Gateway Partners: Africa ready for capital as trade accelerates

Gateway Partners, a private equity investor, recently launched a $300 million Africa-focused private credit fund in collaboration with the African Export Impact Bank. The fund aims to target a dollar gross internal rate of return between 11 and 13 per cent while also focusing on developmental impact. In a recent interview with CNBC Africa, V. Shankar, Co-Founder, Partner & Chief Executive Officer of Gateway Partners, discussed the fund's strategy and the state of private equity investments in Africa. Shankar highlighted the significance of the Africa Credit Opportunities Fund, emphasizing that it is dedicated solely to Africa, in contrast to their previous equity funds that also invested in other regions. He pointed out the high demand for credit in Africa, especially in sectors that are crucial for trade and exports. Many businesses in Africa struggle to access capital due to constraints in the banking sector and the lack of deep and liquid debt capital markets. The Credit Opportunities Fund aims to bridge this gap and drive real impact through trade growth, job creation, and economic development. Shankar addressed the issue of elevated interest rates and borrowing costs, noting the global trend of increasing interest rates. He highlighted the importance of capital availability for businesses in Africa, emphasizing the need for various investment sources to address the funding gap. The fund's approach to overcoming high borrowing costs involves strategic deployment of capital to support businesses and stimulate growth. Discussing the investment landscape in Africa, Shankar emphasized the continent's demographic trends, urbanization, and emerging middle class as key drivers of demand for essential goods and services. He identified sectors such as food, shelter, clothing, water, data, education, and healthcare as resilient and promising investment areas. The balance between profit and impact is crucial, and Shankar acknowledged the challenge of finding companies that offer both financial returns and developmental benefits. Gateway Partners has already dispersed funds to four entities in Africa through the Credit Opportunities Fund, with a focus on sectors like telecommunications services and agricultural commodities. Shankar highlighted the importance of identifying and nurturing 'diamonds in the rough,' referring to undervalued or underperforming companies with potential for significant growth. He stressed the need for strategic execution to maximize the value of investments and drive sustainable growth. In light of the geopolitical shifts and global economic dynamics, Shankar shared his perspective on emerging markets, emphasizing the growth potential and stability of these regions compared to traditional Western markets. He highlighted the opportunities presented by the diversification of global supply chains and the continued growth of South-South trade and investment flows. Despite the inherent risks, Shankar remains optimistic about the investment prospects in emerging markets, including Africa. The conversation also touched on the African Continental Free Trade Area (AfCFTA) and its potential to boost intra-Africa trade and economic integration. Shankar highlighted the importance of supporting companies that can expand across borders to achieve scale and drive regional growth. He emphasized the value of integration and highlighted examples of companies like Dangote Cement and Liquid Intelligent Technologies that have successfully leveraged cross-border operations. As Gateway Partners continues its investment journey in Africa, Shankar remains committed to supporting businesses that not only offer financial returns but also contribute to the continent's economic development and job creation. With a focus on key sectors and strategic execution, Gateway Partners aims to play a crucial role in fueling Africa's growth and prosperity.