Private equity roundup — Africa

Remarkable resilience across the African continent to drive geographic expansion in private equity (PE) investment.

In recent years, economic growth rates in Africa have been in excess of those in developed economies and above those in many emerging markets.

Factors contributing to favorable demographic trends that are helping to drive growth are:

  • Growing urbanization
  • Increasing formal labor force
  • Declining dependency ratios
  • Rising middle-class incomes
  • Increasing political stability
  • Improvements in legal, regulatory and business environments

Although PE fund-raising in Africa in 2012 has been subdued, many firms are currently in the market raising Africa-focused funds to capitalize on growth opportunities in the region. As such, fund-raising totals should improve in the coming years.

There is a growing trend toward funds that target specific sectors, largely to capitalize on opportunities in sectors benefiting from consumer growth as well as infrastructure investment.

PE firms are increasingly diversifying their geographical focus outside the more advanced economy of South Africa to countries such as Nigeria, Ghana, Kenya and Ethiopia.

The large number of small and medium-sized enterprises (SMEs) needing growth funding, coupled with strong economic fundamentals and a lack of alternative funding sources, should continue to drive the growth of PE investment across Africa.

While a negative perception about Africa still remains, macroeconomic stability and microeconomic reforms should continue to positively transform Africa’s image in the global landscape over the coming years.

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