African companies are looking for partners, with nearly 50% of them planning to pursue a joint venture or a new strategic alliance in the coming year. More than 25% of CEOs are anticipating an acquisition, primarily in their home market or in the rest of continent.
This according to a new survey by PwC, The Africa Business Agenda, that features the opinions of 260 company heads from across the continent.
PwC says the main challenge for African CEOs seeking partners may not be financial, but operational.
“They will have to adopt the right approach and business model to launch new ventures, choosing between trade agreements, joint ventures, contractual partnerships – or M&A operations – and they will have to make sure that these operations can deliver the value they are expecting,” say Emmanuel Le Bras and Hervé Demoy, partners with PwC France.
There is a rising interest from international companies to invest in the continent. While these companies can provide a welcome capital injection, there will also be a necessity for African companies to align with the business standards of these global firms.
Some 74% of respondents in PwC’s 16th Annual Global CEO Survey, published last year, said they expect to expand their footprint in Africa, although only 13% of them currently have a presence in the continent.
The past year has seen a number of international joint ventures in sectors such as food and beverages, animal feed, IT, business services, media, engineering and resources.
PwC says success factors for these partnerships include a clear definition of roles and responsibilities between partners, strong involvement from each of the stakeholders and capacity for partners to build trust and clear governance rules, processes and performance management systems.
Private equity: an instrument for growth?
Although private equity penetration in many African countries remains low, the industry is expected to see continued growth over the coming years.
While private equity firms such as Emerging Capital Partners, Actis and Helios have been doing deals on the continent for a many years, new players are also entering the space. For example, New York-based private equity giant KKR recently invested in an Ethiopian flower business.
“There is something happening, there’s a significant structural shift and we think it’s there to stay. And yet when you look at the amount of private equity capital that has actually come into the [African] continent annually over the last ten years, it has grown a little bit but it hasn’t really spiked. So we think the opportunity is still very early. And for people who get in now, the view through the windscreen is a lot brighter than what you will see in the rear view mirror,” said Kola Olofinboba, head of Fairview Capital’s Africa practice at a recent industry event in New York.