Today, XSML, the fund manager active in Central & East Africa, announced its final close of the African Rivers Fund at US$50mn. The African Rivers Fund is XSML’s second fund under management, after its maiden fund the Central Africa SME Fund (CASF), bringing total assets under management to US$69mn.
The African Rivers Fund (ARF) targets growing, well-managed small and medium-sized enterprises (SMEs) in the Central & East African region covering Democratic Republic of Congo (DRC), Uganda and Republic of Congo as well as - over time - Burundi. The fund is named after the two most powerful rivers in Africa, the Congo and Nile Rivers, which embody the potential of the Central & East African region.
ARF follows the successful investment strategy of its predecessor, CASF, by providing debt, equity and mezzanine finance to fast-growing companies in the Central African region. The three existing investors in CASF, IFC (a member of the World Bank Group), FMO (the Dutch development bank) and Lundin Foundation (Canadian foundation), were joined by BIO (Belgium Investment Company for Developing Countries), CDC Group (the UK development finance institution), Dutch Good Growth Fund (DGGF) and FISEA (Proparco - AFD Group) - an expansion of the investor base for the African Rivers Fund, which demonstrates their commitment and support for investing in these frontier markets.
Barthout van Slingelandt, Managing Partner at XSML says: “The final close of our second fund, the African Rivers Fund, at US$50mn demonstrates a continued interest and commitment from our investors in frontier markets as Congo DRC. The private sector in Congo has tremendous growth potential and long term capital is scarce, evidenced by our ability to invest some 26% of ARF’s total capital during the fund’s first year.”
Through CASF, a USD 19m fund with 80% allocation to DRC and 20% in CAR, XSML provided risk capital with an investment size ranging from USD 100,000 to a maximum of US$500,000. With this first fund, XSML made 32 investments in SMEs across 10 sectors. CASF has exited four investments and has so far returned close to 40% of invested capital to investors. Since February 2016, ARF has made investments in eleven companies in a range of industries and has committed 45% of its capital to sixteen companies.
Van Slingelandt: “With the experience and network that we have built up over the last six years, XSML is well placed to capture opportunities on the ground in DRC. And since August 2016, we are building a pipeline of potential investments in Uganda, through our office in Kampala. We are an active investor in privately held businesses in Congo and surrounding countries, and this helps creating jobs and supporting the growth of the economy.”
XSML believes that sustainable economic development in fast growing markets as the DRC and Uganda can be achieved by encouraging local entrepreneurship. Currently, many opportunities in these countries remain unexploited due to the lack of risk capital and support. By stimulating entrepreneurship, jobs and income are created. The African Rivers Fund continues CASF’s strategy with investments in between US$100,000 and US$5mn.
Between the two funds XSML has provided technical assistance to some 28 companies to help them improve their operations and skills. Evidence of further impact can be found in various fields, with over 500 jobs created since 2011, over 4,000 additional pupils spread over three private schools and the addition of some 40 hospital beds, an operating theatre and maternity rooms in a clinic in Kinshasa, improving healthcare standards.
Although international investors show an increasing interest in emerging markets, the demand for finance from small and medium sized enterprises (SMEs) remains largely untapped. XSML, eXtra Small Medium Large, founded in 2008, bridges this gap by investing in small businesses to help them grow into medium and large enterprises. We manage two funds with a focus on frontier markets in Central and East Africa: the Central Africa SME Fund and the African Rivers Fund. Our local teams of 15 investment and operating professionals have experience in emerging and frontier markets in private equity, corporate and development banking and corporate restructuring with offices in Kinshasa (DRC), Kampala (Uganda) and Bangui (CAR).
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