To support the growth of mid-market companies in sub–Saharan Africa, World Bank Group subsidiary the International Finance Corporation (IFC) on July 24 announced an equity investment of $25-million in Metier Capital Growth Fund III (MCGF III), as well as a co-investment envelope of $15-million to invest alongside the fund in select companies.

The fund, which will be managed by private equity firm Metier Private Equity International, will invest in eight to twelve mid-market companies primarily in Southern Africa and East Africa.

The fund will invest in sectors including telecommunications, fast-moving consumer goods, healthcare, non-banking financial services and manufacturing, as well as infrastructure and energy.

MCGF III will invest at least 40% of the fund outside of South Africa.

IFC’s investment will help the fund reach its first close and, through a co-investment envelope, enable the fund to attract more follow-on equity for its investee companies. IFC will also support Metier in strengthening its gender-lens investing approach and promoting gender diversity, both within the fund manager and its investees.

“Beyond delivering top quartile returns, Metier’s core objective is to contribute towards positive and sustained impact across Africa,” says CEO and co-founder of Metier Paul Botha.

“Our active deal pipeline is characterised by growth capital investments. These will develop new business opportunities that will have a positive impact on the effects of climate change, create decent jobs with a broader focus on gender-lens investing, support the connectivity of rural communities and enhance small business development across Africa. We are excited about our continued partnership with IFC.”

Private equity investment in Africa remains among the lowest in emerging markets, representing just 4% of total volumes. Challenges include perceptions of high risk, foreign exchange risk, high inflation and economic uncertainty. 

As a result, equity financing for mid-market companies has been scarce, hindering the development of the private sector.

“A strong private sector is an essential driver for sustainable growth, job creation, market competitiveness and shared prosperity,” says IFC VP for Africa Sérgio Pimenta. 

“IFC’s investment in Metier Capital’s Growth Fund III will increase access to much needed private capital that will catalyze value creation for these companies and help bolster Africa’s private equity industry,” he adds.

IFC’s investment is aligned with its strategy to strengthen the African private equity market. It will also demonstrate that investing in African markets can generate commercial returns for investors as well as positive developmental impact for Africa.