The European Investment Bank (EIB) has said it will support private equity investment across Ethiopia through support for the new $100 million Cepheus Growth Capital Fund.20 Oct 2017.
The bank said its $10m participation represents the first backing for an Ethiopia-focused fund and “one of the first engagements with a single country private equity fund in Africa by Europe’s long-term lending institution”.
EIB vice-president Ambroise Fayolle said: “With this new initiative the EIB will help Ethiopia, the second largest country in Africa, to meet key sustainable development goals and continue its recent impressive economic growth.”
Fayolle said: “The EIB is committed to fostering private sector investment across Africa. Our first support for private equity in Ethiopia, through the Cepheus fund, will help leading local companies to expand and succeed. The fund manager’s significant financial experience and understanding of Ethiopia will ensure companies can unlock their true potential.”
Frederic Ichay of Pinsent Masons, the law firm behind Out-Law.com, said: “Currency devaluations, weak commodity prices and political instability have dampened appetite for foreign private equity investment in Africa in recent years. However, new initiatives by the Ethiopian government to stabilise the economy and increase investment in the private sector, combined with the relatively low cost of labour, have resulted in the creation of an attractive economic proposition for foreign investment.”
Ichay said: “New private equity investment will provide the necessary capital injection to enable private sector growth, helping Ethiopia achieve the target set out in its Growth and Transformation Plan II, to transform into an industrialised middle-income country by 2025.”
The Cepheus fund, founded by two Ethiopian born partners, will invest in private sector companies all over Ethiopia involved in manufacturing, consumer goods, agriculture and agro-processing. The EIB said the fund is expected to invest between $3m and $10m in each company. The EIB’s participation in the fund was approved by the bank’s shareholders in September 2017 and is expected to be finalised before the end of the year with support from other international investors.
The EIB said it has provided more than €10.1 billion for investment across Africa over the past five years.
According to the head of the EU delegation to Ethiopia, ambassador-designate Johan Borgstam: “Private equity investment will strengthen the growth of leading companies in Ethiopia and create new jobs across the country. This new cooperation with Cepheus demonstrates the EIB’s commitment to Ethiopia and support for economic growth across the country in the years ahead.”
The World Bank’s ‘5th Ethiopia Economic Update’ (79-page / 8.19 MB PDF), published last year, said ongoing investments in Ethiopia’s power and transport infrastructure are expected to help boost future growth and exports, despite the impact on the country of “the worst drought in 50 years”.
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