South African private equity firm raises $800m in new fund

January 23
10:11 AM 2013

South Africa's Ethos Private Equity has raised $800 million for a new fund that will look for opportunities in the continent's biggest economy and its fast-growing neighbours in one of the largest amounts secured by an Africa-focused fund.

Ethos, one of South Africa's top private equity firms, said it had beaten an initial target of $750 million, underscoring foreign investors' desire to gain exposure to sub-Saharan Africa through its most developed economy.

"South Africa has obvious advantages in the context of infrastructure and corporate governance. Investors see those as a huge plus in terms of tackling sub-Saharan Africa," said Andre Roux, chief executive of the 29-year-old Johannesburg-based firm.

Roux said Ethos had managed to attract a wider spread of investors than in previous rounds of fundraising, drawing Asian pension and sovereign wealth funds for the first time, as well as investors from Europe, North America, the Middle East and Africa.

"Previously a large portion of our international fund money came from North America," he said. "It's now much more evenly spread. Asia is now an important contributor to our funds where previously we had no contributions from Asia.

"Private equity investors are increasingly targeting sub-Saharan Africa, home to some of the world's fastest growing economies and an expanding middle class.

The region is projected to grow at an average rate of 5 percent from 2013-2015, according to the World Bank. Excluding South Africa, growth is expected to average 6 percent over the same period.

In 2011, Helios Investment Partners raised the largest Africa-focused fund, totalling $900 million, after attracting more than $1 billion in orders.

Last year, Brazilian bank BTG Pactual Group announced plans to raise $1 billion for what will be Africa's biggest private equity fund, with a focus on the infrastructure and energy sectors.

U.S. private equity firm Carlyle Group completed its first African deal in November, paying $210 million for a stake in Tanzania-based agribusiness Export Trading Group along with two other investors.

The Ethos VI fund has already made two South African investments, in companies in the construction and corporate branding sectors.

Ethos typically invests in medium-sized to large businesses with an enterprise value of between $100 million and $450 million, Roux said.

Outside South Africa, Roux said Ethos saw potential in west African oil producers Nigeria and Ghana and in east Africa, where Kenya and Uganda have discovered oil.

"We think that's going to be a huge stimulus to that part of the world as those oil finds are developed," he said. 

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