UK development finance institution CDC Group has made its first fund commitments as part of its African private credit fund strategy, the investor announced this morning.
It has committed $60 million across two funds with a view to addressing the ‘mid-market financing gap’, which it says has been exacerbated by the covid-19 crisis.
CDC has committed $30 million to Vantage Mezzanine Fund IV, which is managed by Vantage Capital, a pan-African firm that has been investing since 2001.
CDC has committed a further $30 million cornerstone investment to the debut fund from BluePeak Private Capital. BluePeak was founded in 2019 by three former executives from the credit team at Middle-Eastern alternatives firm Gulf Capital, including Walid Cherif, who started and led Gulf’s credit team.
Both fund commitments will “enable the fund managers to increase credit supply to mid-market African companies by providing countercyclical mezzanine funding that is bespoke and meets the market need”, CDC said.
“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,” said Jo Fry, investment director and head of intermediated credit at CDC. “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.”
The stated aim of CDC’s African private credit fund strategy is to have “a signalling effect” to attract more commercial investors into African debt markets to help develop “reliable, long-term private debt platforms”. This, in turn should contribute to economic growth and employment, aligning with UN SDG 8 (“decent work and economic growth”).