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Carlyle private equity fund eyeing investments linked to emerging middle class

US-based private equity firm Carlyle Group has seen greater than expected investor interest in a fund focused solely on sub-Saharan Africa.

The Carlyle Sub-Saharan Africa Fund last week closed at US$698m, almost $200m above its original target of $500m.

According to a statement by Carlyle, the fund managed to attract investment from both African and international investors.

To date the fund has made two investments: One in a Tanzanian-based supply chain manger, and the other in Mozambican logistics company.

Speaking during a conference last year, Carlyle co-founder David Rubenstein highlighted sub-Saharan Africa as a region that could deliver good returns in 10 years’ time.

He however said that challenges of operating in the region include corruption, the relatively small size of many African economies, and management quality.

“It is not for the faint of heart, and it is not easy to do deals there. It is not one country like China, where pretty much the same language and pretty much the same techniques can be used, but it is an opportunity where I think over the next 10 years you are going to see a lot of private equity firms going there,” said Rubenstein.

The advisory team for Carlyle’s Sub-Saharan Africa Fund operate from offices in Johannesburg and Lagos.

According to Carlyle, it is primarily focused on opportunities linked to the growth of the middle class in Africa. The fund is therefore expected to invest in sectors such as consumer goods, logistics, financial services and telecommunications.

A recent survey by RisCura, the South African Venture Capital and Private Equity Association (SAVCA) and the African Private Equity and Venture Capital Association (AVCA) found that limited partner (LP) investors – including pension funds, asset managers and development finance institutions – are increasingly willing to back African focused private equity funds. The authors spoke to a diverse mix of 48 LPs based across four continents.

The survey found that 85% of LPs plan on increasing their percentage exposure to private equity on the continent over the coming two years.

More than two-thirds of respondents indicated that they think Africa is more attractive compared to other emerging markets.

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