Business
Opportunities abound as Africa based Private Equity funds seek new strategic partners
Africa-based private equity funds will be seeking new strategic partners in 2013 to improve their capacity to finance bigger deals to meet growing demand for funding by expanding enterprises.
Enterprises in Africa will want more funding to increase their production and operation bases to meet consumption demands by a growing middle class.
“Foreign private equity companies are equally interested in partnerships with African funds because of the higher returns being realized on the African continent,” said Anthony Gichini, the managing partner of Inreturn Capital, a private equity company focused on small and medium enterprises.
Sub-Sahara Africa is one of the fastest growing economic regions in the world. A growing middle class, investments in social infrastructure and discoveries of natural resources are expected to sustain economic growth in the coming year and beyond.
As a result, more foreign-based investors are seeking opportunities on the continent, according to successive studies, with some previously pessimistic funds especially from United States now being more open about investing in Africa.
Emerging Capital Partners for instance, the first US-based fund focused solely on Africa has invested US$1 billion in about 50 investments in Africa that include pay TV stations in Kenya and Tanzania and a coffee chain shop in Kenya.
Foreign-based private equity funds are seen to perform well to tap the best opportunities in Africa if they chose to partner with fund managers with knowledge of Africa, a factor that will drive strategic partnerships.
Inreturn Capital for instance is seeking partners that will enable it increase its average funding per deal from the current range of US$ 500,000 – US$1 million to finance deals ten times the current average.
Strategic partnerships offer African-based funds opportunities to fund-raise more easily because most of the funds managed locally are raised from foreign investors especially those from Europe.
The partnerships also offer opportunities for skills transfer especially where a fund is needed to investment in managerial skills in the new investments on the continent.
Evidence of the growing Private Equity interest on the continent is presented by the increasing number of mission visits and conferences focusing on the Private Equity environment in Africa planned for 2013.
They include Private Equity World–Africa 2013 to be held in London in March, Private Equity in Southern Africa 2013 to be held in Johannesburg in February and the United States Private Equity Certified Trade Mission in Africa in Johannesburg in August among others.
Source: The East African