On April 4, the The British development finance institution, Commonwealth Development Corporation (CDC) Group, has formally changed its name to British International Investment.
As part of the name change, the Development Finance Institution (DFI) announced it has exceeded its pledge to invest £2 billion in Africa over the past two years. It was a reminder of the series of work BII had done on the continent that led to this point: more than 600 portfolio companies valued at $4.2 billion. Nigeria is the largest investment market in Africa, with a portfolio of $570 million.
Within this period, the impact investor supported several companies in different sectors such as banking, trading, private equity and venture capital. Some deals include $300 million in direct equity in DP World, $75 million in direct debt in Stanbic IBTC Bank, $100 million in Standard Chartered, a $20 million investment in Verod Cap and a $15 million investment in the TLcom TIDE Africa Fund.
In a new development, BII said it will invest between £1.5 billion and £2 billion annually between 2022 and 2026 in “Africa, parts of Asia and the Caribbean”. But to limit this to just Africa, the impact investor wants to mobilize $6 billion to the continent over these five years, Benson AdenugaThe company’s headquarters and coverage director for Nigeria told londonbusinessblog.com in an interview.
“We want to do a lot in Africa. Africa is one of the most important strategic markets for BII. It’s been around since inception, and it continues even with our current strategy for 2022-2026,” Adenuga said. “The main reason for that is you have over a billion people in Africa, the level of development needs across Africa is very We see a very important role for DFIs like us who have the experience, capital and skills to support development.”
BII has adopted a strategy of making calculated, not sporadic, investments in key sectors: infrastructure, financial services, manufacturing, food and agriculture, health, education and real estate and construction† The strategy is to divide countries into four categories based on market development and specific risk profiles. They include mature, strong, stable and fragile markets. “What we do in each country depends on where the country is,” noted the director.
In mature markets such as South Africa, Adenuga said BII will be on-site and offer its full range of services ranging from climate finance, financial inclusion finance and equity and debt financing. BII will have offices in major markets such as Nigeria, Egypt and Kenya and will offer equity and debt financing to projects in these countries. For stable markets like Ghana, BII gets representative offices that allow investments to go all in if there are noticeable benefits. And in fragile markets, BII will work through intermediaries and partners to make investments on its behalf in key sectors.
“We offer these across countries and use various instruments for this, from equity to debt and everything in between. That is how we approach Africa.”
Progress So Far: Banks, VC Firms & Startups
About 57% of the African population has little or no access to financial services. And a primary goal of the BII’s engagement and investment in Africa is to bring more people into the financial stratosphere. In his trades to date, the impact investor is not only constructing avenues to increase financial inclusion, but also increasing opportunities for women, as they are typically more financially excluded than men.
In February, FirstBank, one of Nigeria’s largest banking groups, received a $100 million credit facility from Impact Invest to provide loans to small and medium-sized businesses in the country. Adenuga said 30% of that money is dedicated to women-run and led SMEs.
BII has also made investments in TLcom Capital, one of the largest pan-African venture capital firms. In January, TLcom reached the first close of its second $150 million fund; BII contributed $10 million of that money. This investment follows the impact investor’s $15 million commitment to TLcom Capital’s first $71 million fund.
TLcom Capital is just one of many offices where BII is a limited partner. It has put money into VC and PE firms such as Sawari Ventures, AfricInvest, Novastar Ventures, Verod Capital and Ezdehar Management.
Investing in startups through these companies made sense for BII, as it is not traditionally structured to take early-stage risk by participating directly. However, it becomes difficult to ignore some of these companies as they enter the growth phases and need more capital – usually more than what venture capital firms can provide – to scale up. BII has taken its game to the next level by investing directly in such companies.
“We have operated as a growth capital company, with at least $10 million in investment and more. There are several early stage innovative companies that we were unable to support before,” says Adenuga. “But we see a gap in the market when it comes to startups with a proven concept, a product on the market that is acceptable and needs more capital; we then come in and co-invest with our fund managers directly in the companies.”
An example is the investment in B2B e-commerce platform TradeDepot. In previous rounds, BII had invested indirectly through Novastar Ventures as a limited partner, but in TradeDepot’s Series B round, BII also invested $5 million directly with Novastar on the startup’s table.
BII and Novastar Ventures also backed TeamApt, a Nigerian fintech, last year in its $30 million+ Series B. The impact investor invested about $5 million. Other African startups that have received funding directly from BII include M-KOPA, Paymob, Apollo Agriculture and Pylon.
Big plans for climate finance
This week, BII announced its $20 million investment in Moove, a mobility fintech that is democratizing access to car ownership in Africa. The company provides revenue-based vehicle financing and financial services to Uber drivers. However, unlike the other equity rounds, the Moove deal is a 4-year structured credit investment. BII said the funding will enable Moove to purchase and import brand new “economy cars” in Lagos, which will be rented out to drivers who can earn their way to asset ownership in three to four years.
In an interview with londonbusinessblog.com, Moove co-CEO Ladi Delano said that at least 60% of the vehicles the company funds will be electric or hybrid in the coming years. This grand plan from a company that has raised more than $200 million in equity and debt aligns well with BII’s climate finance goals. It is one of the reasons why the impact investor is interested in the mobility company, Adenuga said.
He said at least 30% of BII’s total new commitments in value will be in climate finance over the next five years. It is the first time that BII has set clear, explicit targets for climate finance, a development that will make it one of Africa’s largest climate investors.
Last week, BII, which has offices in numerous African countries, announced plans to partner with Norfund and Scatec to invest up to $200 million in hydropower projects across the continent. It follows other climate-focused projects that BII has been involved in, such as New Forests and Energy Access Relief Fund, and smaller commercial projects such as Lumos and Greenlight Planet.
“What we want to do is invest in companies that lead to a reduction in emissions, that support adaptation and resilience, and also help companies adapt to the impact of climate finance,” said the director. “When we talk about climate finance, people often think of investing in solar panels and renewable energy; it’s that and much more. Climate-smart agriculture and green buildings, for example, are something we’re going to look at. In terms of mobility, things like electric vehicles, converting diesel to CNG or clean energy vehicles – those are also some of the things we will support. So it’s a comprehensive set of investments that we will try to make, which is critical for us.”