XSML, a private equity fund manager active in Central Africa, has announced the first close of its African Rivers Fund at $45m, attracting a number of leading institutional investors.

Marcel Posthuma, Managing Partner at XSML, said: “The successful close of our second fund, the African Rivers Fund, demonstrates the continued interest and commitment from our investors in frontier markets like Congo DRC.”

The African Rivers Fund (ARF) is XSML’s second fund under management, after its maiden fund the Central Africa SME Fund (CASF), bringing total assets under management to $65m.

ARF has received support from current investors in CASF - IFC, FMO and Lundin Foundation, that were joined by BIO (Belgium Investment Company for Developing Countries), CDC Group, Dutch Good Growth Fund and FISEA (AFD Group).

Stephen Nairne, Managing Director at Lundin Foundation, said: “With the Central Africa SME Fund, XSML demonstrated its ability to successfully execute a difficult investment strategy in a complex regional environment.”

“We see the African Rivers Fund as an expansion and extension of this strategy, one that will enable the development of a broader SME ecosystem across Central Africa,” he told Africa Global Funds.

ARF target size is $50m with a hard cap of $65m.

Jarl Heijstee, Co-founder and Managing Partner of XSML, said: "We expect to have the final close at the end of 2016. We expect to have a second close in about 2-3 months."

The fund targets growing, well-managed small and medium-sized enterprises (SMEs) in the Central African region covering Democratic Republic of Congo (DRC), Uganda and Republic of Congo as well as Burundi and Central African Republic (CAR).

Posthuma said that for example the private sector in Congo has tremendous growth potential and long term capital is scarce.

“XSML is well placed to capture the opportunities as the first and only fund manager on the ground in DRC actively making investments in private companies in Congo, creating jobs and supporting the growth of the economy,” he said.

Heijstee added that ARF expects to make the first investments in March: "We have strong pipeline and bringing 3 investments to IC in February. The first investments will be in Congo DRC."

ARF follows the successful investment strategy of its predecessor, CASF, by providing debt, equity and mezzanine finance to fast-growing companies in the Central African region.

Through CASF, a $19m fund with 80% allocation to DRC and 20% in CAR, XSML has provided risk capital with an investment size ranging from $100,000 to a maximum of $500,000.

The African Rivers Fund continues CASF’s strategy with investments in between $100,000 and $5m.
To date, XSML has made 32 investments in SMEs across 10 sectors.

CASF has been fully invested and has exited two investments.

The fund manager believes that sustainable economic development in fast growing frontier markets can be achieved by encouraging local entrepreneurship.

“Currently, many opportunities in these countries remain unexploited due to the lack of risk capital and support. By stimulating entrepreneurial endeavors, jobs and income are created,” said XSML.