Business
Private Equity experiences significant growth in Africa
By Ritesh Anand
Over the last decade, private equity has significantly grown in sub-Saharan Africa from less than US$1 billion in 2009 to over US$4 billion in 2014. The trend is likely to continue as global private equity funds turn to what is widely considered the “final frontier”.
Private equity is a form of equity investment into private companies not listed on the stock exchange. It is a medium to long-term investment, defined by active ownership. Private equity builds better businesses by strengthening management expertise, delivering operational improvements and helping companies to access new markets.
This form of equity has grown steadily over the past 5 years and is likely to continue growing.
According to the World Bank, sub-Saharan Africa requires a significant amount of investment in infrastructure in order to sustain and maintain growth. Such investments require long-term capital, which is best suited to private equity.
Global investors are turning their attention to Africa. Helios Partners (Africa-focused private investment firm that was founded by two Nigerian entrepreneurs), recently announced their Africa-focused private equity fund closed at US$1 billion; Abraaj Capital (one of the world’s largest private equity investment firms) is likely to follow suit.
Global private equity firms such as Carlyle and TPG Capital have contributed to Africa-focused funds with Carlyle raising US$698 million for their inaugural Africa Fund.
Much of the early investment went into businesses based on fixed assets, such as mobile phone masts. Now retailers, packagers, restaurants and payment systems have all attracted investor interest.
In 2012, Emerging Capital Partners (ECP) invested in Nairobi Java House, a Kenyan coffee house chain and has since helped it to build Planet Yogurt, a group of frozen yogurt outlets.
In 2013 Helios Partners acquired 1600 franchised Shell service stations across sub-Saharan Africa, not just to get into the fuel business, but also to develop the convenience shops attached to such stations.
