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Thursday, 23 September 2021

UK’s CDC Group announces $60 mln commitment to address Africa’s credit markets’ risks amid pandemic

The CDC s African Private Credit Fund Strategy also aims to kickstart a signalling effect by attracting more commercial investors to African markets, which will in turn help develop reliable, long-term, private debt platforms

Doaa A.Moneim , Tuesday 14 Sep 2021
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The CDC Group — the UK’s development finance institution and impact investor — announced on Tuesday that it has made a $60 million commitment under its African Private Credit Fund Strategy, which targets addressing a significant credit market dislocation and mid-market financing gap that is evolving amid the ongoing COVID-19 pandemic.

This commitment covers two investments; including a $30 million investment in Vantage Mezzanine Fund IV, which is managed by Vantage Capital — an established pan-African fund manager — and a $30 million cornerstone investment in BluePeak Private Capital Fund I, BluePeak’s maiden fund.

“These commitments will enable fund managers to increase credit supply to mid-market African companies by providing countercyclical mezzanine funding that is bespoke and meets the market’s need,” said the CDC.

The CDC’s African Private Credit Fund Strategy also aims to kickstart a signalling effect by attracting more commercial investors to African markets, which will in turn help develop reliable, long-term, private debt platforms that can streamline economic growth, employment, and sustainable development throughout the continent.

The investment contributes to the United Nations’ sustainable development goals (SDGs) by working towards SDG 8, which relates to the availability of decent work and economic growth.

“The investments are a testament to the CDC’s pledge to play an anchoring role in the success and scale of Africa’s mid-sized companies through different instruments,” said Clarisa De Franco, the managing director and head of Private Equity Funds at the CDC.

“Additionally, we are confident that our partners will steward their investee firms to onward growth, generating favourable returns that will motivate commercial investors to invest in Africa’s nascent private credit market as we observe its rise as a promising asset class.”

Meanwhile, Jo Fry, investment director and head of intermediated credit at the CDC, said that the CDC’s investments in Vantage Capital and BluePeak Private Capital present an opportunity to get capital to where it is most needed.

“Businesses in Africa often face significant challenges in gaining access to funding, and the pandemic has further tightened the availability of capital in these markets. We are excited to be supporting the continuing development of the private credit [fund] sector,” he explained.

“This can fill a funding gap with debt capital for medium-sized enterprises whose financing needs are of a size that excludes them from accessing credit from traditional banks.”

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