African private equity firms increasingly able to mobilise much-needed capital

The outlook for private equity in Africa remains positive for 2015, a new report by the African Private Equity and Venture Capital Association (AVCA) reveals.

This is in spite of ongoing challenges concerning subdued growth prospects in Europe and China and any short-term uncertainties on the continent itself. The report shows growing support for, and increased investor confidence in, African private equity over the next few years.

The African Private Equity Data Tracker shows deal activity on the continent remains strong with US$8.1bn worth of deals completed in 2014 – the second highest on record. This was due, in part, to a number of significant deals announced in 2014 including the $3.1bn worth of funding secured by IHS Towers, the mobile infrastructure provider, from existing and new investors in 2014. Since 2007, 983 transactions have been completed with a total value of $34.5bn reflecting the improving environment for private equity in Africa.

Fundraising in Africa also shows no signs of slowing down, with over $4.1bn raised in 2014 and a total of $22bn raised since 2007 demonstrating increasing global investor appetite for private equity funds on the continent.

The tracker reveals a shift in investment activity, with West Africa now receiving the highest share of private equity investments by number, providing evidence of a gradual widening of investment activity outside South Africa. West Africa’s share of private equity transactions on the continent grew from 22% between 2007 and 2010 to 25% between 201 and 2014 whilst South Africa’s share dropped from 28% to 24% in the same period.

The main sectors attracting African private equity investments continue to be fast-moving consumer goods, financials and industrials, which have accounted for around 60% of private equity transactions by volume from 2007-2014.

Private equity investment is likely to continue to be geared towards the fast-moving consumer goods sectors, as well as infrastructure, real estate and energy, with sub-Sahara Africa (excluding South Africa) remaining the focus for investors.

Michelle Kathryn Essomé, chief executive of the African Private Equity and Venture Capital Association, said: “This research shows that even with global systemic challenges affecting the investment environment, investors are still keen to explore opportunities in Africa. This report shows that Africa is well placed to successfully ride the wave of short-term global and local uncertainties and investors can remain confident of the medium-to-long term growth and opportunities that are available.”

Dorothy Kelso, director of research at the African Private Equity and Venture Capital Association, adds “The research provides further evidence of a maturing private equity market in Africa. Supported by local and foreign institutional investors, African private equity firms are increasingly able to mobilise much-needed capital to invest in a diverse range of companies, countries and sectors across the vast African continent.”