Amid growing demand for funding for Africa's underserved medium-sized companies, IFC today announced an investment in a new mezzanine fund managed by Vantage Capital, a leading mezzanine funding provider on the continent, which will provide capital to fast-growing companies in Africa.
IFC's US$25 million investment in the Vantage Mezzanine IV Pan-Africa fund will support companies based in Kenya, Nigeria, Morocco, Egypt and other countries across Africa engaged in job-creating sectors, including healthcare, tourism, manufacturing, information and communications technology (ICT), and telecommunications.
This is IFC's first investment in an Africa-focused mezzanine fund, which will provide growth capital that sits between senior debt and equity and has both debt and equity features. Vantage Capital aims to raise a total of US$350 million for the fund.
"Vantage is proud to have achieved a successful first closing of our fourth fund, which is a validation of the mezzanine asset class in Africa and our role as a pioneer of this form of finance on the continent over the past 15 years. IFC's investment in a fund like ours represents a boost to this important alternative source of growth capital for mid-sized African businesses," said Warren van der Merwe, Managing Partner of Vantage.
"Vantage Mezzanine IV will play an important role in providing underserved mid-sized companies with an alternative form of growth capital in the nascent private credit and mezzanine financing space in Africa," said Kevin Njiraini, IFC's Regional Director for Southern Africa and Nigeria. "The COVID-19 pandemic has made this type of financing more necessary and important, as banks are becoming increasingly risk-averse, often preferring to lend to larger corporates."
Limited access to finance is a key constraint many business owners in Africa face, hindering the growth of local companies, including medium-sized companies, which are a critical part of the economy. Africa represents only about four per cent of total private credit funds raised for emerging markets, according to data from EMPEA, the global industry association for private capital in emerging markets. Private capital fundraising has further been hampered by the COVID-19 pandemic.
Many fast-growing businesses in Africa do not have the required scale, or collateral, to attract sufficient bank debt to support their growth objectives. Mezzanine financing helps these businesses to expand their consumer base, build a track record, and prove that their business models are both scalable and profitable. Vantage Capital's mezzanine financing aims to support these companies and enable them to subsequently access senior debt.
IFC—a member of the World Bank Group—is the largest global development institution focused on the private sector in emerging markets. We work in more than 100 countries, using our capital, expertise, and influence to create markets and opportunities in developing countries. In fiscal year 2020, we invested $22 billion in private companies and financial institutions in developing countries, leveraging the power of the private sector to end extreme poverty and boost shared prosperity. For more information, visit www.ifc.org.
About Vantage Capital
Vantage Capital was founded in 2001 and, to date, has raised eight funds with aggregate commitments of more than $1 billion, which includes four mezzanine, three renewable energy, and one technology fund. Since 2006, the fund manager's mezzanine division has made 31 investments in 11 African countries, making it the largest and most experienced independent mezzanine funder on the continent.
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