Private equity fund manager XSML announces its US$54m ARF III first close

AFRICA – XSML, a private equity fund manager active in Central and East Africa, has announced the first close of its African Rivers Fund III (ARF III) at US$54 million.

According toAfrica Global Funds, Barthout van Slingelandt, Managing Partner of XSML, said that the Fund is expecting to reach the final close within the next 12 months and is targeting US$85m.

“We have now successfully closed our third fund, African Rivers Fund III, within ten years of operation and in a challenging COVID environment.  This demonstrates the continued interest and commitment from our existing and new investors in frontier markets in Central and East Africa,” Jarl Heijstee, Managing Partner at XSML.

“The private sector in DR Congo and Uganda, our core markets, as well as Angola, our new third home market, has tremendous growth potential and long-term capital remains scarce.

“Through our local presence in these markets, XSML is well placed to capture the opportunities as one of the few, if not the only fund manager on the ground, actively making investments in private companies, creating jobs and supporting the growth of the economy.”

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 US$120m.

ARF III targets growing, well-managed small and medium-sized enterprises (SMEs) in the Central & East African region covering Angola, the Democratic Republic of Congo (DRC), Uganda and the Republic of Congo and surrounding countries.

ARF III will provide debt, equity and mezzanine finance to fast-growing companies in these regions. According to van Slingelandt, the Fund will invest in 30-40 companies. Between equity and debt transactions, the split will be roughly 80/20. When asked about sector opportunities, van Slingelandt mentioned Retail, Healthcare and Trade.

Through CASF and ARF, XSML has provided some US$70m in risk capital with an investment size ranging from US$100,000 to a maximum of US$5,000,000. XSML has made investments in over 50 SMEs across ten sectors.

For this first close, BIO (Belgium Investment Company for Developing Countries), the Dutch Good Growth Fund (DGGF), FMO (the Dutch development bank), IFC (a member of the World Bank Group), all existed investors in Fund I and/or II.

This round they are joined by Swedfund (the Swedish Development Finance Institution) and the SDG Frontier Fund (which includes nine private and institutional investors from Belgium) – an expansion of the investor base of ARF, which demonstrates their commitment and support for investing in these frontier markets.

Both CASF and ARF have been fully invested and 12 investments have been exited. XSML believes that sustainable economic development in fast growing frontier markets in Sub-Saharan Africa can be achieved by encouraging local entrepreneurship.

Currently, many opportunities in these countries continue to remain unexploited due to the lack of risk capital and operational support. By stimulating entrepreneurial endeavors, jobs and income are created.

ARF III continues the existing strategy with investments in between US$100,000 and US$7.5m. Between the two first funds XSML has provided technical assistance to over 35 companies to help them improve operations, financial management and environmental and social practices.

Evidence of further impact can be found in various fields, with some 1,000 direct jobs created since 2011, over 4,000 additional pupils spread over three private schools and the addition of some 60 hospital beds, and operating theatres and maternity rooms in clinics in Kinshasa and Kampala, improving healthcare standards.

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