IFC has announced an equity investment of $25m in Metier Capital Growth Fund III (MCGF III) as well as a co-investment envelope of $15m to invest alongside the fund in select companies.

The fund, which will be managed by Metier Private Equity International, will invest in 8 to 12 mid-market companies primarily in Southern and East Africa.

The fund will invest in sectors including telecommunications, fast moving consumer goods, healthcare, non-banking financial services, manufacturing as well as infrastructure and energy. MCGF III will invest at least 40% of the fund outside of South Africa.

IFC's investment will help the fund reach its first close and, through a co-investment envelope, enable the fund to attract more follow-on equity for its investee companies.

IFC will also support Metier in strengthening its gender-lens investing approach and promoting gender diversity, both within the fund manager and its investees.

"Beyond delivering top quartile returns, Metier's core objective is to contribute towards positive and sustained impact across Africa," said Paul Botha, CEO and Co-Founder of Metier.

"Our active deal pipeline is characterized by growth capital investments that will develop new business opportunities that will have a positive impact on the effects of climate change, create decent jobs with a broader focus on gender-lens investing, support the connectivity of rural communities, and enhance small business development across Africa. We are excited about our continued partnership with IFC."

Private equity investment in Africa remains among the lowest in emerging markets, representing just 4% of total volumes.

Challenges include perceptions of high risk, foreign exchange risk, high inflation, and economic uncertainty.

As a result, equity financing for mid-market companies has been scarce, hindering the development of the private sector.

"A strong private sector is an essential driver for sustainable growth, job creation, market competitiveness and shared prosperity," said Sérgio Pimenta, IFC Vice President for Africa. 

"IFC's investment in Metier Capital's Growth Fund III will increase access to much needed private capital that will catalyze value creation for these companies and help bolster Africa's private equity industry."

IFC's investment is aligned to its strategy to strengthen the African private equity market.

It will also demonstrate that investing in African markets can generate commercial returns for investors as well as positive developmental impact for the continent.