markets and so the capacity is available.

Private equity firm Catalyst buys stake in Jamii Bora Bank

Private equity firm Catalyst Principle Partners has bought a stake in Jamii Bora Bank for an undisclosed fee.

The small-tier bank created new shares to accommodate the PE fund in a deal that will help it raise its core capital and ultimately boost lending.

“It’s a minority investment, but quite a significant one for the fund. We have looked at the banking industry and identified Jamii Bora as one of the players we think is going to create an impact in the market,” said Catalyst chief executive Paul Kavuma.

Catalyst did not disclose the stake or deal value, but it normally invests between $5 million (Sh445 million) and $20 million (Sh1.78 billion). Mr Kavuma said Jamii Bora has strengthened its management and operation systems, setting it on a path to higher profitability.

The bank, formerly City Finance Bank, has posted profits for the past two years after being in the red since 2005. Its net profit for the half-year ended June stood at Sh43.28 million, compared to Sh42.69 million in the same period last year.

Jamii Bora’s majority shareholders comprise of Asterisk Holdings Limited with 24.5 per cent, Jamii Bora Scandinavia AB (JBSAB) of Sweden with 24.2 per cent, and Nordic Microcap Investment which holds 12.2 per cent.

The bank’s managing director Samuel Kimani and chief commercial officer Timothy Kabiru are listed as directors of Asterisk, which in December 2011 invested Sh320 million into the bank.

Mr Kimani and Mr Kabiru joined the bank from KCB Group in 2011 and started a restructuring plan that is changing the lender’s business model from its initial target of the low end of the market to include other products like home loans, corporate banking and forex trading.

The Jamii Bora deal is Catalyst’s second investment in a Kenyan firm this year, following its debt and equity investment in September in retail drugs store chain Mimosa Pharmacy.

Catalyst invests in companies for between four and six years before exiting. It has also invested in Tanzanian personal healthcare manufacturer ChemiCotex, Ethiopian water bottling company Yes Brands, Tanzanian logistics and heavy equipment renting company EFFCO and Chai Bora, a tea packer in Kenya and Tanzania.

The lender floated a five-year Sh1 billion bond last year with a 13.3 per cent coupon rate. In June, the bank’s shareholders approved the conversion of the bond into shares and also ratified a proposal to issue five million new stocks through a cash call.

Investors holding at least Sh400 million worth of Jamii Bora’s corporate bond have already committed to convert their interest into shares, equivalent to 40 per cent of the lender’s targeted amount.

The funds injection would increase Jamii Bora’s core capital to Sh2.4 billion and allow the bank to grow lending to small and mid-sized enterprises and invest in technology driven channels such as Internet and mobile banking.

Catalyst Principle Partners reinforces its strategic agenda for Kenya and East Africa

Nairobi, Wednesday 5 November 2014. Catalyst Principal Partners convened its annual reception in recognition of its investors and to mark a milestone in the deployment of its US$125m private equity fund with two recent investments in Kenya.

Paul Kavuma, Chief Executive, Catalyst said: “With the completion of two significant Kenyan investments, being Jamii Bora Bank, fast growth micro-finance and SME banking institution, and Mimosa Pharmacy, a leading retail pharmacy chain, we have achieved an important milestone in the crafting of a high quality regional portfolio of strategic investments across diversified sectors in Eastern Africa, including agro-processing, financial services, consumer goods, retail, healthcare and industrials, with Kenya being at the core and the market into which we expect to commit the largest allocation of capital.”

The reception was attended by a cross section of prominent business leaders, key amongst them, Hon. Adan Mohamed, Cabinet Secretary for Industrialization and Enterprise who was the Chief Guest for the occasion. The CS acknowledged the role private equity plays as a valuable and innovative source of funding in supporting entrepreneurs to accelerate the attainment of their strategic ambitions, with private equity investment also promoting best practices, institutionalization and professionalization of emerging businesses. Special Guest Hon. Dr Kamau Thugge, Principal Secretary, The National Treasury, (who was represented by Esther Koimett, Investment Secretary, The National Treasury) also recognized that private equity provides access for international and domestic investors to high growth unquoted companies through managed pools of medium- term investment capital.

Commenting on the recent Kenyan investments, Paul Kavuma said: “Jamii Bora Bank has a strong management team capable of delivering the company’s ambitious transformation strategy, leveraging the bank’s strong brand positioning within the high growth micro-finance and SME consumer segments. Investment in the bank’s capitalization program is testament to Catalyst’s confidence in the bank’s expansion plans to extend its reach and to offer a broader range of innovative and tailored products and services to its customers.”

Kavuma further advised: “As disposable incomes and consumer aspirations expand, spending on healthcare will continue to account for a increasing proportion of spending, underpinning our investment in Mimosa, leading retail pharmacy chain, with growth plans aimed at enhancing the customer proposition, broadening the health and beauty offerings, and expanding national and regional footprint, including through consolidation within the fragmented pharmacy retail sector.”

At its inaugural event on 14 October 2014, Paul Kavuma was recently appointed a member of the Emerging Markets Private Equity Association Frontier Markets Council, having been a director of the Africa Private Equity and Venture Capital Association, since [2012], the continent’s preeminent industry association.

Africa Still Attractive Despite Challenges

The confidence index for Africa among business leaders has remained unchanged over the third quarter of 2014, according to YPO Global Pulse.

The Young Presidents’ Organisation (YPO) Global Pulse Confidence Index for Africa released on Tuesday puts Africa at 61.9 points despite the Ebola outbreak that is rampaging West African states.

According to Paul Kavuma, CEO at Catalyst Principal Partners, business leaders in Africa maintained a cautious optimism.

“Any sought of confidence rating over 60 per cent still shows strong confidence and optimism in the economy. So generally Africa although it remains stagnant from one perspective, it is actually stagnant but at a high level and while it may have been stagnant because there are some economics that have been under more pressure while others have been really racing well  and doing extremely well,” Kavuma said in a statement.

Slight alterations were seen in Africa’s one year outlooks for sales and capital spending. Employment confidence rose marginally by one-tenth of a point to 57.4.

“While there were increased geopolitical risks in the third quarter coming from both inside and outside the continent, they are not yet expected to be long-lived enough to counteract the economic tailwinds of infrastructure investment and strengthening services sector,” Paul Berman chair at YPO’s Africa region said in a statement.

The quarterly electronic survey conducted in the first two weeks of October with 2,431 CEO’s across the globe, including 152 in Africa saw variations in confidence at the country level. South Africa, the highest weighting in the index shaved off 1.3 points to read at 63.3 points while Africa biggest economy, Nigeria, rose marginally by 0.4 points to 56.7. Meanwhile, Kenya, East Africa’s largest economy climbed 3.7 poijnts to 68.7 over the third quarter.

“If you look at the macro environments, it is improving. We [East Africa] have got better governance, better accountability, more investment in infrastructure, better provision of services and the business community therefore is responding whereas if you look at our economy in East Africa 20 years we probably had very export orientated economy,” Kavuma explained.

Meanwhile globally, the YPO confidence index dropped by 0.8 points. Confidence in Asia declined by 1.8 points, Australia dipped 1.5 points, Canada shaved off 0.7 points despite it being the world most upbeat region, European Union was down 2.5 points and the United States also down by 0.6 points.

Nonetheless, the Middle East and North Africa were up with a reading of 65.8 points.

Catalyst Principal Partners Invests in Leading Pharmacy Retail Chain

Nairobi, Kenya: East African focused private equity firm, Catalyst Principal Partners, has announced an investment in retail pharmacy chain, Mimosa Pharmacy Limited. The investment will leverage Mimosa’s strong reputation for quality health and beauty products within high traffic retail destinations, with plans to expand its footprint across major commercial centers in Kenya and across eastern Africa. Alongside Chris Getonga, the founder of Mimosa, Catalyst has partnered with a strategic investor, Africa Chemist and Beauty Care (ACBC), which has a depth of international and emerging markets pharmacy retailing expertise to support enhancement of the customer offering and to accelerate expansion of the business.

Catalyst Principal Partners’ Managing Director, Biniam Yohannes, said “We are delighted to make our first investment in the healthcare sector. The sector has evolved rapidly over the last decade, with increased consumption of pharmaceutical and personal care products in formal retail channels being driven by increased access, exposure and appreciation of the health benefits of quality products and brands. Our investment will further fill the gap between the consumer demand and market supply, with the aim of building the business into a world-class pharmacy retail chain of regional scale.”

Josh Ruxin, the Chairman and Co-Founder of ACBC, echoed Yohannes’ sentiment: “We look forward to adding value and capability to the leading east African pharmacy chain to deliver a unique high quality customer experience to service increasingly discerning consumers in Kenya and across the region. That experience starts the moment consumers enter our doors to find trusted medicines and related products.” His colleague David Zapol, Co-Founder of ACBC, added, “We are bringing insights into the business accrued from our team’s depth of experience working with top global pharmacy retailers delivering health and pharmacy products to service a diversity of consumer segments”.

Established ten years ago, Mimosa Pharmacy is a quality-focused pharmaceutical retail company with 6 branches strategically located in premier sites within Nairobi and Mombasa with stores at Junction Mall, Crossroads Mall – Karen, Ridgeways Mall, Oasis Mall – Malindi and WPS Building – Watamu. “I am confident that the strategic partnership with Catalyst and ACBC will create a platform for Mimosa to realize its vision of becoming the most convenient and trusted provider of pharmaceutical and personal care products in the region, in line with the growing opportunities that exist, while empowering and strengthening our team through skills transfer and capacity building”, noted Chris Getonga, founder of Mimosa.

The investment in Mimosa Pharmacy represents the continued expansion and diversification of Catalyst’s eastern Africa focused investment portfolio, following earlier investments across the region in consumer goods, agro-processing, financial services and equipment leasing.

Notes to the Editor

Catalyst Principal Partners LLC

Catalyst Principal Partners LLC (www.catalystprincipal.com) manages Catalyst Fund I LLC, a US$125m private equity fund that supports dynamic entrepreneurs and management teams, and invests in high growth mid-sized and emerging companies across Eastern Africa, including in Kenya, Tanzania, Uganda, Ethiopia, Rwanda, Zambia and the Democratic Republic of Congo. Catalyst’s sector focus includes consumer goods, retail, financial and business services, industrials, manufacturing and value-add processing, technology and telecommunications, with the Fund making strategic minority and controlling equity investments ranging from between US$5 million and US$20 million.

Africa Chemist and Beauty Care

Africa Chemist and Beauty Care, Inc. (www.africachemist.com) was established to develop the pharmacy retail industry across East Africa. ACBC’s mission is to deliver quality medicines in a region where a substantial percentage of drugs are counterfeit or substandard. ACBC seeks to make capital and human resource investments in East African pharmacies to make them trusted sources of health and beauty products while expanding health care access, growing markets for products, and creating rewarding careers for employees.

For further information please contact:

Evalyn Warigia | Associate Consultant | africapractice

Office +254202396898/9 | Mobile +254722433212 | Skype eva_hawa1

africapractice.com

Catalyst Acquires EFFCO Tanzania Ltd.

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Nairobi- Kenya-based private equity firm Catalyst Principal Partners has announced the acquisition of a majority stake in Tanzania of a heavy equipment rental and logistics firm, EFFCO. Catalyst Principal Partners invests amounts of between US$5million – US$20million into deals with an average investment period of between 4 to 6 years.

The management-backed buyout is consistent with Catalyst’s strategy of investing in emerging companies within high-growth sectors across eastern Africa. Catalyst has backed a dynamic management team with ambitious growth aspirations, with local senior managers acquiring a significant equity interest alongside Catalyst and being empowered to drive an accelerated growth strategy.

“We see great growth potential in EFFCO,” Catalyst Managing Director Rajal Upadhyaya said. “We are impressed with the range and sophistication of services they offer blue chip companies across industrial, construction, mining and oil and gas sectors – all high-growth areas with significant demand and potential for the specialized best-in-class services and health and safety standards that EFFCO can provide.”“This opens new frontiers for the company,” EFFCO Group CEO George Miseda remarked. “Catalyst’s ability to add value, its active investment approach and extensive networks will allow us to rapidly scale up our operations and expand the business to take a leading positioning in Tanzania and across the rest of the east African region”

Acquisition of EFFCO is the fourth deal Catalyst Principal Partners has announced in the region since it successfully raised a US$125million (KSh10.8 billion) private equity fund, focused on investing in eastern Africa. The private equity firm has also invested in ChemiCotex, a leading personal and oral care manufacturer, and Chai Bora, the largest tea packaging firm, both based in Tanzania. The firm has also invested in Ethiopia’s Yes Brands, the leading mineral water bottling company in Ethiopia.

Notes to the Editor

EFFCO was established in 2010 as a plant hire company whose services comprise of heavy lifting and haulage, logistics services and civil works in mining and industrial businesses operating in Tanzania. :

Catalyst Principal Partners LLC (www.catalystprincipal.com) manages Catalyst Fund I LLC, a US$125m private equity fund that invests in high growth mid-sized companies across Eastern Africa, including Tanzania, Ethiopia, Kenya, Uganda, Rwanda, Zambia and the Democratic Republic of Congo. The Fund’s sector focus includes consumer goods and retail, financial and business services, industrials, manufacturing and value-add processing, technology and telecommunications, with the Fund making strategic minority and controlling equity investments ranging from between US$5m and $20m.

For more information please contact:

James Mbugua | Lead – Investor Relations | africapractice EA

4th Floor, The Exchange, 55 Westlands Road, Nairobi 00100

Office +254202396898/9 | Mobile +254721321819 | Skype jgmbugua

www.africapractice.com

Evalyn Warigia |Associate Consultant| africapractice East Africa Ltd4th Floor, The Exchange, 55 Westlands Road, Nairobi 00100

Office: +254 (0) 20 239 6899 |Mobile: +254 (0) 722 433212|Skype: eva_hawa1

www.africapractice.com

Kenya’s Catalyst Acquires 50% Stake in Ethiopia’s Yes Brands

Addis Ababa — Principal Partners, East African-focused private equity firm, today announced the acquisition of a 50% stake in Yes Brands Food & Beverages PLC, Ethiopia.
 
Speaking at the signing ceremony, Catalyst CEO Paul Kavuma said “Yes Brands is the leading bottled mineral water company in Ethiopia with a dominant brand and market share.  Catalyst aims to build upon the company’s strength to accelerate growth of the business through enhanced operational capacity, deeper distribution and product innovation.”
 
Yes Brands founder, Alemayehu Nigussie, welcomed Catalyst as a value-add partner saying, “Together with Catalyst, we have embarked on an ambitious growth strategy for Yes Brands. We will continue to build on the success of Yes Brands to ensure wide availability of our products to satisfy the evolving needs of consumers in Ethiopia and across the region.”
 
Ethiopia is amongst the best performing economies in the world and the second fastest in Africa, with GDP growth averaging 8-10 per cent over the past 5 years. “With its dynamic economy and population of 85 million, the second largest in Africa, Ethiopia is an attractive market for emerging players within the consumer sector and represents a compelling investment opportunity,” said Catalyst Managing Director, Rajal Upadhyaya.
 
Ethiopia’s Minister of Trade and Industry, Tadesse Haile, who officiated at the ceremony, hailed Catalyst’s decision to invest in Yes Brands, saying it was a signal of confidence in the country’s economy.
“It is encouraging that significant investments and resources are being directed towards the development of leading Ethiopian products and brands. The expansion of manufacturing capacity within Ethiopia will certainly translate into broader socio-economic benefits.”
 
Other recent Catalyst investments include ChemiCotex Industries Ltd, the leading oral and personal care products manufacturer in Tanzania, and Chai Bora Ltd, Tanzania’s premier tea packaging company.

Addis Ababa — Principal Partners, East African-focused private equity firm, today announced the acquisition of a 50% stake in Yes Brands Food & Beverages PLC, Ethiopia.
 
Speaking at the signing ceremony, Catalyst CEO Paul Kavuma said “Yes Brands is the leading bottled mineral water company in Ethiopia with a dominant brand and market share.  Catalyst aims to build upon the company’s strength to accelerate growth of the business through enhanced operational capacity, deeper distribution and product innovation.”
 
Yes Brands founder, Alemayehu Nigussie, welcomed Catalyst as a value-add partner saying, “Together with Catalyst, we have embarked on an ambitious growth strategy for Yes Brands. We will continue to build on the success of Yes Brands to ensure wide availability of our products to satisfy the evolving needs of consumers in Ethiopia and across the region.”
 
Ethiopia is amongst the best performing economies in the world and the second fastest in Africa, with GDP growth averaging 8-10 per cent over the past 5 years. “With its dynamic economy and population of 85 million, the second largest in Africa, Ethiopia is an attractive market for emerging players within the consumer sector and represents a compelling investment opportunity,” said Catalyst Managing Director, Rajal Upadhyaya.
 
Ethiopia’s Minister of Trade and Industry, Tadesse Haile, who officiated at the ceremony, hailed Catalyst’s decision to invest in Yes Brands, saying it was a signal of confidence in the country’s economy.
“It is encouraging that significant investments and resources are being directed towards the development of leading Ethiopian products and brands. The expansion of manufacturing capacity within Ethiopia will certainly translate into broader socio-economic benefits.”
 
Other recent Catalyst investments include ChemiCotex Industries Ltd, the leading oral and personal care products manufacturer in Tanzania, and Chai Bora Ltd, Tanzania’s premier tea packaging company.

Catalyst Acquires 50% Stake in Ethiopia’s Yes Brands

Addis Ababa — Principal Partners, East African-focused private equity firm, today announced the acquisition of a 50% stake in Yes Brands Food & Beverages PLC, Ethiopia.
 
Speaking at the signing ceremony, Catalyst CEO Paul Kavuma said “Yes Brands is the leading bottled mineral water company in Ethiopia with a dominant brand and market share.  Catalyst aims to build upon the company’s strength to accelerate growth of the business through enhanced operational capacity, deeper distribution and product innovation.”
 
Yes Brands founder, Alemayehu Nigussie, welcomed Catalyst as a value-add partner saying, “Together with Catalyst, we have embarked on an ambitious growth strategy for Yes Brands. We will continue to build on the success of Yes Brands to ensure wide availability of our products to satisfy the evolving needs of consumers in Ethiopia and across the region.”
 
Ethiopia is amongst the best performing economies in the world and the second fastest in Africa, with GDP growth averaging 8-10 per cent over the past 5 years. “With its dynamic economy and population of 85 million, the second largest in Africa, Ethiopia is an attractive market for emerging players within the consumer sector and represents a compelling investment opportunity,” said Catalyst Managing Director, Rajal Upadhyaya.
 
Ethiopia’s Minister of Trade and Industry, Tadesse Haile, who officiated at the ceremony, hailed Catalyst’s decision to invest in Yes Brands, saying it was a signal of confidence in the country’s economy.
“It is encouraging that significant investments and resources are being directed towards the development of leading Ethiopian products and brands. The expansion of manufacturing capacity within Ethiopia will certainly translate into broader socio-economic benefits.”
 
Other recent Catalyst investments include ChemiCotex Industries Ltd, the leading oral and personal care products manufacturer in Tanzania, and Chai Bora Ltd, Tanzania’s premier tea packaging company.

Addis Ababa — Principal Partners, East African-focused private equity firm, today announced the acquisition of a 50% stake in Yes Brands Food & Beverages PLC, Ethiopia.
 
Speaking at the signing ceremony, Catalyst CEO Paul Kavuma said “Yes Brands is the leading bottled mineral water company in Ethiopia with a dominant brand and market share.  Catalyst aims to build upon the company’s strength to accelerate growth of the business through enhanced operational capacity, deeper distribution and product innovation.”
 
Yes Brands founder, Alemayehu Nigussie, welcomed Catalyst as a value-add partner saying, “Together with Catalyst, we have embarked on an ambitious growth strategy for Yes Brands. We will continue to build on the success of Yes Brands to ensure wide availability of our products to satisfy the evolving needs of consumers in Ethiopia and across the region.”
 
Ethiopia is amongst the best performing economies in the world and the second fastest in Africa, with GDP growth averaging 8-10 per cent over the past 5 years. “With its dynamic economy and population of 85 million, the second largest in Africa, Ethiopia is an attractive market for emerging players within the consumer sector and represents a compelling investment opportunity,” said Catalyst Managing Director, Rajal Upadhyaya.
 
Ethiopia’s Minister of Trade and Industry, Tadesse Haile, who officiated at the ceremony, hailed Catalyst’s decision to invest in Yes Brands, saying it was a signal of confidence in the country’s economy.
“It is encouraging that significant investments and resources are being directed towards the development of leading Ethiopian products and brands. The expansion of manufacturing capacity within Ethiopia will certainly translate into broader socio-economic benefits.”
 
Other recent Catalyst investments include ChemiCotex Industries Ltd, the leading oral and personal care products manufacturer in Tanzania, and Chai Bora Ltd, Tanzania’s premier tea packaging company.

PE Funds From Pension Soon Viable

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By COSMAS BUTUNYI Posted  Sunday, December 18  2011 East Africa’s venture capital and private equity industry’s dream of tapping into local sources of capital may be inching closer to fruition. If Kenya succeeds in loosening regulations that have long held back this aspiration, the industry could soon tap into the country’s pension funds to raise capital. The Retirement Benefit Authority (RBA) and the Capital Markets Authority (CMA) are spearheading the review of regulations that have over the years, limited the ability of pension funds to invest in the industry. “Private Equity can complement government’s efforts by stirring up small companies with huge potential to grow and consequently be crucial in Kenya’s entrepreneurial and industrial development targets,” says the chief executive of CMA, Stella Kilonzo. According to Ms Kilonzo, among the regulations slated for review are those on investment ceilings and collective investment schemes. Presently, the guidelines indicate that before pension funds can make an investment through a private equity vehicle or fund, they have to obtain the approval of RBA. Besides, RBA boss, Edward Odundo, told the recent SuperReturn Africa Conference that beyond the East African region, Kenyan pension funds cannot invest in private equity, as only equities and bonds are allowed. Mr Odundo said RBA has proposed a separate investment category to be created specifically for venture capital and private equity with its own maximum percentage allocated. This review will see private equity and venture capital category join the current 10 categories that pension funds can invest in. It will also see the need to seek prior approval from the authority lifted. “Financial sector regulators have proposed the elimination of investment guidelines such as pensions, insurance and capital markets, in line with risk based supervision models,” he added. The review of guidelines is part of a raft of measures that Kenya is putting in place to facilitate the private equity industry. In the recent past, CMA has announced it will establish a Growth and Enterprise Market Segment within the Nairobi Securities Exchange to enable private equity funds to exit from their investments in Small and Medium-sized Enterprises. Besides, the country has a law that allows venture capital firms operating within to claim a 10-year tax holiday on profits made from their investments. Ms Kilonzo added that policy incentives for private equity are being considered in the annual memorandum of policy proposals to Treasury. These latest developments in the Kenyan pension industry are set to benefit the entire East African Community, whose common market arrangement allows for free movement of goods, labour and capital. Presently, venture capital and private equity funds operating in the region rely on overseas sources of capital, usually from development finance institutions. “Private equity should not rely on international sources when there is local capital,” says Paul Kavuma, the chief executive of Catalyst Principal Partners. Besides regulations, a section of the fund managers say that another factor that has restricted the harnessing of local capital is the concentration on international investors when raising capital for funds. “They should engage local investors earlier on and not at the tail end of the process,” says Edwin Dande, the chief executive of British American Asset Managers. Generally, the industry players reckon, there is still a huge need for education for pension funds to pave way for the unlocking of local sources of capital. This is because, it is said, even with change of regulations, some pension fund managers are uncomfortable putting their money in private equity and venture capital because of insufficient knowledge about the asset class.

CDC Direct Investment Strategy Marks Sharp Shift

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By Victor Juma
The British government owned investment firm, Commonwealth Development Corporation (CDC), will set up a new private equity fund in Kenya in the next few weeks to channel a new wave of direct investments in East Africa.
“The new private equity (PE) fund targeting general investments will be up and running in the next few weeks. It will focus directly on opportunities in Kenya, Uganda, and Tanzania,” said Richard Laing, CDC chief executive.
He added that CDC was yet to decide on the initial amount, but hinted it would be million of US dollars. Mr Laing said the firm also plans to make direct investments in the consumer goods sector.
This marks a shift in strategy in the firm’s investments model that has been defined by channelling funds through PEs with knowledge of the local market. The firm, whose current portfolio in Kenya stands at about Sh7.4 billion, has been investing through fund managers Actis, Aureos, ECP, Grofin, Helios, and Business Partners International. The move to make direct investments in future deals means that CDC will be competing with PE firms.
“This is a surprise move and it points to increased confidence in private equity investments in the region,” said Ms Eline Blaauboer, a partner at TBL MirrorFund.
Mr Laing said the advantage of investing directly is that it will allow CDC to quickly grab opportunities on a sectoral and geographical basis.
“The obvious first partners will be the fund managers, who have a good set of transactions. If they come across a transaction that may be too big for them and they desire more capital, we will invest alongside them. Over time, we will build up a subset of partners with whom we would like to make direct investments,” he said.
The new strategy, to be implemented in Sub-Saharan Africa and Southern Asia, was approved by the British government years ago. Earlier this year, Mr Andrew Mitchell, the British government’s International Development secretary, started to push for a shift for CDC to focus from investing in countries that can easily access private capital and focus more on investing directly in unattractive developing markets.
Britain is planning to commit half of all new investments to Sub-Saharan Africa in the next four years. Valued at over £2 billion, CDC is one of the biggest investors in emerging market private equity funds. Last year, it invested £359 million and £220 million in African and Asian businesses.
Mr Laing noted CDC investments in Kenya are low and said the firm will go big in energy, property and consumer goods — its main areas of focus.
“What is interesting in Kenya is that people have more money to spend now than ever before. Anybody providing the kind of goods consumers want will do well,” said Mr Laing.
CDC has stakes in Nairobi Business Park, the property complex at the Junction, Ngong Road; and two energy projects in Ol Kalou and Rabai. Other firms include Athi River Steel Plant, Brookside Dairy, Wananchi Group, Tsavo Power Company and Equity Bank.
Founded as a vehicle for promoting investments in former British colonies, CDC has been in Kenya since 1948. The economic upturn, stabilisation of the political environment, and deepening of regional integration has seen increased activity from private equity funds keen on riding the wave of growth expected in the medium-term.
East Africa, with a population of 126 million, presents a huge consumer base. Kenya, the region’s biggest economy, has high potential companies that can be harnessed to grow.
This has intensified activity by PE firms, as seen by AfricInvest’ injection of Sh1 billion Family Bank and the International Finance Corporation’s Sh2 billion in Diamond Trust Bank. Both banks are SME-focused. Catalyst Principal Partners is another new PE firm seeking to invest between $5million and $15million in SMEs in the region.

Africa The Next Frontier For Private Equity, Venture Capital

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Africa the next frontier for private equity, venture capital By COSMAS BUTUNYI Posted  Sunday, December 18  2011 The Organisation for Economic Co-operation and Development has said funds raised for private equity in sub-Saharan Africa has more than trebled over the past five years. COSMAS BUTUNYI spoke to the chief executive of the African Venture Capital Association (AVCA) on the state of the industry, the outlook on venture capital inflows in the coming years and the role of her association in writing the success story What would you consider as the main obstacles standing in the way of African private equity from realising its potential? The industry is still at its infancy and is still small but growing at the same time. Most of the General Partners in the continent are developing growth capital and we are seeing sector funds coming up. Eventually, we will see the rise of debt funds. I think where we are in Africa is part of the life cycle of the industry. However, as an industry, we still need to communicate a lot. We need to engage entrepreneurs so that they can see the value addition that private equity can bring to a business. We also need to speak to pension funds and break up the stereotypes of perceptions versus reality. In your opinion, what factors make Africa the next frontier for private equity and venture capital? There are good stories coming out of Africa; there is no better place to be. Think of the consumer story, population, middle class and you could not find a better investment opportunity. We however need to move the conversation away from political risk. Not  that it is not there, but it would not be greater than any other geography. Impact investment in Africa has been billed as the next big asset class. What do you think about it? There is a lot of misunderstanding on what it is; some people think it is private equity. AVCA has to give a platform to different strategies and impact investment is a strategy in the same way that infrastructure is and consumer is. At the moment, we are working on collaboration with a foundation to research case studies in impact investment. Related Stories – Fab Lab showcases Kenya’s innovation potential What is your association’s contribution to efforts towards unlocking local sources of capital? Unlocking local capital is a huge responsibility for us. Over the past year, with the Commonwealth Secretariat, Emerging Markets Private Equity Association (EMPEA) and a number of practitioners, we have held a number of roundtables in different parts of Africa for private equity and pension fund managers. This is something that we have to keep doing because the more LPs are trained to invest in private equity funds, the more we allow resources into the community and the economy. How about engaging authorities and regulators to create a favourable environment for private equity investment? I want to start engaging with them on issues of impact investing and private equity. I am of the mindset that we need to reach out to everyone so that there is idea exchange. There is a lot of benefit in this. How else does AVCA hope to contribute to growth of the industry? AVCA’s long term goal is that we will have a chapter inside Nairobi that will cover all of East Africa, because what we want to be able to give to our members are services suited to local needs. We will look to replicate the same in West Africa. In Southern Africa, we are working on linking with SAVCA to collaborate with them because they have been around for a long time and have a good reputation.  We will do the same in North Africa. The needs will be very different; it will be advocacy, speaking to regulators and government to understand the benefit of private equity and to develop of growth capital to create jobs and efficient companies. The chapters will also be responsible for addressing training needs for GPs such as negotiation skills and financial modeling; as well as LPs on private companies. Before your appointment, AVCA had been dormant. What were the reasons for this? AVCA has been around for ten years now but it has had an uneven history. There are many reasons for this and I only know of it anecdotally because am new to AVCA. However, this gives me an opportunity to be forward looking and not to focus on what happened in the past. There are things we are working on that AVCA needs to change. I think we need to be reflective of the same principles we ask GPs to establish in portfolio companies: good governance and good corporate practices. We are putting all these things in place today. Things are different; our board is different and is made of GPs who have deep connections in Africa; and we have a new management team. It does not bode well for the association, the industry, or even public perception and Africa as a whole, when we are not sustainable.