ICEA teams up with Imara, Norfund in $100m venture
Bernard Matthewman uses a Pesa point ATM located at ICEA Building on Kenyatta Avenue in Nairobi. Picture: Fredrick Onyango
A Kenyan insurance firm has been linked as an investor in a new private equity fund that is set to be launched in July targeting small and medium enterprises in East and Central Africa.
In a rare gesture where a private equity fund taps into domestic sources of capital, the Nairobi-based Insurance Company of East Africa (ICEA) has teamed up with Imara Securities, a Botswana investment group, and the Norwegian Investment Fund for Developing Countries (Norfund) in the $100 million venture that is dubbed Batian Fund.
The new development comes about a year after ICEA merged with Lion of Kenya under a holding company whose asset base was estimated at over $350 million at the time of the merger, and annual premium revenue of $100 million.
This was motivated by a bid to comply with new guidelines introduced by the Insurance Regulatory Authority that barred a single insurance company from offering both life and general products.
Its investment into Batian Fund is a departure from the current trend in the industry where most private equity funds that operate in the region are mainly invested in by development finance institutions and other foreign investors.
Among the strategies that have been proposed to unlock such domestic pools of capital is intensified training to possible sources of domestic capital, as well as detailed studies to identify bottlenecks.
The new venture strikes at the heart of the industry’s wishes. In addition to insurance funds, there have been calls for local pension funds and high net worth individuals to invest in the burgeoning private equity industry.
This is the path that ICEA has taken. The move, analysts say, is likely to contribute towards building confidence and encouraging more domestic capital into private equity.
The fund in which it has invested shares a name with the highest peak on Mount Kenya, the second highest mountain in Africa, perhaps a demonstration of not only its aspirations, but also those of the industry.
The chief executive of Batian Fund, Shaun Collyer, said that it would make investments of up to $10 million in SMEs that are valued between $5 million and $25 million in these regions. The targeted countries are mainly Kenya, Tanzania, Uganda, Zambia and Botswana; as well as Mozambique, Zimbabwe and Rwanda.
“We are concentrating more on consumer-driven businesses, services, financial services, information communication services, and infrastructure businesses,” Collyer said, adding that they would not invest in the agricultural and resources sectors. This is because of the larger amounts of capital that they require, besides a longer period for turnaround.
It is expected that the new fund will hit the ground running. “We are looking at closing by the end of this year and to be deploying capital by around that time. We are incubating transactions at the moment.”
As the region awaits the birth of this new fund, the private equity industry will be watching keenly to see which other insurance company or pension fund follows suit.
