China to invest in Africa private equity funds


China is seen as a latecomer in investing in Africa through the private equity funds, a strategy successfully used by sovereign wealth funds of countries like France and Germany that enables them to benefit from diversified investment returns in the continent.

Managing Director of Institutional Fundraising at the Citadel Capital Stephen Murphy said it is time Chinese investors dipped their money in private equity funds in Africa to give them additional investment leverage in private sector in addition to the public sector contracts. "Investing in regional private equity funds will help the Chinese have a wider coverage of opportunities in the continent and generate more profits from the continent's high returns," said Murphy in Nairobi on Monday.

Citadel Capital with investments of 8.6 billion U.S. dollars under control is ranked the No. 1 private equity firm in Africa. It is ranked No. 93 in the world. "So far, more interest to invest in private equity funds in Africa is coming from the European Union. That way, these investors are able to take advantage of wider opportunities in the continent," he said.

The most popular active EU funds investing in Africa's private equity funds include PROPARCO, the subsidiary of the French Development Agency that finances the private sector, FMO, the entrepreneurial development bank of the Netherlands and the KfW Bankengruppe, German-based development finance institution that provides long-term project and company financing.

He said institutions like the China Investment Corporation (CIC) , a sovereign wealth fund and China Africa Development Fund, an eventual 5 billion dollar fund to encourage and support Chinese enterprises to invest in Africa should take opportunities to invest in Africa's private equity funds.

Citadel Capital is expected to start talks with CIC next month with possibility of the fund investing in into the African private equity.

A report by global consultancy firm Ernest & Young, "Global private equity watch: Winners will emerge" names Africa alongside Poland and Turkey as garnering growing interest from private equity investors. "These markets are home to a significant number of successful family-owned and other growth-oriented companies, and also expect to see a rise in privatizations of state-owned enterprises," notes the report.

An earlier report by the same company forecast that an increase private equity exit activity in Europe and North America in 2010 will most likely benefit Africa from this year going forward. It said the natural choice or existing private equity funds was in Africa because of higher returns and wide opportunities.

Citadel Capital has invested in mining, rail and water transport, agriculture, solid water management among other businesses in 15 African countries.

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