Emerging markets private equity group Abraaj has raised more than $1.3 billion for two funds investing in Africa, the largest amount amassed for direct deals across the continent, people aware of the matter say.
The two funds mark further global investor interest in Africa as private equity groups bet on strong growth as Sub-Saharan economies develop and the middle class grows, while stability returns to parts of North Africa wracked by unrest for the past four years.
Dubai-based Abraaj, which has been fundraising for these funds for eight months, has capped the Sub-Saharan Africa fund at $990m, higher than the $800m the company had originally sought to raise. The North African fund will probably end up oversubscribed at $340m, exceeding its $250m target.
There has been a surge of private equity interest across Sub-Saharan Africa, with US group Carlyle making its debut investments in Nigeria and South Africa last year. Abraaj, which manages $7.5bn of assets, has deployed $3bn to date across Africa. The company declined to comment.
Other funds are also raising capital to tap into growth. Carlyle, which last year raised a $700m fund for Africa, is not only leading private equity group to have arrived on the continent – KKR and Blackstone have also struck regional deals. Other smaller buyouts groups, such as Brait, Helios and AfricInvest have also been raising funds to tap into the private equity surge.
In January, Helios closed a $1.1bn Africa fund, the first to top the billion mark and the group’s third since starting in 2007. Last year, Edmond de Rothschild raised $530m for its first Africa deal fund.
Razia Khan, head of Africa research at Standard Chartered Bank, said private equity across the continent remained at a “nascent stage” but the macroeconomic conditions are in place for more opportunities for groups such as Abraaj.
“The deal flow that we saw last year has only just recovered to its pre-crisis highs,” she said. “So it is not surprising that we should see sustained interest in this space.”
IMF’s growth forecast for Africa – The International Monetary Fund forecasts growth in Africa this year of 5.75% higher than Abraaj’s home markets in the Middle East, where growth forecasts have been slashed to 3.3% after oil prices halved.