Subsaharan Africa - Grofin - 2009

Boosting African SMEs

 

Project start: 2009
Financing: Equity investment of $10M with technical assistance
Partner : GroFin Manager
 
 
Context
 
GroFin is a multi-national specialist SME finance and development company offering an innovative combination of risk capital and business development assistance to viable enterprises.
The Growth Finance sector is a niche market providing risk finance for small and medium businesses in emerging markets, focusing on the ability of the business to make a profit year after year. Entrepreneurs in this sector are often unable to access finance from traditional finance institutions as they lack the necessary track record or collateral. Microfinance, although flexible and development orientated, is restricted to supporting individuals and small entities. Private Equity offers management input and long term involvement, but is confined to assisting larger, more mature companies. Venture Capital offers the seed funding so desperately needed by start-up businesses lacking a track record, but is confined to early stage, high growth businesses.
 
 GroFin, as a leading supplier in the Growth Finance sector, offers a solution which integrates flexible finance with business support, serving entrepreneur-owned businesses. GroFin has established itself as one of the leaders in the market by raising five funds dedicated to SMEs between 2004 and 2007.
GroFin Africa Fund, the 6th fund managed by GroFin’s team, is a mezzanine fund of $170M and is the biggest multi-countries fund raised by the group, with a presence in seven countries in sub-Saharan Africa: South Africa, Uganda, Tanzania, Kenya, Nigeria, Ghana and Rwanda. It is also the largest fund targeting the Growth Finance sector.
 
Project objective
 
FISEA’s equity investment in GroFin Africa Fund aims at taking part in the development of the private sector and the strengthening of SMEs in sub-Saharan Africa. Beyond its equity contribution, FISEA’s intervention through technical assistance aims at improving the standardization and performance of GroFin’s financial offering in several countries throughout sub-Saharan Africa. FISEA’s contribution aims to provide financing and operational support to the “intermediary marginalized sector” of African SMEs in order to create a virtuous circle benefiting local economies.
 
Project description
 
The financing offer provided by GroFin materializes in a financial package -mezzanine loans (average amount of $350 000), performance based incentives, with technical support- tailored to each entrepreneurs’ needs and cash flow’ risk profiles. The standardization of tools and methods enables the organization to reach a scale effect that could be comparable to that of the banking network.
 
Impacts
 
The impact on the development is very high.
 
According to GroFin forecasts, more than 13 000 jobs should be created or conserved thanks to the investments of GroFin Africa Fund. Around 92 000 people should benefit from it (through the creation of indirect jobs).
 
Andrew Sibeko, Engen Maraisburg (bakery business)
 
 
“GroFin’s hands-on personal approach is so refreshing after having worked with a bank before. Their guidance in finalising my business plan and helping me address the risks made the start-up more successful and I now benefit from their assistance to help me grow the business. Having them support me financially and making their expertise available to grow my own management skills is a big part of my business success.”
 

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