Carlyle Co-CEO Sees Africa Private Equity ‘Explosion’

Carlyle Group LP Co-Chief Executive officer David Rubenstein said the private-equity industry “will take off” in Africa as his company and Blackstone Group LP (BX) backed energy partnerships with the continent’s richest person.

Helping private equity gain a bigger foothold in Africa will spur deals that make the continent’s companies and economies more productive, Rubenstein said in a panel discussion today at the U.S.-Africa Business Forum in Washington.

“Opportunities there are far greater than people thought years ago and the great explosion in private equity, if it’s going to occur anywhere around the world in the next couple of years, is probably going to be in Africa,” he said.

Africa accounts for about 1 percent of private-equity investment worldwide, according to Rubenstein, whose company is trying to help plug a shortfall in the continent’s infrastructure funding requirement. African nations need an extra $50 billion a year to ease energy shortages and transportation bottlenecks, according to the World Bank.

Since the mid-1990s, financing for African power projects has averaged about $1.2 billion a year, split between public and private money, the World Bank says. In sub-Saharan Africa, 70 percent of the population lack electricity, while those who do have power experience regular blackouts and face high prices, according to the International Energy Agency.

Photographer: Drew Angerer/Bloomberg

David Rubenstein, co-chief executive officer of Carlyle Group LP, speaks at the US-Africa Business Forum in Washington, D.C., on Aug. 5, 2014. Close

David Rubenstein, co-chief executive officer of Carlyle Group LP, speaks at the... Read More

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Photographer: Drew Angerer/Bloomberg

David Rubenstein, co-chief executive officer of Carlyle Group LP, speaks at the US-Africa Business Forum in Washington, D.C., on Aug. 5, 2014.

Power Projects

Blackstone and Carlyle, the world’s two largest buyout firms, today announced separate agreements with Aliko Dangote, the Nigerian whose cement and commodities businesses have built him a $24.7 billion fortune.

Dangote committed to invest a combined $5 billion by 2019 with New York-based Blackstone in power projects in sub-Saharan Africa and formed a joint venture with Carlyle to invest an unspecified amount in Nigerian oil and gas ventures and other sub-Saharan projects.

Related story: Ride 'African Lion' Economies With an ETF

Africa’s power generation shortfall is “enormous,” Dangote said today in a Bloomberg Television interview. The $5 billion Blackstone deal will focus on sub-Saharan African countries and invest in power generation, transmission, distribution and infrastructure, he said.

Blackstone will commit half of the $5 billion in the next five years from its main buyout fund, Blackstone Capital Partners, and its chief energy pool, Blackstone Energy Partners. The rest will come from Dangote Industries Ltd.

Trade Missions

“The total need for power in Africa is $300 billion,” Blackstone Chairman and CEO Steve Schwarzman said today in an interview with Bloomberg Television’s Hans Nichols at the forum. The deals announced today represent “a number that starts to make a dent in the problem.”

Today’s gathering, hosted by Bloomberg Philanthropies and the U.S. Commerce Department, gave business and national leaders an opportunity to discuss investment in the continent. Bloomberg Philanthropies is led by Michael Bloomberg, the founder and majority owner of Bloomberg LP, the parent of Bloomberg News.

President Barack Obama today announced $14 billion in commitments from U.S. companies for investments in Africa. Also at the forum, World Bank President Jim Yong Kim said the lender was committing $5 billion to African power efforts. Commerce Secretary Penny Pritzker said the U.S. will add 10 trade missions in Africa to compete with China, the continent’s biggest trading partner.

Carlyle Deals

Carlyle, which this year raised $698 million for its first sub-Saharan Africa fund, counts Dangote among its limited partners. The billionaire told Washington-based Carlyle when it was raising the fund that he would match the firm’s own 10 percent commitment to the pool.

The fund has done three deals: taking a stake in Tanzanian agricultural commodity business Export Trading Group in 2012; investing in Mozambique-based logistics company J&J Africa this year; and helping buy commodities trader Traxys SA in a transaction closing this quarter.

Despite the opportunities in Africa, private-equity investing in Africa is not without its difficulties, Carlyle’s Rubenstein said.

“It’s not easy to get control of assets,” he said in the panel discussion. “It’s not easy to make the changes we want.”

Ajay Banga, CEO of MasterCard Inc., the world’s second-largest payments network, said on the same panel that Africa is at the development stage Asia was at 15 years ago and that risks in the region are manageable. He said technology and access to financial networks will help boost consumer spending that will drive the continent’s economic growth.

Pan-African Bourse

“Consumption-led growth will only come by expanding the middle class and by getting people at the low end of society to participate in that growth,” Banga said.

The World Bank projects a 5.2 percent growth rate for sub-Saharan Africa this year, driven by strong household spending and rising investment in natural resources and infrastructure. Last month, the BRICS group of nations -- Brazil, Russia, India, China and South Africa -- agreed to create a $50 billion development bank to fund projects and serve as an alternative source of finance from the World Bank.

Mo Ibrahim, the founder of telecommunications company Celtel International BV, called for a pan-African stock market to help facilitate investment in the continent’s companies.

“Before any investor goes into any country he is looking for an exit,” said Ibrahim, who is also the founding chairman of Satya Capital Ltd., an investment fund focused on Africa. “We have only six or seven liquid exchanges in Africa. That doesn’t work.”

To contact the reporters on this story: Jeff Kearns in Washington at jkearns3@bloomberg.net; Elizabeth Dexheimer in Washington at edexheimer@bloomberg.net; Devin Banerjee in New York at dbanerjee2@bloomberg.net

To contact the editors responsible for this story: Chris Wellisz at cwellisz@bloomberg.net Simon Casey, John Simpson

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