Private equity fundraising for Africa returns to pre-crisis levels

Private equity fundraising for funds dedicated to Sub-Saharan Africa has returned to levels seen before the start of the financial crisis, although actual investments are much lower than previous years.

According to recent data released by the Emerging Markets Private Equity Association (EMPEA), private equity funds focused on Sub-Saharan Africa raised US$1.056 billion in the first half of 2011. This is around 50% of the full year totals of $2.092 billion, $2.034 billion and $2.241 billion in 2006, 2007 and 2008 respectively. See table below:

Sub-Saharan Africa private equity fundraising (US$ millions):
200620072008200920101H 2011

“Sub-Saharan African funds raised $1.1 billion through June 2011, comprised largely of a single $900 million fund raised by Helios Investors, the largest pan-African fund raised to date, which drew heavily on investors from outside the development community,” says EMPEA in a statement.

Helios’ investments are focused on high-growth sectors, which have been deregulated, are core to the economy and are industries in which the firm has particular expertise. Helios has recently made three investments through the Helios II fund. These include the acquisition of Interswitch, Nigeria’s leading electronic payments processing company; the establishment of Helios Towers Africa, which builds and operates telecommunications tower businesses across Africa, and the acquisitions of tower portfolios in Ghana, Tanzania and the DRC; and the acquisition of Continental Outdoor Media, Africa’s largest outdoor advertising company. In addition, Helios recently announced the acquisition of Shell’s downstream fuel business across Africa.

Actual private equity investments for the first six months of 2011 were, however, much lower than in previous years. The first half of 2011 only saw 18 deals with a total value $256 million, compared to $2.889 billion (50 deals), $1.383 billion (37 deals) and $0.631 billion (48 deals) in 2008, 2009 and 2010 respectively. See table below:

Sub-Saharan Africa private equity investment (US$ millions):
Year2008200920101H 2011
Number of deals50374818

“Unlike China and Brazil where the trend is towards localisation of capital sources, commercialisation is the theme for Africa funds, which are increasingly drawing on a more international and institutional investor base, e.g. pension funds and asset managers, and relying less on financing from development finance institutions,” says EMPEA.

Looking at all emerging markets, EMPEA notes that the majority of growth in new capital continues to be driven by a handful of countries, with funds dedicated to investment in China, India and Brazil collectively drawing 70% of capital raised between January and June, versus 50% in all of 2010.

As with fundraising, a small number of markets accounted for the majority of deal activity. “China and India together captured 68% of the total invested, with $5.8 billion going into China and $3.8 billion into India,” says EMPEA.