Business
Africa: Private Equity – New Cash for Expanding Businesses
Africa is growing, and African companies need cash to expand. Investors want in on the action, especially given low returns in many other parts of the world these days. But with few stocks and bonds, and scant liquidity for those out there, how do investors get a foothold? And how do African firms access much-needed cash?
Enter private equity – the purchase by a private investor of a share of a company that is not listed on a stock market. The company can take the money from the sale and use it for expansion or other investments. In exchange, the owner gives up some control, as the new partner gets a seat on the board or, in smaller companies, plays an advisory role. Eventually investors make money by selling their shares or receiving dividends.
Opportunities galore
In Africa, private equity is all the rage. “If you look at all the opportunities,” says David Jeromin, managing partner of the US-based Golden Mean Capital, it is like the “nightmare” of someone with attention deficit disorder. “There is just so much stuff.”
Announcements of new African private equity funds come regularly. In February the African Development Bank (AfDB) announced that it would chip in US$50 million towards a fund of the US-based Carlyle Group, which plans to invest at least US$500 million in sub-Saharan Africa. In May, the Brazilian investment bank BTG Pactual launched a US$1 billion Africa-focused private equity fund. In the 15 months from January 2011 to March 2012, eight new funds focusing on East and Southern Africa were launched.
(More: Private equity investment in Africa totals $ 3 billion – 2011)
East Africa alone has 16 dedicated funds, out of 53 active in that region. Officials of nearly three dozen funds responded to a survey, released in March by Deloitte, a global consultancy, and Africa Assets, a private research and consulting firm, showing that nearly four-fifths planned to increase outlays in the next year.
