Good Investment?

$125m boost for African Mining SME sector from new ‘Pan-African’ fund

The largest ever fund to target Africa’s under-served sub $1m SME sector has reached the $125m milestone.

Promoted by South-African based company GroFin, in partnership with Shell Foundation, the “GroFin Africa Fund” has raised $125m which aims to unlock the potential of Africa’s small and medium-sized enterprises. These firms often struggle to grow because of a lack of access to capital and business development assistance, and as a result, Africa misses out on a significant engine of economic growth.
This fund adds to $100m already raised for this sector through the joint efforts of GroFin - a specialist business developer and financier - and the Shell Foundation, bringing the total committed capital level to $225m.

GroFin, co-established by the Shell Foundation in 2004, already provides risk capital funding and vital business skills assistance to entrepreneurs across seven African countries. During this time it has initially supported over 1,000 enterprises with business assistance and financed more than 100 of these, resulting in the creation and maintenance of over 2,500 jobs and the improved livelihoods of over 17,000 people.

The GroFin Africa Fund is attempting to plug the so-called ‘missing middle’ – the gap that exists between micro-finance, which tends to cater for informal entrepreneurs needing less than $50,000, and commercial banks and private equity, who prefer to finance larger companies which require over $1 million.

The international development sector has long sought to find financially viable ways to support this missing middle – known increasingly as the ‘Growth Finance’ sector – so that entrepreneurs can grow their businesses and create sustainable employment. All GroFin-backed entrepreneurs receive extensive support building their businesses – as well as risk capital.

Chris West, Deputy Director of the Shell Foundation, commented: “SMEs are a key driver of economic growth in the developed world, but the sector has long been neglected in Africa by risk-averse banks. Currently, a whole raft of African entrepreneurs are missing out on investment and business advice which means that the continent is being denied a potential engine of economic growth and job creation.

“With exceptional growth over the last five years, GroFin demonstrates the massive potential of Growth Finance as a new asset class. The new fund will help in excess of 400 budding entrepreneurs to create thousands of sustainable new jobs that will help lift people out of poverty.

Having firmly established GroFin as a pioneer, and demonstrated the viability of the Growth Finance sector, the greatest challenge now is to develop and professionalise this asset class. Within the next decade, we want to see Growth Finance become a multi-billion dollar industry.”

Jurie Willemse, Chief Executive of GroFin, said: “Africa will only be transformed through bottom-up enterprise which delivers economic independence. This new capital commitment is a strong endorsement of our performance to date and it will enable us to support many new businesses which will help to create wealth and jobs across a number of different countries.”

A number of different organisations have contributed to increase GroFin’s total assets under management from $100m to $225m:
• International Finance Corporation: $30m
• CDC UK Development: $30m
• FMO: $20m
• African Development Bank: $20m
• Shell Foundation: $15m
• GroFin: $10m

The fund is still open for investment and expects to reach $150m shortly.
- END -
For more information, case studies or to arrange an interview with Chris West or Jurie Willemse, please contact James Terry on 0207 400 4480 / 07941 829 582.
Notes to Editor

About the SME sector

In OECD countries, SMEs and microenterprises account for over 95% of firms, 60-70% of employment, 55% of GDP and they generate the lion’s share of new jobs1. In developing countries, SMEs represent over 90% of all firms and

Standard Chartered estimate that in African countries they generate between 32-60% of GDP, with an average of 39%2. The World Bank estimates SMEs represent more than half of all GDP and account for nearly two-thirds of employment3. Yet in all of Africa and South Asia, less than $1 billion in actively managed investment funds specifically target the SME sector4.

The second largest provider of capital to the African SME sector manages $65mill. Most other organisations – around 20 providers - operating in the Growth Finance asset class have around $5mill under management each.


1 World Business Council for Sustainable Development: ‘Promoting small and medium enterprises for sustainable development’ (July 2007)
http://www.wbcsd.org/DocRoot/Hg1G0KSeDlHEjrCI9M1L/PromotingSMEs_latest.pdf
2 Standard Chartered SME business statistics
3 The Brookings Institute, Policy Brief 159, “Beyond Microfinance: Getting capital to SMEs to fuel faster development,” Mar 2007, http://www.brookings.edu/papers/2007/03development_de_ferranti.aspx
4 International Finance Corporation, 2007. List of SME funds

Source: http://www.shellfoundation.org/admin/upload_img/images/06%2010%2009%2008%20GroFin%20announcement%20FINAL.pdf