Private equity gains momentum in Côte d'Ivoire

Over the next three decades private equity (PE) is set to play a significant role in financing, developing and supporting the private sector in West Africa. The growing number of PE firms with offices in Côte d’Ivoire highlights how its profile has expanded in the years since the civil war came to an end. Indeed, by mid-2017 there were 15 PE funds operating in the country – ranging from Tunisia’s AfricInvest and France’s Amethis Finance, to South Africa’s AFIG Funds, Mauritius’ Adenia Partners and US-based Emerging Capital Partners (ECP). This number is up from only two in 2008.

Growing Potential

In March 2017 PE funds based in Côte d’Ivoire formed the country’s first domestic professional organisation for the sector – the Ivorian Association of Capital Investors – with the aim of promoting the country’s PE market and private sector more generally. Headed by Michel Abrogoua, founder of Phoenix Capital Management in Côte d’Ivoire, the organisation estimates that PE companies hold investments of approximately CFA184bn (€280m) in more than 40 private firms in the country.

Expanding the number and type of funds in Côte d’Ivoire could also help diversify the deals made. According to African PE and Venture Capital Association (AVCA) figures, investments in consumer staples represented about 24% of the PE deals between 2011 and 2016, followed by the industrial sector (20%), health care (12%) and financial services (12%).

While development finance institutions have traditionally been cornerstone investors in the region’s PE funds, there is growing interest from enterprises and family offices to support small and medium-sized enterprises. “The potential for family-owned offices is strong in West Africa,” Laureen Kouassi-Olsson, regional director for Amethis West Africa, told OBG. “Wealthy Africans are more likely to be in the business of providing debt relief,” she added.

Investors are also continuing, encouraged by the West African CFA franc’s currency peg to the euro at a rate of CFA655.96:€1, according to Vincent Le Guennou, co-CEO and managing director of ECP.

Exit Advantage

One of the biggest hurdles PE funds traditionally face in Africa is exiting an investment, but this has proven less burdensome in Côte d’Ivoire. Between 2011 and the first half of 2016, 14% of West Africa’s PE exits occurred in Côte d’Ivoire, ranking the country third after Nigeria (42%) and Ghana (17%), according to the AVCA. In 2016, for example, PE firm Cauris Management exited from Atlantic Business International and Bridge Bank Group Côte d’Ivoire, with returns of 1.7 and 3.1 times the company’s original financing, respectively. The ability of funds to exit investments is supported in large part by the steady growth of the local stock market, which has seen the volume of shares traded grow six-fold since 2011. This offers an attractive route for potential PE exits.

New Players

In November 2017 France’s Investisseurs & Partenaires (I&P), an Africa-focused PE firm, launched the Comoe Capital fund. I&P has been investing in Côte d’Ivoire for three years, has had an office in Abidjan since 2014, and holds stakes in three local health, equipment and business-to-business services companies, but the new fund will be the first of I&P’s vehicles to focus exclusively on Côte d’Ivoire. The Comoe Capital fund will concentrate on businesses in the start-up phase with project financing needs of up to €500,000, and will contribute to Côte d’Ivoire’s growing share of francophone West Africa’s PE activity. Between 2014 and 2016 Côte d’Ivoire hosted 48% of regional PE deals, accounting for 79% of the total value. This was a significant increase on the 2011-13 period, when the country’s share of PE deals and their value, stood at 40% and 54%, respectively, according to the AVCA.

The new subsidiary is being conceived under the aegis of the firm’s I&P Développement 2 (IPDEV2) project. Launched in October 2015, IPDEV2 has already overseen €200m in capital raised for funds focused on investments in Niger, Burkina Faso and Senegal.