Africa's compelling fundamentals have set the continent up to become a leading engine of global growth in the decades to come ' creating outstanding opportunities for private equity investment in the process
Enduring macro fundamentals including a diverse natural resource wealth, 60% of the world’s uncultivated arable land and what will become by 2040 the world’s largest workforce together make Africa home to outstanding potential long-term investments as the continent becomes an engine of global growth, the co-founder of the continent’s largest private equity firm told a gathering of global PE leaders in Geneva, Switzerland, today.
“We will add more than 700 million people to our continent-wide workforce by 2050 at the same time as population growth in China and India flags. Africa’s proven oil reserves have climbed from 58.7 billion barrels of oil to 132.1 billion in the past two decades. Supportive policymaking has helped FDI to Africa grow nearly ten-fold in the period 1995-2009, a pace that outstrips even growth in FDI to Asia,” said Hisham El-Khazindar, Managing Director and Co-Founder of Citadel Capital, the leading private equity firm in Africa with US$ 9.5 billion in investments in 15 industries spanning 15 countries
Six of the world’s 10 fastest-growing economies in the period 2001-10 were African, and while the International Finance Corporation (IFC) noted just one African nation as holding investable private equity opportunities in 2001, nearly two dozen are categorized as such today.
“Africa is home to outstanding opportunities for long-term investors in the infrastructure that will support this growth,” El-Khazindar said in a keynote speech today at SuperReturn Emerging Markets in Geneva.
In East Africa, for example, Citadel Capital is leading the turnaround of Rift Valley Railways, the national railway of Kenya and Uganda, for which the firm has devised and arranged full funding of a more than US$ 300 million turnaround program with investments from leading development finance institutions and niche investors, El-Khazindar noted.
“Our investments ease road congestion and reduce emissions by shifting transport off our highways and onto un-used waterways through Nile Logistics. And they will substantially curb Egypt’s reliance on diesel imports while simultaneously preventing the release of nearly 180,000 tons of sulfur dioxide each year,” he said, pointing to Egyptian Refining Company (ERC).
ERC, which recently reached financial close with US$ 1.1 billion in equity from leading Egyptian, Gulf Cooperation Council and global investors, is building a US$ 3.7 billion greenfield petroleum refinery in the Greater Cairo Area that will halve Egypt’s diesel imports while producing Euro-V diesel, the cleanest-burning diesel fuel of its kind in the world. US$ 2.6 billion of the project cost is covered by a debt package.
ERC stands as among the largest-ever project finance transactions in Africa and is one of Egypt’s largest inward investments.
“The key going forward is for private equity investors to articulate the solutions they offer in a way that is clear to policymakers, to limited partners — including development finance institutions with mandates to invest in Africa — and to the citizens of the nations in which they do business,” El-Khazindar said.
“These opportunities may be distinct, but they are not unique: The continent is wide-open to private investment, in part thanks to a new generation of policymakers who speak the language of the private sector. Transactions of the size of ERC — among numerous other significant transactions in recent years — underscore the fact that Africa has reached a new level within the emerging markets pantheon. We have been saying for years that opportunities in Africa should, at a minimum, be on your watch list. No more: Now is the time to invest. Now is the time for Africa,” El-Khazindar concluded.
Citadel Capital (CCAP.CA on the Egyptian Stock Exchange) is the leading private equity firm in the Middle East and Africa. Citadel Capital focuses on building regional platforms in select industries through acquisitions, turnarounds, and greenfields executed via Opportunity-Specific Funds. The firm’s 19 OSFs now control Platform Companies with investments of more than US$ 9.5 billion in 15 countries spanning 15 industries, including mining, cement, transportation, food and energy. Since 2004, Citadel Capital has generated more than US$ 2.2 billion in cash returns to its co-investors and shareholders (on investments of US$ 650 million), more than any other private equity firm in the region. Citadel Capital is the largest private equity firm in Africa by PE assets under management (2007-2012, as ranked by Private Equity International). For more information, please visit www.citadelcapital.com.
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