African pension funds and other institutional investors are slowly recognizing the need, and opportunity, of playing an active role in building the continent’s economic engine: small businesses. A group of Ghanaian pension funds have backed Ci-Gaba, a local fund of funds that invests in small business fund managers in West Africa (see, “African investors warm to regional funds of funds to finance small business growth“).
The fund, launched in 2023 by Impact Investing Ghana, reached a first close of $30 million with the pensions’ support. The pensions contributed two-thirds of the raised capital.
UK government-backed FSD Africa Investments provided $7.5 million to the fund’s junior equity tranche. “FSDAi’s investment is made in US dollars into the Ghana-cedi-denominated fund and is used to support CiGaba’s USD and foreign-exchange obligations, helping to reduce FX exposure in the event of cedi depreciation between commitments to underlying fund managers and capital drawdowns,” an FSDAi representative told ImpactAlpha.
Other investors in the fund include Small Foundation which provided $2.5 million, an undisclosed European development financial institution, and Argidius Foundation, which offered working capital. Ci-Gaba is aiming to raise $75 million, with 70% from African investors.
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Impact Investing Ghana, the Ghanaian national advisory board for impact investing, network groups like the Collaborative for Frontier Finance, and philanthropic collaborations like Growth Firms Alliance have been working to shift policy, regulations and investor risk perceptions to unlock more local capital for Africa’s small businesses.
Ci-Gaba’s team is working on “expanding co-investment frameworks that enable pension funds to safely participate in alternative assets,” said Dinah Hammond of Savannah Impact Advisory, which manages Ci-Gaba. Ci-Gaba has invested in two funds and has a pipeline of 40.
