US-based PineBridge Investments' agreement with Saudi Arabia's Kingdom Holding Company to jointly invest in African private equity assets reflects fast-growing interest in the continent, including from Asia.
Kingdom Holding is a diversified investment holding company with $12.77 billion in available-for-sale assets as of June 30, 2013, and it is chaired by Saudi prince Alwaleed Bin Talal Bin Abdulaziz Alsaud.
The joint venture will invest in African companies, in response to rising investor demand for exposure to the continent’s fast-growing economies, said the two companies. Key focus sectors will include manufacturing, consumer-driven sectors, infrastructure and financial services.
There are now “massive flows” from Middle East institutional investors into North Africa, said a senior fund services banker. “It has really ramped up in the past two years.”
Investors in Asia are also increasingly looking to Africa as a deal destination, with the Middle East seen as a natural channel through which to do so. State funds such as China Investment Corporation have been active in buying energy and resource assets in Africa for years, but other institutions – as well as wealthy individuals – are increasingly following suit.
“The main talk in DIFC [Dubai International Financial Centre] these days is 'how do we develop business in sub-Saharan Africa?'” said Nigel Sillitoe, chief executive of Dubai-based research firm Insight Discovery.
The move comes as trade between the United Arab Emirates and Africa has increased, to 84 billion dirhams ($22.9 billion) from 10 billion dirhams in the past nine years, he added, with the main beneficiaries being tourism and finance.
Chris Harran, Dubai-based partner at law firm Dechert, told AsianInvestor that more and more investment firms are setting up presences in the Middle East at least partly as a base for doing business in Africa.
PineBridge has been doing direct investments in the continent since the 1990s, but the Kingdom deal is its first involvement with the Saudi group, which it sees as a natural partner due to its “investment rigour, solid reputation and existing investments in Africa”.
Alwaleed said: “The investment in this platform is a continuation of KHC’s successful investment strategy in Africa that began in 2003, and reflects our confidence in achieving long-term returns for investors in this venture.”
The agreement was signed by Adel Alsayed, KHC’s executive director for private equity and international investments, and Talal Al Zain, chief executive of PineBridge Investments Middle East.
The $71.4 billion fund house invests in Africa across sectors including infrastructure, banking and consumer industries. It has offices in Kenya, South Africa and Uganda, investing in credit, equities and private markets.
The firm has its Middle East base in Bahrain and offices across Asia Pacific and Latin America, and invests across traditional and alternative asset classes.