The Metier Capital Growth Fund II, which completed its first close in mid-February, has signed a binding sale agreement with its first portfolio company, a consumer retail chain with a presence in South Africa and the rest of the continent.

After conclusion of its retail transaction, the fund is pursuing deals in healthcare services, and hardware and building supplies.

The fund’s investment theme is premised on obtaining significant exposure to South, Southern and Sub-Saharan Africa.

The fund is targeting exposure of 50% to Sub-Saharan Africa, excluding South Africa.

It concentrates on mid-cap entrepreneurial businesses requiring growth capital, in sectors which demonstrate emerging market growth potential.

Investments are targeted in sectors including transport and logistics; retail; health; tourism; fast moving consumer goods; agri-processing; infrastructure services and education.

These are sectors set to benefit from demographic trends such as population growth and increased urbanisation, and the accompanying consumer spend from the emerging middle class.

Fund investments are also in sectors which are advantageously exposed to the multiplier effects of rising capital spend on infrastructure and increasing intra-regional and international trade.

Metier Capital Growth Fund II is targeting 8 to 12 investments, with controlling or significant minority private equity holdings.

It has a ten year intended term, and makes moderate use of financial leverage.

Investors at the first close include South African institutional investors and European development finance institutions FMO and DEG.

Paul Botha, Metier CEO, said: “The Metier team has also made its own material financial commitments to the fund and we continue to engage with several further potential investors in anticipation of a fully invested final close in approximately 12 months.”

“At that stage the fund will have the capacity to enter into deal transactions where the equity investment requirement is in the range of R100m ($8.46m) to R600m ($50.75m) with expected co-investment support.”

Many economies in Sub-Saharan Africa are expecting GDP growth rates of around 5% per annum for the foreseeable future, and the annual African urban population growth rate up to 2030 is expected to be greater than 7%.

Utilising South African businesses as a conduit to the rest of the continent, the fund will invest in companies that are well positioned to participate in the broader region’s growth prospects.

“With the assistance of private equity investment, these businesses should be able to deploy their operational skills, industry expertise, customer relationships, systems, products and services, as well as governance standards, into opportunities in the broader region,” said Botha.

The Metier Capital Growth Fund II is the ninth capital pool for the Metier team, which has worked together for over three decades and collectively has a track record of over 100 strong performance deals.