Proprietary research and on-the-ground presence key to private equity success in Africa

Investors concerned about the accuracy of African economic statistics and national account figures should rely on proprietary research and an on-the-ground presence in sub-Saharan Africa.

According to Pieter de Wet, head of research at South Africa-based Novare Equity Partners, the private equity unit of Novare Holdings: “Placing too great an emphasis on official statistics when making decisions about frontier markets like sub-Saharan Africa could mean that planned outcomes are not achieved.

“Additional research is required to make suitably informed decisions, compared with more developed markets.

“Also, having a physical presence when doing business in Africa is hugely beneficial. Hands-on experience helps companies grasp the subtleties of the environment in which they’re operating.”

Recent questions about the statistical capacity and accuracy of some sub-Saharan countries seem to be based on changes to national account figures provided by Ghana and Nigeria.

In 2010, Ghana’s statistics office said that, due to a change in the base year, the GDP growth figure would be adjusted upwards by roughly 60%. In 2011, Nigeria announced that it was also reviewing its numbers, and the effect would be to increase the overall size of the economy by some 15%.

De Wet said this led to investors asking: If national data is so unreliable, is sub-Saharan Africa really the growth story that the world is starting to accept?

“For investors the question is an important one. African markets tend to be relatively illiquid, with the result that investments are longer term. Although potential rewards are significant, the associated risks need to be managed more carefully perhaps than in the developed world and some developing countries.

“If a country’s statistical agencies are seen to be unreliable, investors need to go the extra mile to establish how best to access sub-Saharan Africa’s potential and how to benefit from economic growth taking place across the ‘last investment frontier’.”


The book, ‘Poor numbers: how we are misled by African development statistics and what to do about it’, by an economic historian from Canada, Morten Jerven, has raised considerable debate over the past few months.