Ninety One: Africa Credit Opportunities Fund 2

Description of the fund

Ninety One Africa Credit Opportunities Fund 2 (ACO 2) is a senior private credit fund investing in market dominant companies in African financial inclusion, infrastructure and telecoms sectors.

Targeting development of the African Debt Capital Markets (DCM) by creating an alternative asset class, crowding in African pension funds.

Sound ESG management system, supporting companies contributing to the SDGs.

Manager

Founded in 1991 as Investec AM, Ninety One is based in London and Cape Town and dual-listed on the London Stock Exchange and the Johannesburg Stock Exchange, with $180.6 billion global AUM.

Ninety One is a leading investor in African private credit since 2008, with 18 previous African private credit funds.

21 offices across 14 countries (including emerging markets), with over 1,150 employees.

Investors

Allianz, South African pension funds, US endowment.

Key attraction points for institutional investors

• Scale
• Low correlation strategy (against US/Europe) and attractive returns versus other credit strategies
• Experienced team with deep track record
• Sound ESG management system

Key challenges for institutional investors

African focused strategy; return expectations for Africa; capacity to do due diligence in Covid-19 period.

Pipeline and portfolio

Market opportunity

The Problem: African private credit is still nascent; demand for Africa private credit exceeds supply.

The Opportunity: Private credit as an asset class has grown materially since 2003 with a compound annual growth rate (CAGR) of 15%, approaching $1 trillion, yet

Africa has not attracted major capital flows, leading to favourable supply/demand fundamentals; opportunity to develop African debt capital markets.

Pipeline: The African credit markets have grown and diversified; $650–$750 million credit investments per annum made across the various strategies.

Just transition in the investment process

• The fund proactively sources with an ESG lens as well as the traditional investment sourcing and vetting/strategy using their large credit team

• Strong partnership and relationship model: minimum size, rating, sector/geographic priority, market dominance and track record.

Structure & risks

Key risks

Outcomes framework

Climate and social metrics

• Climate and Environmental Action: CO₂ emissions for certain investee companies
• Socio-economic Distribution and Equity: Total employment, female employees, taxes paid
• Community Voice: N/A

Framework and reporting

Underlying reporting standards: ESG per IFC performance standards; UN SDGs for investee companies and IMP classifications of investee companies and portfolio level

• Transparency: Quarterly investor reporting and annual ESG report
• Third-party verification: N/A

Four main focus areas covering 75% of the portfolio:

Investee in the spotlight

Investing in Ghana coconut board term loan

Background

Ghana Cocoa Board (GCB) is the government owned entity responsible for marketing and export of cocoa beans from Ghana. The crop generates about $2 billion in foreign exchange annually and employs circa 800,000 farming families. The underlying trade facility has an excellent 23- year track record.

Ghana is the second largest producer of cocoa in the world with 22% market share.

Investment

African Development Bank (AfDB) African Development Bank (AfDB) is acting for an up to $600 million

multi-tranche term loan facility to GCB, which ACO2 invested into. The facility is a self-liquidating 3 year tenor structure, secured by proceeds from OECD countries’ cocoa sales contract receivables.

Impact

The investment covers various climate and socio-economic aspects. The use of proceeds helps improve the lives of the 800,000 farming families. The aim is to build efficiency, sustainability and improve yield, leading to higher subsequent income levels and thus resilience, alongside job creation. Proceeds are used as follows:

• $40m – Farm irrigation (improving yield, resource efficiency and reliance leading to furthering the sustainable farming)
• $68m – Hand pollination (creating employment opportunities and increasing farmer yields)
• $200m – Environmental rehabilitation (leading to better resilience and sustainability of the land)
• $50m – Warehouse capacity (Agri infrastructure)
• $10m – Farmer database (for building efficiency and management for micro farmers)
• $200m – Promotion of domestic processing (for greater value chain integration)

Investee in the spotlight

Investing in Globaleq energy project finance

Background

Globeleq is powering Africa’s growth through the development and operation of utility scale power plants across the continent.

Founded in 2002, Globeleq has become a power industry leader by operating or acquiring interest in multiple power facilities across the world with its focus on the African continent. In 2014 and 2015, Globeleq started changing strategy to focus more on Africa and formed Globeleq Africa.

Under the ownership of shareholders CDC (70%) and Norfund (30%), the cornerstone of their strategy is to be the trusted, reliable and committed partner of choice within the African IPP industry.

With a portfolio of 13 power plants located in Tanzania, South Africa, Côte d’Ivoire, Cameroon and Kenya, Globeleq currently generates more than 1,400 MW, with another 2,000 MW in development.

Investment

To increase the scale in Africa, ACO 1 provided project finance for their expansion into Cameroon by purchasing two grid stability plants.

Impact

Globeleq is a leading green African infrastructure sponsor, aiming to build a Just Transition in the African power sector.

By providing clean power, Globeleq helps facilitate the growth and social development of African countries in a climate- aligned way.

Globeleq’s power capacity:

• 866MW gas
• 219MW solar
• 165MW wind
• 88MW heavy fuel oil