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Proparco is supporting SMEs in East Africa via an equity investment in CATALYST FUND II. This fund will target companies generating stable cash flows, but with limited growth due to their difficulty in accessing capital. This investment should promote job creation, as this fund supports dynamic SMEs that aim to achieve a significant social impact by targeting social sectors, such as health and education.
Client presentation

Catalyst Fund II is a regional development capital fund dedicated to East Africa and raised by the manager Catalyst Principal Partners (“Catalyst”) based in Nairobi. Catalyst has been set up by three African partners, each with over 15 years of experience in finance and management in East Africa (Paul Kavuma, Biniam Yohannes and Rajal Upadhyaya). In 2011, Catalyst raised its first USD 123m fund (Catalyst Fund I – “CF I”) dedicated to East Africa, with a financing round mainly made up of DFIs. 

Project description

With a size of USD 153m, Catalyst Fund II is planning 8 to 12 equity investments for tickets ranging between USD 7.5m and USD 25m. This will ensure it has significant minority or majority positions in SMEs in East Africa. The fund will target companies generating stable cash flows, with a growth typically limited by a lack of capital and sub-optimal management. The fund will support the development of these companies through internal growth (development of the domestic and regional market) and external growth (acquisitions). CF II will mainly target local companies in the domestic consumption market (agribusiness, health, manufacturing industry, financial services), with strong fundamentals and high potential for regional development. The fund will focus its activity on Kenya, Uganda, Tanzania and Ethiopia, with the possibility of also investing in Zambia, Rwanda and DRC.

Project impact

Proparco’s investment in the CF II fund is supporting the creation of a local private equity team targeting SMEs in East Africa in sectors that (i) provide goods and services at the Bottom and Middle of the Pyramid, (ii) often have difficulty in accessing venture capital in the region, (iii) promote job creation by investing in dynamic SMEs, (iv) have a significant social impact by targeting social sectors (health and education) and companies oriented towards domestic demand.
In 5 years, Catalyst has become one of the most credible local managers in the region. In addition, all the investments will include a development plan to facilitate the growth of the targets and ESG action plans to increase the impact of these investments.  

22/12/2016
Date of signature of the project
Ethiopia Uganda Tanzania Multi-country Africa
Location
Financing tool
15 000 000 Euros
Amount of funding
EUR 15m Equity investment
Financing details
CATALYST FUND II
Client
CES