OPIC Board Approves $360 Million for Investment Funds Targeting Consumer Populations in Africa, Indonesia & Russia
September 13, 2012
(OPIC)
Will tap middle-market opportunities in undercapitalized countries; funds’
combined target capitalization is $1.2 billion
WASHINGTON, D.C. – Emerging middle classes in Africa, Indonesia and Russia – all
fast-growing markets with lucrative return potential – received a boost today
when the Board of Directors of the Overseas Private Investment Corporation
(OPIC) approved $360 million in financing for three investment funds targeting
consumer populations in each. The funds have a combined target capitalization of
$1.2 billion.
The growth of the middle class in each of these markets is ongoing but often
ignored by investors:
Africa is consistently growing faster than almost any other region of the
world, with a dozen countries having averaged at least six percent growth for
six or more years. By 2015, 100 million African households are expected to have
annual incomes above $3,000 a year, an increase of 40 million from 2011, putting
Africa on par with India.
Russia’s economy is expected to grow twice as fast as the United States’ in
the next four years, driven largely by domestic demand. With the world’s ninth
largest population, Russia became the world’s eighth-largest retail market in
2006, although official numbers probably underestimate its size—surpassing
Brazil, Mexico, Spain, and Italy.
Indonesia is forecasted to accelerate its six percent growth rate in the
coming years, fueled mainly by private consumption. Economic growth has kept
pace with population growth and transformed the world’s fourth most populous
country from a low-income country to a mid-income country by the mid 1990s.
“Emerging middle classes in markets such as Africa, Indonesia and Russia are a
vital foundation of long-term economic growth,” said OPIC President and CEO
Elizabeth Littlefield. “These three funds will support sustainable economic
development by providing essential financing to dynamic local companies serving
a growing middle class.”
All three funds were chosen from respondents to the Global Engagement Call for
Proposals OPIC issued in November 2011, which generated an agency record number
of responses.
The funds approved by the Board were:
African Development Partners II
The Board approved up to $150 million in OPIC financing for this pan-African
fund, which will generally invest in companies that serve Africa’s emerging
middle class, such as financial institutions, pharmaceuticals and hospitals,
telecommunications, food service and agribusinesses, consumer goods, education,
engineering and construction. The fund has a target capitalization of $500
million.
The fund will help to alleviate a shortage of long-term financing on the
continent and will emphasize environmental, social, and corporate governance
standards, supporting the development of African economies through sustainable
investing.
OPIC selected as fund manager Development Partners International LLP, a private
equity management group founded in 2007 and focusing on investments across
Africa.
Falcon House Partners Indonesia Fund I
This fund will invest in Indonesia’s fast-growing middle and lower mid-market
segments, with a focus on consumer-driven industries, including retail, food
products, personal care products and health care. OPIC’s Board approved up to
$60 million in financing for the fund, which has a target capitalization of $225
million.
Indonesia is fast emerging as a profitable destination for emerging market
private equity, driven by its strong economic fundamentals, favorable
demographics, and a demand for growth capital that has outpaced supply,
particularly for mid-market companies. Private domestic consumption accounted
for 57 percent of Indonesia’s gross domestic product in 2010, and 60 percent of
its population is below 40 years of age.
OPIC selected as fund manager Falcon House, one of the most experienced fund
managers in the region.
Elbrus Capital Fund II
Russia has experienced two decades of rapidly growing consumer spending power
but, due to decades of underinvestment during the Soviet era, the country lags
behind other regions in both consumer and business infrastructure. Both the
government and the private sector are currently making efforts to close this
gap, which creates attractive investment opportunities.
This fund will invest in the consolidation of middle-market companies in
rapidly-growing industries in Russia, helping to build competitive businesses
that respond to unsatisfied demand across a number of critical needs: changing
consumer patterns, need for consumer and business infrastructure, efficient use
of natural resources, and the increasing need for high-quality health care and
education. It will also aim to stimulate economic development in regions outside
of Moscow and St. Petersburg. OPIC’s Board approved up to $150 million for the
fund, which is raising $500 million in equity in addition to the OPIC
commitment.
OPIC selected as fund manager Elbrus Capital, which spun out of Renaissance
Group, a large Russian investment bank and wealth manager, in 2010, having
operated under the Renaissance umbrella for three years.
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