CDC Group, the UK’s publicly owned impact investor, has announced a commitment of US$39.2 million to support SMEs in West Africa. CDC is backing Verod Fund III and Adiwale Fund I, West-African based private equity funds targeting SMEs in the region, with commitments of US$19.2m and US$20m respectively.
In West Africa, banks and low levels of private equity activity are currently struggling to meet the financing needs of SMEs, hampering their potential as engines of economic growth in the region. Access to finance is cited as the top barrier for doing business in Nigeria and Ghana. Increasing access to capital to this market is a core element of the CDC’s Africa strategy by backing well-networked, experienced local teams.
This should, in turn, support private sector development, economic growth, and long-term sustainable employment, particularly for the semi-skilled and low-skilled workforce in the region, therefore contributing to Sustainable Development Goal 8: decent work and economic growth.
Adiwale Fund I is an SME fund primarily targeting investments in West Africa focusing on Cote d’Ivoire, Senegal, Burkina Faso, and Mali. It is the first fund raised by Adiwale Partners and will make investments in selected industry sectors (FMCG, business services and manufacturing) with commitments of US$3-10 million.
CDC has had a long-standing relationship with the Adiwale founders for a number of years and, following its creation in 2016, provided advice on setting up Adiwale’s ESG structures, business integrity team and processes, and compliance policies.
Verod Fund III is the second fund being raised by Verod Capital to invest in West African SMEs. The fund manager has built a strong investment track record over the last decade, committed capital to 18 companies in Nigeria and Ghana and concluded 10 successful exits.
Fund III is targeting investments in consumer-facing SMEs in Nigeria and Ghana. The fund will be focused on sectors such as consumer goods and services, agribusiness and financial services with investments of up to US$20 million concentrating on themes including regional expansion and import substitution.
Verod has attracted US$200m in total commitments for Fund III, with a significant share (40%) of commercial capital, reaching its target despite the current challenges in fundraising for African private equity.
Nick O’Donohoe, CEO of CDC Group commented noted, “In West Africa, SMEs should be the engine room of regional economies but they are being held back by the lack of access to finance. As the largest private equity investor in Africa, CDC is committed to boosting access to finance for these businesses.”
He said investing in SMEs enables the agency’s capital to go further with positive returns generating an important demonstration effect and help mobilize further capital into these markets, encouraging more commitments towards the United Nations Sustainable Development Goals.
Mobilising capital into West African SMEs will, in turn, support private sector development, economic growth and long-term sustainable employment, particularly for the semi-skilled and low-skilled workforce in the region, therefore contributing to Sustainable Development Goal 8: decent work and economic growth and SDG 7: partnership for the goals.
CDC Group is the world’s first impact investor with over 70 years of experience of successfully supporting the sustainable, long-term growth of businesses in Africa and South Asia.