South African private equity firm Harith General Partners has confirmed its acquisition of a substantial 46% stake in its larger counterpart, Mergence Investment Managers. The deal is set to facilitate the pooling of their formidable combined assets, totaling a whopping 59 billion South African rand, equivalent to $3.1 billion, to support crucial infrastructure projects and other investments across the African continent. Harith’s Chief Executive Officer, Sipho Makhubela, revealed the strategic objectives of the acquisition in a recent interview, while refraining from disclosing the financial specifics of the transaction.

“The numbers currently don’t stack up well for Africa when it comes to the investment needed for its growing infrastructure needs,” explained Makhubela. “This is why we did this deal, to grow Mergence as a financial services business, with a bias towards infrastructure assets.”

The African continent’s infrastructural requirements are substantial, yet governments are often constrained by financial limitations. According to the African Development Bank, a staggering $170 billion per year is essential to construct vital infrastructure such as roads, power plants, and ports. These projects are critical in a region where approximately 600 million people lack access to electricity, and 800 million people live without basic sanitation.

Makhubela emphasized that this agreement will empower Mergence to invest in various sectors, including clean energy, water, and digital and social infrastructure. Furthermore, it will enable the expansion of Mergence’s financial services business into other African countries.

Mergence is known for its focus on both listed and unlisted markets, offering a wide array of investment options such as equities, infrastructure, debt, and private equity funds. Meanwhile, Harith, established in 2006, boasts an impressive track record of infrastructure investments across eight African nations, including the creation of the largest wind farm on the continent. The firm is also actively involved in investing in South African Airways.

Sipho Makhubela highlighted the promising future of the African continent, citing factors such as urbanization, a youthful population, natural resources, technological advancements, and regional trade as catalysts for significant economic growth. He firmly believes that investments in infrastructure are essential to unlock this potential.

The International Monetary Fund (IMF) has predicted a growth in sub-Saharan Africa’s gross domestic product, forecasting an increase from 3.3% in 2023 to 4% in the coming year. This underscores the continent’s promising prospects.

Notably, this landmark deal also aligns with Regulation 28 of the Pension Funds Act, which governs how pension fund managers allocate investments across various asset classes. By promoting diversification in retirement fund portfolios, the acquisition will serve the financial interests of pension funds while simultaneously driving infrastructure development in Africa.

The Harith General Partners’ acquisition of a substantial stake in Mergence Investment Managers is a pivotal moment in the financial landscape of Africa, promising to accelerate much-needed infrastructure investments and stimulate economic growth across the continent.

Photo Source: Harith Africa

By Delino Gayweh
12th, October 2023
Serrari Financial Analyst