Press Release
Friday, April 18, 2008
OPIC BOARD APPROVES $50 MILLION FOR AFRICA CONSUMER INVESTMENT FUND
WASHINGTON, D.C. – The Board of Directors of the Overseas Private Investment Corporation (OPIC) approved up to $50 million in financing to support a new private equity investment fund that will invest in small and medium-sized enterprises (SMEs) in goods and services sectors throughout Africa, benefiting low- and middle-income populations across the continent.
As the fourth and latest OPIC investment fund established in response to a 2007 call to create funds providing social benefits in Africa, it will also undertake socially- and environmentally-responsible investments. The OPIC call was part of the Africa Financial Sector Initiative announced by President Bush in May 2007, which has since generated more than $1 billion in fund capital supported by OPIC. The President’s initiative is designed to encourage capital flows into African markets.
The GEF/Africa Growth Fund will provide expansion capital to high-growth companies targeting essential supply chain products and services throughout Africa to the consumer goods and services sectors, including companies engaged in logistics support, distribution and transportation, light manufacturing, and agro-processing. The fund will initially target investments in the Southern African Development Community region, then expand to East, West and North Africa. The fund has a target capitalization of $150 million.
The fund intends to exploit a supply-and-demand imbalance in the region, whereby limited access to equity capital for SMEs has limited the entrepreneurs’ financing options to expand their businesses. Although significant levels of development-oriented finance have flowed into Africa in recent years, the majority has been allocated to infrastructure and natural resource projects, large companies and microfinance institutions.
The fund will primarily benefit low- and middle-income populations: the expansion of the availability of consumer goods and services will benefit both consumers and suppliers by stimulating the local industries, generating competition, expanding options for consumers, and encouraging other FDI flows into local markets through a demonstration effect.
OPIC selected as fund manager the Global Environment Fund (GEF). Established in 1990, GEF manages private equity investment funds with $800 million in aggregate capital under management. Between 1998 and December 2007, GEF has invested more than $310 million in 28 investments in clean energy, environmental services, infrastructure, and technology.
Historically, GEF has targeted projects involved in solving environmental challenges; it also as a track record of undertaking socially-responsible investments that explicitly benefit the communities in which they operate. The GEF/Africa Growth Fund will use previous GEF products as a model of corporate social responsibility for implementation of its subprojects.
“The GEF/Africa Growth Fund will have a significant impact on Africa’s economic development by helping its consumer goods and services markets expand through SME investments. Its additional focus on socially- and environmentally-responsible investments, as part of President Bush’s Africa Financial Sector Initiative, will also help to ensure that its investments benefit as many Africans as possible,” said OPIC President and CEO Robert Mosbacher, Jr.
OPIC was established as an agency of the U.S. government in 1971. It helps U.S. businesses invest overseas, fosters economic development in new and emerging markets, complements the private sector in managing risks associated with foreign direct investment, and supports U.S. foreign policy. Because OPIC charges market-based fees for its products, it operates on a self-sustaining basis at no net cost to taxpayers.
OPIC’s political risk insurance and financing help U.S. businesses of all sizes invest in more than 150 emerging markets and developing nations worldwide. Over the agency’s 35-year history, OPIC has supported $177 billion worth of investments that have helped developing countries to generate over $13 billion in host-government revenues and create over 800,000 host-country jobs. OPIC projects have also generated $71 billion in U.S. exports and supported more than 271,000 American jobs.