GroFin Capital (Pty) Ltd. (GroFin or the Manager) will manage GAF. GroFin, in partnership with Shell Foundation, was established in 2004. The sole focus of GroFin is the financing and development of smaller SMEs – i.e., below $1 million - while offering value adding partnerships. GroFin was founded by Jurie Willemse, a South African national, with extensive operational experience in South Africa. Over the past four years, the firm has established itself as a specialist in financing smaller businesses in Africa. GAF is seeking several other investors, primarily development finance institutions.

The target size for GAF is between $130 – 150 million. The proposed investment by IFC is an equity investment of up to $30 million in the Fund, not to exceed 20% of total commitments.

30.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan
Equity	30.0

* These investment figures are indicative

The Fund will invest in Sub-Saharan Africa, in seven countries initially, namely, Kenya, Tanzania, Uganda, Rwanda, Ghana, Nigeria and South Africa, and then identifying and expanding to more countries using the same transferable business model. The Manager currently consists of 28 investment professionals in the above six African countries with 29 support staff and plans to grow and have offices in 10 African countries by 2010.

The Fund will deliver strong development impact by: - Providing access to financing for up to 500 SMEs in Africa which lack risk financing. The Fund will make investments ranging from $50,000 to $1 million in target companies. - Improving management capacity of these SMEs to make them regionally and globally more competitive and therefore more attractive to potential buyers, lenders, etc. Through GroFin’s value-added investment approach, the Fund’s management teams will provide hands-on monitoring and guidance on management issues to these SMEs. - Providing financing in the form of equity and debt to investee companies. The annual private equity survey of Price Waterhouse Coopers in South Africa identifies the lack of financing on attractive terms as a major problem for local companies. - Contribution to regional and pan-African economic development by supporting investments across countries in East, West and South Africa. - Development of local management teams by promoting adoption of international standards of management and corporate governance as well as developing a culture of management ownership through management buyouts.

IFC will bring to bear its experience in SME development as well as its deep knowledge of the respective regions that will be targeted within Africa. Specifically, IFC roles include the following: - Professionalize the industry: IFC will bring additional “emerging market standard” ideas into structuring fund terms; - Demonstration impact: IFC’s presence as an investor is expected to encourage other institutional investors to invest; - Growth of GroFin: IFC can help GroFin develop into one of the top tier SME financiers in Africa; - Sustainability: IFC will contribute by defining environmental and corporate governance standards for the investees; - Advisory Board: IFC, through its seat on the Fund’s Advisory Board, will provide oversight and review potential conflicts of interest; - Advisory services: A key element in successfully financing small entrepreneurs is the ability to provide appropriate assistance beyond the financing. GroFin has developed an in-house capacity for its existing clients, known as Business Development Assistance, but the expansion to other countries will require a significant increase, and IFC’s advisory services group is well placed to assist the Fund.

This project has been classified as Category FI according to IFC''s Environmental and Social Review Procedure. During appraisal, IFC will analyze the Fund''s expected portfolio and sectors of investment and determine the applicable requirements if any, that would include a combination of:

- the IFC FI Exclusion List; and/or
- the applicable National Environmental and Social Laws and regulations; and/or
- the IFC Performance Standards

IFC will also review, if required, the capacity of the Fund to manage social and environmental risks and to establish and maintain a Social & Environmental Management System (SEMS). IFC may suggest supplemental actions to address any gaps in the SEMS if required. The Fund Manager will be required to:

- Develop or upgrade, if necessary, any existing SEMS, prior to disbursement to the satisfaction of IFC;
- Identify responsible, qualified persons to manage and implement the SEMS;
- Commit to implement the SEMS to ensure that its activities are in compliance with the requirements
- Take action to remedy any gaps in SEMS implementation on an ongoing basis;
- Submit a periodic report to IFC as per a format to be provided by IFC.