By The Citizen Reporter
Dar es Salaam. The Board of Directors of the African Development Bank (AfDB) has approved a $25million (Sh37.5billion) to support some selected portfolio companies across the Africa, the bank said yesterday.
The amount is to be channeled the equity investment in Vantage Capital Fund II (VCF II).
“This second-generation multi-sector fund, designed to reach $250 million, will provide mezzanine financing – a combination of debt and equity instruments,” the bank said in a statement made available to The Citizen.
The pan-African fund, with up to 45 per cent of its portfolio in the Southern Africa Development Community (SADC) countries, 30 per cent in North Africa and 25 per cent in East and West Africa, will support the growth of African businesses. According to the bank, the first generation Fund (VCF I) helped create some 19,300 jobs, generated $91 million in tax revenue for the South African government, and added $281 extra capital flow to South African businesses over a period of eight years.
“VCF II is expected to help catalyze some $735 million in aggregate capital flows to African mid-markets companies, trigger the creation of 10,000 additional jobs and bring in $145 million in government revenues,” the bank said.
The AfDB’s investment in VCF II will promote the expansion of mezzanine financing as a mainstream asset class on the continent.The Fund is expected to attract institutional investors from several African countries and promote higher levels of investment in long-term instruments.
As the first fund domiciled in Botswana, VCF II will help launch the nascent Botswana International Financial Service Center (BIFSC).Mezzanine assets currently represent less than 2 per cent of African private equity funds, compared to a world average of 10 per cent.
However, a host of factors- including sustained growth rates, the increasing needs of mid-market companies for expansion capital, sound but conservative banking sectors and increasingly favorable tax and regulatory regimes- have generated an African mezzanine market potential estimated at $1.6 million over the next 5 years.
Source:The Citizen