Fall of Abraaj jolts African private equity: The collapse of one of the best-known fund managers operating in sub-Saharan Africa has shaken investor confidence in the continent's once booming private equity industry.

Author:Kedem, Shoshana
Position:Finance
 
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In 2018, the collapse of one of the world's largest emerging market investors, the Dubai-based Abraaj Group, sent shockwaves through the private equity industry. Once the Middle East and North Africa's largest manager of buyout funds, Abraaj's collapse has led to uncertainty over the future of millions of dollars worth of its African investments, and shaken investor confidence in emerging markets.

As one of the best-known fund managers operating in sub-Saharan Africa, allegations that it mismanaged funds have left high-profile investors reeling and some funds on the continent struggling to raise cash.

As liquidators continue picking over the remnants of the firm's sprawling empire, experts say the affair may cause lasting damage to the private equity investment climate.

"It has done damage to the investment environment in Africa. In the old days we used to say the aristocrats of private equity investing were Helios, Actis and Abraaj, and one of those has imploded that can't be good for African private investing," says Rob Hersov, the founder of Invest Africa, which supports private and institutional investors and funds looking for opportunities in Africa.

Towers of debt

Abraaj, meaning "towers" in Arabic, started out as a small Middle East investor founded by Pakistani businessman Arif Naqvi with $3m in capital in 2002.

Over 16 years of operations, the firm carved a name for itself as one of the developing world's most influential investors, closing a US$990m Sub-Saharan Africa fund in 2015.

The group's fortunes started to unravel in early 2018 when allegations that the firm was mismanaging funds were leaked to the press, shattering investor confidence. Four months later Abraaj filed for liquidation in the Cayman Islands, owing a combined $1bn to creditors and becoming the world's largest private-equity insolvency case.

US prosecutors have launched a criminal probe into the collapse. Charges against three senior executives on 14 June followed the earlier arrest, charging and bailing of three other executives, including Naqvi, who is alleged to have misappropriated $250m.

Winding up

As liquidators PwC and Deloitte continue the process of recovering the assets of Abraaj's sprawling empire, the futures of some of its Africa holdings remain uncertain.

At the time of its collapse Abraaj had funds spanning Africa, Asia and Latin America with over $14bn in assets. Its sub-Saharan Africa investments totalled over $2bn, spanning Nigeria, Ghana, Cote...

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