EFAfrica Group raises $12m; acquires Tanzanian equipment finance business
EFAfrica Group has raised $12 million new equity for regional expansion and acquired EFTA, Tanzania’s leading SME equipment finance business.
EFAfrica Group aims to become the leading equipment leasing provider for SMEs in Africa. Through the acquisition of EFTA, EFAfrica Group will leverage EFTA’s experience, equipment suppliers, and systems and processes to develop the business in Kenya. EFTA has assets of $16 million, 60 employees and eight branches. Almost 1,200 loans were made at the end of December 2019 for productive-use equipment for a value of over $37 million, supporting the growth of over 1,000 businesses across almost every sector of the Tanzanian economy. Its core lease product is a three-year financial lease of $10,000 to $60,000 for equipment such as tractors, milling and construction equipment for small SMEs with average annual revenues of about $230,000 and an average of 10 employees. EFTA also provides larger, flexible tenor $100,000+ leases for businesses in the agriculture, transport and tourism sectors.
EFAfrica Group has raised $12 million from investors, including KfW on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ), Small Foundation and the Mennonite Economic Development Association (MEDA) to support EFTA’s growth and expand into other African countries. The Kenyan business is expected to open in Q4 2020. EFTA’s shareholders, including AgDevCo and Equity for Africa Ltd, will become shareholders in EFAfrica Group. Germany has also made a €1 million technical assistance grant available to support EFAfrica Group’s development in technology and promotion of sustainable agriculture.
Michiel Timmerman, co-founder and chair of EFAfrica Group and EFTA commented, “We are very excited to have closed the equity raise for EFAfrica Group. This enables us to support EFTA’s growth and bring the benefits of its business model to support SME growth and job creation in other countries. EFTA has shown that it is possible to build a sustainable business which provides access to much-needed finance for SMEs with small loan sizes and without collateral. EFTA’s management team have done a fantastic and pioneering job over the years and we look forward to benefiting from their experience. We look forward to working with new investors KfW, Small Foundation and MEDA, as well as with long-term supporters AgDevCo and Equity for Africa, who all share our vision and commitment to job creation and SME development in Africa, particularly in the agriculture sector.”
Jenny Scharrer, head of division for financial sector development and education with KfW said, ”For decades development finance institutions have been trying to build financially sustainable institutions that can provide financing to the ’missing of the missing middle’, that is MSMEs with a financing need of $10,000 to $50,000 – too large for classic microfinance and mostly too small to be interesting for commercial banks. For decades it has proven to be extremely difficult. EFTA has managed to find a model that works. It is key to promote much-needed mechanisation across Africa’s agricultural sector. We are thrilled to be part of the endeavour to scale EFTA’s model.”
Orvie Bowman, CFO of MEDA noted, ”MEDA strongly believes in the importance of agricultural leasing as a productivity enhancing investment in farms in Africa. MEDA is proud of its association with EFTA, and now EFAfrica Group, and firmly believes this investment aligns well with MEDA’s mission of creating business solutions to poverty.”
Svet Varadzhakov, director of EFAfrica Group and investment director of AgDevCo said, ”We are delighted with the strong backing for EFAfrica Group’s innovative leasing model. The new equity will allow a regional expansion to reach more small businesses, including in the agriculture sector, which currently lack access to affordable financial leases.”
Reach Africa’s private equity community by publishing a Showcase Article on Africa Private Equity News. Contact us at editor@africaprivateequitynews.com for our rate card and more information.