The Board of Directors of the African Development Bank (AfDB) has approved an equity investment of up to US$15million to the Enko Africa Private Equity Fund (EAPEF).
The Fund aims to invest in mid-size companies registered in Africa and exhibiting a strong potential for successful listing on one or many African stock markets.
The EAPEF is a Pre-Initial Public Offering (Pre-IPO) pan-African private equity investment vehicle with a target endowment of US$150million. The role of the Fund will be adding value to investee companies by injecting financial resources to enable expansion, recapitalisation, and deleveraging; but also to bring expertise in strengthening corporate governance, improving business practices and standards of disclosure in preparing companies for stock market listing.
African financial markets have experienced significant growth since the 1990s, increasing from roughly a dozen to 23 in the past 20 years, including two regional stock exchanges.
Although demand for listed equities is sizeable in Africa, with a significant number of IPOs being oversubscribed, supply has been very sluggish — thereby adding to the perceived illiquidity of the concerned exchanges.
The EAPEF is aiming to contribute in bridging the imbalance between supply and demand for listed equities on African capital markets, thereby complementing the endeavours of many African Stock Exchanges to attract new issues. The Fund’s portfolio will include businesses in health, education, agri-business, financial services, retail and infrastructure sectors.
By broadening the pool of listed companies across sectors, the EAPEF will contribute in making the overall African stock markets more attractive to a wider set of investors and offer a more diversified channel in which to invest domestic savings.
Investment in the Fund is consistent with the Bank’s Private Sector Operations (PSO) strategy, which underscores the provision of equity capital as a catalysing force to attract resources for private sector development.
The PSO strategy also focuses on the provision of support to financial intermediaries, and on forging partnerships with institutions that will promote the implementation of corporate governance best practices while promoting employment creation and economic growth through support to the private sector and financial markets on the continent.