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Jacana Venture Partnership

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Jacana Venture Partnership

Overview:

Our thesis... is that significant amounts of international capital are available for supporting the growth of small- and medium-sized enterprises (SMEs) in Africa and that this growth is essential to the economic development of the region. However there is currently a severe lack of qualified intermediaries (i.e. African Growth Capital Investment Managers) who have the expertise and track record to act as value-added investors of these funds.

Our approach... is therefore to invest in, and support, new and emerging SME Growth Capital Investment Managers in Sub-Saharan Africa (SSA) and build the capacity of those growth capital investment managers to the point where they can achieve critical mass in their operations and funds under management.

SMEs are a crucial driver of economic development in Sub-Saharan Africa (SSA). Every $1 invested in an SME generates an additional $10 in the local community and $1 of SME finance creates 3 times more jobs than an equivalent investment in microfinance. In order to grow, SMEs need access to both capital and management support; however, the availability of growth capital in SSA is limited. Bank loans are difficult to secure, are short-term and expensive and the private equity industry in SSA is extremely under-developed.

Jacana believes that private equity in SSA now represents an attractive investment opportunity. African GDP grew by 1.7% in 2009, vs. -3.4% for the advanced economies. Private equity success stories covering medium-sized investments, such as Aureos and Africinvest, demonstrate that it is possible to build successful SME investment operations in emerging markets; however, emerging growth capital investment managers (“GCMs”) in SSA are generally sub-scale and lacking in experience. Small funds mean a lack of capacity to invest in the breadth and depth of the investment team. Without support, most of these aspiring GCMs (many of whom have real potential) will fail.

Vision:

Our vision is the creation of a sustainable, responsible and robust SME growth capital industry in Sub-Saharan Africa that supports local SMEs, fuels economic growth, creates employment and thereby makes a major contribution to the reduction of poverty in Africa.

History:

The Jacana co-founders are four individuals with a background in venture capital and entrepreneurialism and a commitment to philanthropy and development. Their motivation in founding Jacana is to make a sustainable contribution to the alleviation of poverty in Sub-Saharan Africa.

Jacana started its business development process in mid-2008 with a high-level mapping exercise targeted at understanding Africa’s SME, private equity, social venture capital and venture philanthropy landscape. The survey particularly focused on the availability of financing for those organisations comprising the “missing middle” of private sector finance in SSA outside South Africa. As a result of the survey, the Jacana team concluded that the support of SMEs via a private equity-type platform offered a scalable and sustainable model to drive widespread economic development.

In early 2009, following the completion of the mapping survey and further work talking to potential partners and investors, the four co-founding investors in Jacana decided to take Jacana forward into its execution phase, starting with in-market due diligence in selected African markets.

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