Building bridges between France and Africa

Alice Tchernookova
03 February 2017

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BPI France and AfricInvest have joined forces to raise the first ever private equity vehicle to straddle the Mediterranean between France and Africa. Alice Tchernookova examines the fund's strategy

In January, BPI France and African fund manager AfricInvest launched what the African Private Equity and Venture Capital Association says is the first Franco-African fund, Fonds Franco-Africain (FFA), with €77m in commitments.

Backed by a mixed pool of French and African investors, FFA is the first cross-border investment fund dedicated to the development of small and medium-sized businesses based in France and Africa. With €77m and a 10-year lifespan, the fund should be equally deployed between both geographies, with five to seven investments ranging from €5-10m in France, and the rest deployed as investments of €15-30m in Africa. On the African side, the capital will be merged with AfricInvest's Fund III, which closed on €270m last year.

"The fund is an answer to repeated calls from French companies to have a local partner that can truly accompany them and help them expand in Africa," says AfricInvest partner Khaled Benjennet. "There are many requests, but interested parties don't necessarily have the means and/or resources to go and invest by themselves. What they need is an active partner who knows the place and can guide them through the process." One of the main advantages of the FFA, he says, is that it will provide French companies with the expertise of local investment managers.

The product is a hybrid one, in the sense that it is neither an African nor a French fund per se and, as such, it makes it hard for certain structures to commit capital to it" - Khaled Benjennet, AfricInvest

Says Benjennet: "This fundraise is quite meaningful to us, as gathering the funds wasn't easy. The product is a hybrid one, in the sense that it is neither an African nor a French fund per se and, as such, it makes it hard for certain structures to commit capital to it."

With a fundraising launched in late 2015 and a hard-cap fixed at €100m, the fund was closed after a relatively short time on the road – "proof that it was really answering a need", says Benjennet. BPI France contributed €23m to the fund, while 25% of the gathered commitments came from African investors, including local pension funds, insurers and banks, as well as private Kenyan and Nigerian investors, and AfricInvest itself. On the French side, investors include corporate group Orange, Societe Generale and Proparco.

A generalist fund, FFA will target businesses with revenues of €10-100m, usually taking minority stakes, and will largely follow the geographical path so far outlined by AfricInvest's investments. While the fund is an FPCI with a French, AMF-approved legal base, it will be primarily managed by a team of 55 Africa-based investment managers spread across Tunisia, Morocco, Algeria, Kenya, Ivory Coast and Nigeria.

"Although the fund's size is limited to €77m, its striking force will be much stronger," says Benjennet. "The point will also be to look for co-investment opportunities with French partners, which means the amount of money injected into the continent will be much more significant."

Attracting French funds
According to AFIC's 2015 Livre Blanc du Capital-Investissement en Afrique, only around 10 France-based funds were invested in Africa in 2014. Since 2008, French funds have invested an estimated €636m in a dozen businesses on the continent, mostly in northern and western Africa, the report states.

"French funds are still very mildly involved in Africa, but there is interest, curiosity and a will to understand," says Hervé Schricke, former AFIC chair and president of the association's Club Afrique, launched in 2015. "They do not tend to go and develop their activity on the continent directly, but they are conscious that their portfolio companies are keen to expand their activities there."

Funds such as Rothschild's Amethis Finance and Moringa Partners, Wendel, Investisseurs et Partenaires and Siparex (which helped the launch of AfricInvest in the 1990s), are among the few that have taken the step. "There is an obvious and natural mutual interest between France and Africa, because there is a common history, a cultural dimension to their relationship," Schricke says. "French funds need to realise the growth and investment opportunities this continent represents; FFA is a good first step towards that."

FFA is therefore likely to try and push hard on the co-investment front, on both sides of the Mediterranean. Says Benjennet: "We didn't get any commitments from funds-of-funds this time [a fact that, again, he mostly attributes to the hybrid nature of the fund], but we strongly believe in this cross-border business model and remain hopeful that some will join us on the next fundraise."

Meanwhile, the collaboration should also represent a major opportunity for successful African businesses looking for commercial, technical and R&D partnerships, or for external growth opportunities in Europe – needs which, at the moment, are not properly addressed, according to Benjennet.