By Emmanuel Were | Business Daily
NAIROBI, KENYA — Local fund managers showed little interest in a private placement by an Ethiopian investment bank for lack of knowledge of investment opportunities in the country.
Access Capital, based in Addis Ababa, sought to raise between Sh800 million and Sh1.2bn to fund investments in real estate and financial services in its home country, according to arranging agency Kestrel Capital.
However, Kenyan fund managers shied away, highlighting the weakening global economy and a preference for other regional markets where they have knowledge of operations.
“Some Kenyan investors may invest on a limited scale but may not commit to any significant amount primarily for regulatory reasons but also due to the conservative nature of Kenyan investment managers and trustees with regard to investing outside Kenya,” said Mr Andre Desimone, the executive director Kestrel Capital which has had a strategic partnership with the Addis Ababa based bank.
With local investors staying away, UK based private equity funds showed a huge appetite for the opportunity, highlighting high risk in the unregulated capital markets which do not yet exist in Ethiopia.
“Major interest is from UK based private equity funds, but smaller interest also from US, and Kenya,” said Mr Desimone, adding that in total they had seven foreign investor groups with the possibility of at least two of them taking up the whole offer.
People familiar with the deal said investors are required to part with a minimum of Sh80 million in the private placement that closed at the end of last month. A private placement involves the sale of shares to a limited number of investors such as pension schemes, insurance firms and mutual funds.
With a Sh1.2 billion funding war chest, Access Capital, which has heavy investments in consumer products and packaging industries, is looking at diversifying into sectors such real estate and financial services.
This marked the first opportunity for local fund managers to invest in Ethiopia, a market that Kenyan investors have given a wide berth as many prefer to invest in Rwanda and Uganda.
Reduced interest
Fund managers interviewed by Business Daily said the fund is likely to receive cold reception from the local investor community. Still, the absence of a functioning stock market in Ethiopia is emerging as a concern to local investors, who foresee difficulties in existing from the investments. Ethiopia at one time had a functioning stock market but was closed down due to civil strife and reduced investor interest.
“We have in the past explored Uganda and Tanzania but Ethiopia is not in the radar of many people because its hard to exit given it does not have a stock exchange,” said John Wakiumu head of fund management and research at Amana Capital in an earlier interview with the Business Daily.