Mercy Corps Planning $10 Million Private-Equity Fund in Ethiopia

By William Davison

Dec. 11, 2012 (Bloomberg) — Mercy Corps, a non-governmental aid agency, plans to set up a $10 million private equity fund in Ethiopia to encourage foreign investment, primarily in agriculture, Country Director Dominic Graham said.

Several British and American companies have expressed initial interest, he said in an interview yesterday in the capital, Addis Ababa.

“If you’re looking for rapid growth, then private equity is the way to go rather than debt financing, which restricts you to whatever you’re able to collateralize,” he said. “The government is not looking for incremental change. They are looking to take big steps and to move the country from poor to middle-income status in a short period of time.”

Ethiopia’s government is seeking investment in commercial farming and food processing as it tries to diversify an economy dominated by individual farmers. Agriculture employs more than four-fifths of Ethiopia’s workforce. The government wants to maintain growth it says has been more than 10 percent for the last eight years to become a middle-income nation by 2025.

Portland, Oregon-based Mercy Corps hopes to start the fund, which is awaiting government approval, next year, Graham said. Its typical investments would range from $300,000 to $700,000 into businesses that aren’t served by banks, he said.

The fund may focus on investment into livestock, which accounts for about a fifth of Ethiopia’s $32 billion gross domestic product while attracting less than 1 percent of government expenditure, he said.

Beijing-based Schulze Global Investments announced the first private-equity fund focused on Ethiopia in May. Schulze has committed $1 million to an agro-processing company, $7 million to a manufacturer, and about $2 million to an education company, Bernice Lee, executive assistant to Chief Executive Officer Gabriel Schulze, said in an e-mailed response to questions on Dec. 7.