Kinshasa, Democratic Republic of Congo, 14 April 2022
Today, XSML, the fund manager active in Central & East Africa, announced it had reached the hard cap for its African Rivers Fund III (ARF III) at USD 85 million. ARF III is XSML’s third fund under management, after its maiden fund the Central Africa SME Fund (CASF) and its second fund, African Rivers Fund (ARF), bringing total assets under management to USD 159 million.
According to Barthout van Slingelandt, Managing Partner at XSML: “We have welcomed four new investors in our third fund and are excited that Swedfund, one of those new investors, increased its commitment in the first quarter of 2022, leading us to reach our hard cap.”
ARF III targets growing, well-managed small and medium-sized enterprises (SMEs) in the Central African region covering Angola, the Democratic Republic of Congo (DRC), Uganda and the Republic of Congo and surrounding countries. The fund is named after the two most powerful rivers in Africa, the Congo and Nile Rivers, which embody the potential of the Central and East African region. ARF III follows the successful investment strategy of its predecessor funds, CASF and ARF, by providing debt, equity and mezzanine finance to fast-growing companies in these regions. The top up by Swedfund adds to investments already made by FISEA, managed by Proparco (the French development institution) DALHAP (private impact investor) and Norfund (the Norwegian development fund) and in the first close by BIO (Belgium Investment Company for Developing Countries), the Dutch Good Growth Fund (DGGF, managed by Triple Jump), FMO (the Dutch development bank), IFC (a member of the World Bank Group), Swedfund (Swedish development bank) and the SDG Frontier Fund (which includes nine private and institutional investors from Belgium). Most investors in Fund III have invested in XSML’s earlier funds, but DALHAP, Norfund, Swedfund and SDG Frontier Fund are new investors, demonstrating commitment and support for investing in these frontier markets.
Van Slingelandt: “We have been in full swing in the last 17 months to deploy capital and by the first quarter of this year, have committed over 55% of ARF III capital in 23 businesses. We see Swedfund’s top-up as a testimony of trust in our model, as we start to provide liquidity to our investors in ARF III in the coming quarters – very similar to what we have done with our predecessor funds. Through our local offices, including Luanda, Angola, which is on the verge of opening in Q2, 2022, we continue to invest in local, private businesses to support economic growth and to create jobs.”
Through CASF, ARF & ARF III, XSML has provided over USD 116 million in risk capital with an investment size ranging from USD 100,000 to USD 6,000,000. XSML has made investments in some 65 SMEs across ten sectors. Both CASF and ARF are fully invested and have been returning capital to investors for the last eight years with 23 investments exited. Fast growing frontier markets in Sub-Saharan Africa continue to be underserved, due to a lack of risk capital and operational support, leaving many opportunities unexploited. By stimulating entrepreneurial endeavors via investment and know-how, XSML and its funds stimulate job- and income creation. ARF III continues the existing strategy with investments between USD 100,000 and USD 7.5 million.
Between its funds, XSML has provided technical assistance with over 100 projects to help portfolio companies improve operations, financial management and environmental and social practices. Evidence of further impact can be found in various fields, from education to healthcare, with approximately 5,000 direct jobs created since 2011, over 4,000 additional school children spread over three private schools, the roll-out of operating theatres, maternity rooms, and over 70 hospital beds in clinics in Kinshasa and Kampala, improving healthcare standards.
Although international investors show an increasing interest in emerging markets, the demand for finance from small and medium sized enterprises (SMEs) remains largely untapped. XSML, eXtra Small Medium Large, founded in 2008, bridges this gap by investing in small businesses to stimulate local entrepreneurship and help these businesses grow into medium and large enterprises. XSML manages three funds with a focus on frontier markets in Central and East Africa: the Central Africa SME Fund, the African Rivers Fund and African Rivers Fund III. Our local teams of 16 investment and operating professionals have experience in emerging and frontier markets in private equity, corporate and development banking and corporate restructuring with offices in Kinshasa (DRC), Kampala (Uganda) and Luanda (Angola) to be opened in Q2, 2022.